Home Equity Loan vs. HELOC: How to Access $100,000 in Equity in 2024

In the first quarter of 2024, the average home equity withdrawal in the US was $100,000, according to the latest ICE Mortgage Monitor report.

So, if you're thinking about accessing $100,000 of your home equity, you're in good company. And you’ve got some solid options to make it happen. If you want to keep your current mortgage rate, home equity loans and home equity lines of credit (HELOC) are great choices.

But how do you decide which one is right for you?

Home equity loans work a lot like traditional mortgages. You get a lump sum upfront, with fixed interest rates and fixed monthly payments. On the flip side, a HELOC gives you flexible access to your equity, more like a credit card, but usually with variable interest rates and payments.

So, which option is the best way to tap into $100,000 worth of your equity? Let's dive in.

Choosing Between a Home Equity Loan and a HELOC

If you're weighing a home equity loan against a HELOC, it's important to think about your needs and what you expect. Here’s when each option might be better for you:

When a Home Equity Loan Makes Sense

A home equity loan could be the better route if you don’t foresee needing more equity in the future and you want the stability of fixed payments. A home equity loan gives you a lump sum all at once, and with fixed interest rates and payments, you have a predictable payment schedule."

Home equity loans are perfect for one-time expenses like home improvements, debt consolidation, or big purchases. Another thing to consider is how long you plan to take to repay the money. Home equity loans are usually better for longer terms and larger amounts because the interest rates are fixed.

When a HELOC Might Be the Better Option

A HELOC works more like a credit card. You have a credit limit and can borrow as much as you need up to that limit, repay it, and borrow it again during the draw period, which usually lasts 5 to 10 years.

However, HELOCs typically come with variable interest rates, which can fluctuate. But their flexibility makes them ideal for ongoing expenses or projects where you need funds over time.

HELOCs can be good for short-term or temporary needs as they are easier to secure. But remember that HELOCs have variable rates, and current interest rates are unstable.

So, a home equity loan might be a better fit if you plan to repay over the long term. But if you anticipate paying it back quickly, a HELOC could be the way to go. For example, if an unexpected expense like a home repair pops up, it’s easy to tap into a HELOC and then pay it off when your funds come through.

Which is Best for You?

Both home equity loans and HELOCs are effective ways to access your home equity. The right choice depends on your specific needs.

If you’re looking for long-term financing with predictable payments, a home equity loan might be the better option. If you need short-term financing with flexible access to your equity, a HELOC could be more suitable.