The average interest rate on a home equity line of credit (HELOC) has seen a decrease of 25 basis points from the previous week and currently sits just under 8.5%. Homeowners with a robust credit profile, a minimal debt-to-income ratio, and substantial home equity may be eligible for even more favorable rates.
Discover more: How to use a HELOC to clear debt (and when it’s beneficial)
As reported by Bank of America, which holds the title for the largest HELOC lender in the U.S., the average annual percentage rate (APR) for a 10-year draw HELOC is currently 8.47%. This variable rate follows an introductory period of six months at a lower rate of 5.99% applicable in most states.
The Federal Reserve reports that homeowners had over $34 trillion in home equity by the end of 2024, marking a historic high. With rising mortgage rates above 6%, many homeowners are reluctant to sell their properties and give up favorable primary mortgage rates, which may include rates as low as 3%, 4%, or 5%.
For those looking to leverage their home equity without selling, a draw-as-you-need HELOC presents an attractive solution.
Learn more: Applications for HELOCs: 7 common uses for homeowners
The rates for HELOCs differ from those of primary mortgages. Typically, second mortgage rates depend on a combination of an index rate plus a margin. Currently, the prime rate is 7.25%. If a lender applies a margin of 1%, the resulting HELOC rate would be 8.25%.
Lenders have considerable flexibility when establishing rates for second mortgage options, including a HELOC or home equity loan, making it prudent to compare offers. Your rate will be influenced by your creditworthiness, overall debt, and the ratio of your credit line to your home’s value.
It’s also important to note that many average HELOC rates feature “introductory” rates that may only apply for a limited period—usually six months to a year—after which the interest rate adjusts to a potentially higher variable rate.
By opting for a second mortgage option like a HELOC, homeowners can access their home equity without sacrificing their low-rate primary mortgage. This financial tool allows you the flexibility to pull from your equity as needed, up to your limit, making it easier to manage expenses without accruing interest on unused credit.
Currently, leading HELOC lenders provide advantageous conditions, including low fees, fixed-rate options, and ample credit limits, allowing homeowners to utilize their home equity efficiently. This ensures that your primary mortgage continues to work for you while providing additional financial resources when needed.
For instance, FourLeaf Credit Union is currently offering a competitive HELOC interest rate of 5.99% for an introductory period of 12 months on lines of credit up to $500,000. Prospective borrowers should take into account both the initial and subsequent interest rates while comparing lenders. Additionally, consider potential fees, repayment structures, and the specifics of minimum draw amounts.
One of the significant advantages of a HELOC is the ability to borrow exactly what you need, leaving the remainder of your credit line accessible for future emergencies or opportunities. Interest payments are only incurred on the amount borrowed.
HELOC rates tend to vary significantly among lenders, often ranging from nearly 6% to as high as 18%, making it crucial to assess your credit profile and conduct thorough research to find the best deal.
For homeowners maintaining low primary mortgage rates while possessing considerable equity, it could be an ideal moment to consider securing a HELOC. This strategy allows you to benefit from your existing favorable mortgage rate while gaining access to extra cash for home improvements, repairs, or even recreational activities—provided you are disciplined about repayment. Funding leisure activities through a HELOC should be approached cautiously, as it can lead to undesirable long-term debt.
For example, if you were to withdraw the full $50,000 from a credit line based on a $400,000 home, your monthly payment could be around $389, assuming a starting variable interest rate of 8.63%. This is applicable for a HELOC structured with a 10-year draw period and a 20-year repayment duration. Although this payment appears manageable, it’s essential to recognize that it encompasses a 30-year loan commitment. HELOCs are most advantageous when funds are borrowed and subsequently repaid within a shorter timeframe.
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