There are two types of home equity loan rates: a fixed rate loan, or an adjustable rate line of credit.
The fixed home equity loan rate is attractive when you need the money immediately. This type of loan gives you protection against rising interest rates. They typically take the form of a fifteen year fixed rate, or a thirty year amortization with any outstanding balance due after fifteen years.
A home equity line of credit is advantageous if you do not need the money immediately. Since you only pay interest on the amount outstanding, if there is no balance, there is no payment. When there is a balance, the lender typically requires that you only pay the interest due. The lenders typically let you draw on the line for up to twenty years, and then require you to pay back principal after the draw period has expired.
Your home equity loan rate will also depend on what type of property you own.
The interest rate on a home equity line or second mortgage is directly tied to how much equity you are using. If you are borrowing up to 80% of the value of your home you can expect a lower rate then if you are borrowing up to 100% of the value of your home!
Many consumers have found a "piggyback" home equity loan works well for their needs. This is where you refinance your first mortgage and take out whatever cash you currently need; then you open a Home Equity Line of Credit for any future needs.
Many times the home equity line of credit has an interest rate that is directly tied with Prime. Prime is a rate that is published by Wall Street and is controlled the the Federal Reserve. With the popularity of home equity lines, and because most of them are adjustable rate loans, many lenders offer rate lock options on portions or all of your balance of the home equity line.
Home equity loan rates are dependent upon your loan to value ratio. If you are borrowing a higher percentage of the value of the home then you will have a lower rate. A home equity loan uses the equity in your home as collateral, thus the lender considers the amount of collateral in determining your home equity loan rate.