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Is a HELOC or home equity loan better to borrow $80,000?

Homeowners should carefully weigh their options when borrowing $80,000 worth of home equity. Getty Images/iStockphoto

Home equity borrowing is a smart way to access significant sums of money, especially now that the average homeowner has near-record-high amounts of funding to access. With just over $300,000 worth of equity, the average homeowner has a significant amount of money available to fund major renovations, pay off debt or finance other expenses from weddings to medical debt and more. 

Considering the amount of money available, some homeowners may be looking for the best way to access it. An $80,000 withdrawal can be a preferred amount, as it can provide a significant amount of money for owners to utilize while not stretching the average available amount of equity many homeowners currently have.

But which is the better way to access this sum? Is a home equity line of credit (HELOC) the preferred method or is a home equity loan the better way to access $80,000? Below, we'll break down some considerations to account for now. 

Start by seeing how much home equity you have to borrow here.

Is a HELOC or home equity loan better to borrow $80,000?

While every homeowner's financial situation is different, there are some broadly applicable considerations to account for when considering either option as the path to borrow $80,000. Here's when each may be better:

When a HELOC may be better to borrow $80,000

If you're looking for the cheapest way to borrow $80,000 of your home equity and are confident that the economy is improving and interest rates will soon, too, then a HELOC is the better way to borrow right now. That's because interest rates on HELOCs are variable and subject to change over time, unlike home equity loans which come with fixed rates that will need to be refinanced if you want a lower rate in the future. 

That noted, today's home equity loan and HELOC interest rates aren't quite the same. HELOCs have an average of 9.17% for qualified borrowers while home equity loans have an average of 8.60% — more than half a percentage point difference between the two types. So you'll need to determine if the higher rate on a HELOC right now is worth it versus the potential for it to fall significantly if and when the Federal Reserve issues its first interest rate cut of 2024.

Learn more about your HELOC options online now.

When a home equity loan may be better to borrow $80,000

If you're looking for a cheaper way to borrow home equity, then that half-a-percentage point difference home equity loans offer now is substantial. An $80,000 loan at 8.60%, paid back over 10 years equates to $996.17 in monthly payments for a total interest worth $39,540.31. You'd pay $1,020.78 in monthly payments and $42,493.73 in total interest over the same period with a HELOC, however. That's $24.61 more a month and $2,953.42 over the life of the credit line, all on the assumption that the rate will stay the same, which is unlikely. If rates go down, they may fall below today's average home equity loan rate. But they could rise, too. 

That said, you could take advantage of a lower rate climate in the future with home equity loans, but it will require refinancing to the new, lower rate and, like any refinance, will come with its own set of costs to lock in the lower rate. So you'll want to carefully consider all costs — and potential costs — before proceeding.

The bottom line

There's no right or wrong way to borrow $80,000 from your home equity. For some homeowners, a cash-out refinance or reverse mortgage may also make sense. But if you're considering a HELOC or home equity loan, be sure to calculate the costs of both and the potential for rates to change on either before acting. It's critical to get these numbers as precise as possible before borrowing any money, regardless of the amount, as your home acts as collateral with the lender and you could risk losing it if you're unable to repay all that you've borrowed. 

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