Fixed vs. Variable Home Equity Loan Rates: Which Option Is Best for You?

If you have some equity in your home, you can take out a home equity loan.
Home equity can be used to pay off debt, finance educational tuition, or renovate your house.
The equity you've accumulated over time in your house is used as collateral for home equity loans. Interest rates are lower than those of credit cards or personal loans. Many of the best home equity rates available today are less than 10% APR.
The interest rate depends on certain factors:
- Credit score
- Home Value
The total cost also depends on the interest rate you choose.
You can have a fixed or variable interest rate when you apply for a home equity loan. Variable rates change with the market, whereas fixed rates are stable. This decision affects your finances, so thoroughly weigh the advantages and disadvantages.
This blog covers every aspect of variable or fixed rates to help you decide which is right for you:
What’s the difference between a variable and a fixed rate?
When you take out a loan, interest must be paid; this interest can be variable or fixed.
- Fixed-rate interest remains the same over the entire period. This cost is determined before you agree on loan conditions, and it remains the same until you pay off the debt.
- Variable interest rate works the opposite. When you choose this, always remember that it changes on a regular basis, going up and down.
When to choose
Fixed-rate Home equity loan
When you want to lock in a fixed rate: When you know that the cost will go up in the future. Locking in at a fixed rate helps you avoid higher costs.
When you want to set monthly payments(budget), you need to make only fixed monthly payments over the entire period.
When you are looking for a one-time payment, Most home equity loans come with fixed rates, and HELOCs have variable rates.

Variable-rate home equity loan
If rates may drop: If loan rates fall, a variable rate can help you save money.
If you're able to make adjustments to your payments, this variable rate fluctuates, so only choose this when you can handle the increase in interest rates.
If you want a credit line: Variable-rate HELOCs allow you to borrow as much as you need and only pay interest on the amount you actually use.
Which should you choose?
There’s no right answer to that; it totally depends on your financial situation and risk tolerance.
If you’re looking for stable and fixed monthly payments, then fixed home equity loan rates are the best. Because your interest rate is set for the term of your loan, you are not affected by fluctuations in the market. Even though a fixed-rate loan has a slightly higher interest rate up front, it might provide peace of mind if you're on a tight budget or don't want to take chances with possible rate increases.
These rates begin lower than fixed rates, and you may save money over time if the market moves in your favor. However, if rates rise, your payments may increase, which might impact your budget. A variable rate might also work if you plan to return the loan fast or use a HELOC, where you only pay interest on the amount you borrow.
Make the right choice
A variable rate could save you money if interest rates decline later, if they are high. A fixed-rate, however, provides comfort if rates keep rising. Some homeowners begin with a variable rate and, if rates drop, they refinance it later.
Before choosing a loan, compare the home equity rates that lenders offer and also consider your financial situation.
Pros and Cons of Fixed-rate Home Equity Loan

Pros:
- You know exactly how much you’ll pay every month, thanks to fixed monthly payments.
- Fixed-rate home equity loans make it simpler to plan your finances before taking out a loan.
- No surprises — your interest rate won’t change over time; it remains the same for the duration of the loan.
Cons:
- Fixed rates usually start higher, meaning you may have to pay a larger upfront amount.
- If interest rates drop in the future, you could end up paying more than someone with a HELOC or variable rate loan.
- You won’t benefit from lower interest rates unless you choose to refinance.
Pros and Cons of Variable Rate Home Equity Loan

Pros:
- Typically starts at a lower rate, which can save you money early on.
- You may pay less overall if interest rates decline and stay low.
- A lower initial rate can make payments more affordable at the beginning.
Cons:
- Rates can fluctuate with the market, making it harder to budget.
- If interest rates increase, your payments could rise significantly, making it harder to pay off.
- Unexpected rate hikes can lead to unaffordable payments and negatively impact your finances.
Disclaimer: This content is based on current facts and intended purely for informational purposes. Always ask your lender about current details.