Choosing Home Equity Loan Terms

Things to consider when selecting home equity loan or line of credit (HELOC) terms

Whether you're looking to use the equity in your home for things like home improvements, debt consolidation, or to finance educational expenses, you'll find you have your choice of home equity products and terms. To determine whether a home equity loan or line of credit is best for you, consult this home equity loan comparison. Some of the more important product differences are below:

Home equity loans:

  • Multiple term choices available.
  • Offer fixed interest rates.
  • Disburse the funds in a lump sum, which can be deposited directly into your Citizens Bank account or sent to you as a check.
  • Require monthly payments that include both principal and interest.

Home equity lines of credit:

  • One term that is a 10 year period during which you can borrow against your line
  • Offer adjustable interest rates
  • Disburse the funds as you need them (like a credit card)
  • Features monthly payments during the initial draw period that can be interest-only, or you can pay more. After the draw period, payments of both principal and interest are required during the repayment period on the portion of the line you used.

Things to consider when choosing home equity terms

If you're debating between a home equity loan and a HELOC, the terms may be a deciding factor. There is no right or wrong answer on which home equity loan term may be right for you. But, in order to select the best option for your finances, consider the following:

  • If you sell your home during the life of your home equity loan, you will have to pay off your outstanding balance. The repayment is typically taken out of the proceeds of the sale price.

  • Home equity loans and lines of credit generally have a higher interest rate than your primary mortgage. You may want to crunch the numbers ahead of time to see how much the home equity loan will end up costing you over the entire life of the loan so you have an accurate sense of how much you'll pay in interest. While this is certainly dependent on the size of the loan, the length of time you keep the loan also plays a role.

  • If you have an adjustable-rate HELOC, remember that the rate will adjust during the 10-year term and could adjust higher. You can explore a capped rate HELOC to ensure that the rate won't rise higher than a set threshold; however, you will have a 7-year term.

  • Factor the reason for the loan into your home equity term decision. If you plan to take out a large amount of money, stretching your payments out over more years can make the monthly payment amount more manageable. While this does cost you more interest in the end, it can work better with your budget. If your budget can handle higher payments, paying off this debt sooner rather than later can save you money in interest over the long term.
  • Apply for a home equity loan or HELOC with Citizens Bank

    Citizens Bank offers competitive home equity loan and HELOC terms so you can choose the best option for your situation. You can start the home equity application process by answering a few questions online, and a Home Loan Originator will call you by the end of the next business day to complete your application.


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