How much does a $40,000 home equity loan cost monthly in 2025?

Recent increases in home prices may not have been welcome for buyers but it was a positive development for owners. Not only can these owners now sell their homes for significantly more than they purchased them, but they also have more equity to borrow to finance several expenses, large or small. With the average home equity level currently sitting around $320,000, many owners can borrow a large, five-figure sum of money while still maintaining a comfortable amount of equity to utilize in the future. A loan for $40,000, for example, would allow owners to cover a wide range of expenses, while still leaving hundreds of thousands of dollars worth of equity in the home.

Before getting started with a home equity loan, however, borrowers should carefully consider their potential costs. In the economic climate of 2025, with inflation still a concern and interest rate cuts on pause, it’s critical to calculate the costs of a home equity loan before getting started. Fail to repay all that was withdrawn and borrowers could lose their home to the lender. So it’s important to get the numbers right. But how much does a $40,000 home equity loan cost monthly, if opened now, in February 2025? That’s what we’ll calculate below.

See how much home equity you’d be eligible to borrow here now.

How much does a $40,000 home equity loan cost monthly in 2025?

Home equity loan interest rates largely declined in 2024, though they ticked up very slightly to start 2025. Right now, the average home equity loan rate (for qualified borrowers) is 8.45% but that’s higher for two common repayment terms: 8.57% for a 10-year loan and 8.52% for a 15-year one. That’s around what rates were last September when the Federal Reserve started its recent rate-cut campaign. But with rates on hold now, it may make sense to lock one in.

Here’s what a $40,000 home equity loan costs monthly now:

• 10-year home equity loan at 8.57%: $497.44 per month 
• 15-year home equity loan at 8.52%: $394.36 per month

Here’s how those payments will change if rates fall by another 25 basis points later this year:

• 10-year home equity loan at 8.32%: $492.10 per month
• 15-year home equity loan at 8.27%: $388.52 per month

So, as is the case with borrowing products, homeowners will pay more for the condensed version of the loan each month versus the extended, 15-year term. But they’ll pay less interest over the 10 years versus the 15, so both options should be carefully considered. Still, with the interest rate climate unpredictable, and home equity loan rates significantly lower than those readily available with personal loans and credit cards, it generally makes sense to lock in a rate now.

Get started with a home equity loan online today.

Will home equity loan interest rates fall further?

Predicting the future of interest rates is always difficult, especially now. The Federal Reserve’s monetary policy is a big driver behind home equity loan rates and is a major reason why they fell last year. But following three cuts in September, November and December 2024, the Fed kept its federal funds rate the same in January — and the bank won’t meet again until mid-March. So prospective borrowers may want to utilize this time to shop around for lenders and strongly consider locking in a low rate when discovered. No one knows when or if rates will fall again and, even if they do, borrowers can simply refinance their home equity loan at that point – and they’ll still get to use the funds as needed now.

The bottom line

A $40,000 home equity loan withdrawn in the early part of 2025 will cost qualified borrowers between $395 and $498 per month. However, there is an emphasis on qualified borrowers. If you don’t have a clean credit history and good credit score, the rates you’re offered and the payments you’ll need to make may be significantly higher. So be sure to check your credit and, if needed, work toward improving it, before starting your home equity loan borrowing process.

Learn more about borrowing with a home equity loan here.