HELOC vs. Home Equity Loan: 2026 Comparison Guide

The Battle of Fixed vs. Variable

When you decide to borrow against your home, you have two primary paths. Both are "Second Mortgages," meaning they sit behind your primary home loan. But they function like completely different financial animals.

The Home Equity Loan (HELOAN)

Think of this as a "Second Mortgage." It mimics your first mortgage in almost every way.

• Structure: You get a one-time lump sum of cash at closing.
• Rate: Fixed for the life of the loan.
• Payments: Fixed principal and interest payments starting immediately.
• Best For: One-time large expenses where you know the exact cost (e.g., a pool installation, debt consolidation).

The Home Equity Line of Credit (HELOC)

Think of this as a "Giant Credit Card" secured by your house.

• Structure: You get a credit limit. You borrow what you need, when you need it.
• Rate: Variable (Prime + Margin). It changes with the Fed.
• Payments: Interest-only during the draw period, then amortized later.
• Best For: Projects with variable costs, emergency funds, or ongoing expenses.

2026 Rate Environment Comparison

In the current 2026 market, the yield curve is inverted. Surprisingly, HELOC teaser rates are often lower than rigid Home Equity Loan rates.

• Avg HELOAN Rate: 8.75% Fixed
• Avg HELOC Rate: 8.25% Variable

If you believe rates will fall in the next 2 years, a HELOC allows you to ride the wave down. If you believe rates will skyrocket, a HELOAN locks in your safety.

The Verdict

Choose a HELOAN if you are consolidating fixed debt and can't afford a payment increase.
Choose a HELOC for renovations, flexibility, or if you plan to pay the debt off aggressively within 2-3 years.