Home equity loan rates explained

A home equity loan is a second mortgage. If a home is ever sold to repay its loans, the first mortgage gets paid before the second one. That puts the second lender in a riskier spot, and the rate reflects it.

That doesn't make a home equity loan a bad deal. It often costs less than credit cards or personal loans, because your home secures it.

• Your credit score. You need a credit score of at least 620 for a CapCenter loan, and higher scores usually earn better pricing.
• How much you owe on both loans compared with your home's value. More equity left over usually means a better rate.
• Your loan amount and term. CapCenter offers 15-, 20- and 30-year terms.
• How you use the home. A primary residence and a second home can be priced differently.
• The market. Rates change daily.

CapCenter home equity loans have fixed rates. You get the money in one lump sum, and your principal and interest payment stays the same for the life of the loan.

A home equity line of credit, or HELOC, usually works differently. Most have variable rates that move with the market. CapCenter does not offer HELOCs, so if you want a set payment you can plan around, a fixed-rate loan may be the better fit.

Because you keep your first mortgage, the fairest way to compare is your blended rate. That's the average rate across both loans, weighted by how much you owe on each. A cash-out refinance, by contrast, puts your whole balance at one new rate.

Hypothetical example. APR may differ; example only. Rates change daily.

Say you keep a $250,000 first mortgage at 3.25% and add a $60,000 home equity loan at 8%. Your blended rate is about 4.17%. That's well below a 7% cash-out refinance on the full $310,000.

The APR includes certain loan costs along with the interest rate, so it shows the fuller cost of borrowing. CapCenter home equity loans come with ZERO Closing Costs (restrictions apply; see Offer details). With no lender closing costs, the APR sits close to the rate.