A home equity loan is a secured term loan that allows you to borrow against a portion of your accessible equity. These loans are used for a number of purposes, including debt consolidation, wedding expenses, and college tuition.

Upon approval for a home equity loan, you will get the funds in a lump sum, which will be repaid with monthly payments over a certain period. However, what duration can you anticipate for a home equity loan? Here is a look at the normal range of terms offered by lenders, as well as the impact that varying term lengths have on your overall costs.

Typical Home Equity Loan Terms

The term length of a home equity loan indicates how long it will take to repay the borrowed money. Typically, lenders offer a selection of term options ranging from five to thirty years. 

After selecting a term, your loan amount and interest expenses will be divided by the number of months in the period. If you have a fixed interest rate, your payments will be constant for the life of the loan. With a variable rate, however, your payments will fluctuate as your rate increases or decreases.

Home Equity Loan vs. HELOC

Many lenders provide both home equity loans and home equity lines of credit as home equity financing alternatives (HELOCs). Prior to applying, it is essential to determine whether a HELOC or home equity loan would better suit your needs.

HELOCs make a credit line available for a specified period of time, known as the draw period, which typically lasts between five and ten years. During the draw period, you can use the credit line as needed and only pay interest (at a variable rate) on the amounts that you actually withdraw. At the conclusion of the draw period, you will either make a balloon payment or convert the remaining balance into a five- to a thirty-year term loan. 

When you need a certain loan amount all at once and are prepared to begin repaying the debt immediately, home equity loans may be your best option. For instance, a home equity loan may be appropriate if you wish to purchase a second property or consolidate your debt.

HELOCs are superior when you require access to funds in stages, are uncertain of how much you’ll need, or want time before completing complete repayments on the borrowed amount. For instance, a HELOC can be useful for financing a home repair project that will be paid for in stages and may contain unexpected expenses.

Term Lengths

The conditions of the loan are nothing more than a description of the amount of time you have to repay the loan, and they might vary based on the sort of loan that you acquire. The length of the term for a home equity loan might be anywhere from 5 to 30 years. With a HELOC, you typically have up to ten years to take the funds and up to twenty years to repay the loan. The length of a cash-out refinance can be anywhere from 15 to 30 years.

How Long Does It Take to Get a Home Equity Loan?

A home equity loan can often be obtained in a time frame ranging from two to six weeks’ time. The timing, on the other hand, will be determined by the application, approval, and distribution procedures of your lender. If you need the money by a certain date, it is important to ask this question when you are shopping around for different lenders so that you can get an idea of which lenders will be best able to match your timetable.

How Do You Pay Back a Home Equity Loan?

The repayment of home equity loans is typically structured as a series of monthly payments spread out over the loan’s allotted duration, with the first payment scheduled to be made not long after the money has been transferred to your account. Check the terms of your loan agreement to find out when your payments are due or contact your lender for more information.

How Do Term Lengths Affect Monthly Payments?

Using our loan calculator, you may enter your home’s valuation, remaining mortgage balance, and credit score to determine how much you can borrow based on your equity and credit. In addition, we present a straightforward method for estimating your monthly payments for a Discover home equity loan, with breakdowns for terms of 10, 15, 20, and 30 years.

Shorter terms will accrue fewer interest charges against the loan than longer ones, which indicates that longer-term loans will cost you more in the long run. In general, shorter periods result in bigger monthly payments, whereas longer terms allow for smaller monthly payments.

While the interest rate may be the same whether you choose a short or long payback term, the total amount of interest you will pay on the loan will increase if you opt for a longer duration. For instance, if you obtain a $50,000 home equity loan with an interest rate of 4.99%, a 10-year payback term will cost you $530 each month, for a total of $63,600 over the life of the loan. The identical loan amount and interest rate with a 30-year repayment schedule will cost you only $268 each month, but you will pay a total of $96,480 by the end of the term.

Lenders will normally base their interest rate offers on your credit score and available equity, but you will be free to choose the length of the repayment period. The greater your ability to make monthly payments, the cheaper your loan will be over time.

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Kenneth Holmes
Kenneth Holmes
Linda’s right hand, Kenneth has been working with Linda for years, helping in planning, managing, and editing projects.


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