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The average rate on a 10-year HELOC (home equity line of credit), hit a new high—7.57%, according to Bankrate.com. Meanwhile, the rate on a 20-year HELOC is 7.71%, down 9 basis points from last week.
Home equity lines of credit let homeowners convert their equity—the appraised value of the home minus anything owed to the mortgage lender—into cash. Often referred to as HELOCs, these products offer owners the flexibility to make use of cash only as needed, and to pay interest only on what’s used.
Related: Best Home Equity Loan Lenders
HELOC Rates Today
10-year HELOC Rates
The interest rate for a 10-year HELOC averaged 7.57% this week. That’s up slightly from 7.56% last week and 3.98% at the lowest point over the last 52 weeks.
At the current interest rate, a $25,000 10-year HELOC would cost approximately $158 per month during the 10-year draw period.
HELOCs have a set draw period, often 10 years, followed by a repayment period that can be equal or different than the draw period. During the repayment period, the interest rate may change. That’s different than with home equity loans, where amounts are disbursed all at once, but carry a fixed interest rate for the life of the loan.
Borrowers usually pay only interest during the draw period. However, some borrowers may choose to always pay down the principal amount, too.
20-year HELOC Rates
The interest rate for a 20-year HELOC averaged 7.71% this week. That’s down from 7.80% last week.
At the current interest rate, a $25,000 20-year HELOC would cost approximately $161 per month during the draw period.
HELOCs vs. Home Equity Loans
Though both tap into your home equity and are backed by your house or other property, HELOCs and home equity loans have some key differences.
A HELOC lets you draw money as you need it and pay interest only on what you borrow during the draw period (usually 10 or 20 years). You repay the entire balance and interest during the repayment period (usually 20 years). Home equity loans require homeowners to take their funds all at once and repay the balance with fixed monthly payments.
This can make a home equity loan a better option if you have an extensive project and need one-time funding. Home equity loans have fixed rates, while the rates on HELOCs are variable.
How to Find the Best HELOC Rate
If you already have a mortgage, it probably makes sense to start your search for the best HELOC with that lender, since they know your home and credit profile already, and may be incentivized to give you a deal or a discount. But you should always shop around as well.
You might want to look for lenders who can get you prequalified online. That way, you’ll get a sense of their HELOC rates and terms, as well as any fees they’ll charge during the application process.
HELOC rates track the prime rate, which is what banks and other financial institutions charge the best borrowers. In turn, the prime rate is based on the federal funds rate, which is set by the Federal Reserve.
HELOC Rate Insights
With the Federal Reserve raising its fed funds rate, borrowers may see HELOC rates move higher this year. Typically, HELOC rates move in step with rate increases by the Fed.
Currently, the 52-week high on a 10-year HELOC is 7.57%, while the 52-week low is 3.98%. The 52-week high on a 20-year HELOC is 9.35% and the 52-week low is 5.14%.
Frequently Asked Questions (FAQs)
What can I use a HELOC for?
You can use the funds from a HELOC for all kinds of expenses, from home improvements to big-ticket items to education costs. But since the money borrowed via a HELOC is subject to a variable interest rate that may rise over time, there could be better ways to finance some purchases that come with fixed interest rates.
How much money can I borrow with a HELOC?
Most lenders will let you borrow up to 80% or 85% of the equity in your home. The value of your home is determined by an appraisal.
How do I know how much home equity I have?
The equity you have in your home is the home’s value—as determined by an appraisal— less anything you currently owe to a lender on the house, like through a mortgage.
