HELOC rates saw a decrease today, following a report on Friday that showed consumer prices continuing to cool. This gives the Federal Reserve some breathing room to maintain a pause on further interest rate cuts. The FOMC is expected to hold off on a rate decrease in June and is likely to wait until September for any additional rate relief.
HELOC rates are more demand-driven compared to mortgage rates, as bank and credit union deposits fund most home equity line of credit accounts. This gives depository institutions more flexibility in competitive pricing.
According to Zillow, rates on a 10-year HELOC have fallen by five basis points to 6.84% today. The same rate is also available on 15- and 20-year HELOCs. VA-backed HELOCs have increased by two basis points to 6.36%.
Homeowners have a significant amount of value tied up in their homes, with over $34 trillion in home equity at the end of 2024, according to the Federal Reserve. With mortgage rates remaining high in the 6% range, homeowners are reluctant to let go of their primary mortgages. This makes selling a house less of an option, as homeowners are holding onto their low-rate mortgages.
Accessing some of the value in your home through a HELOC can be a great alternative. HELOC interest rates differ from primary mortgage rates, as they are based on an index rate plus a margin. Lenders have flexibility in pricing second mortgage products like HELOCs or home equity loans, with rates depending on factors such as credit score and the amount of debt carried.
The best HELOC lenders offer low fees, fixed-rate options, and generous credit lines. HELOCs allow homeowners to use their home equity as needed, up to the credit line limit. By keeping a primary mortgage and considering a second mortgage like a HELOC, homeowners can leverage their home equity without giving up their low-rate mortgage.
Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000, with the rate converting to a variable rate later on. When shopping for lenders, it’s essential to compare rates, fees, repayment terms, and minimum draw amounts.
HELOCs offer the advantage of tapping into only what is needed and leaving the rest of the line of credit available for future needs. Homeowners do not pay interest on the amount they do not borrow.
Rates for HELOCs can vary significantly from one lender to another, ranging from around 7% to as much as 18%, depending on creditworthiness and diligence in shopping around. For homeowners with low primary mortgage rates and substantial equity in their homes, now may be an ideal time to consider a HELOC for things like home improvements, repairs, or even a vacation, if managed responsibly.
If borrowing the full $50,000 from a $400,000 home’s line of credit, the payment may be approximately $395 per month with a variable interest rate starting at 8.75%. HELOCs are most suitable for borrowing and repaying the balance in a shorter period, as they typically have a 10-year draw period and a 20-year repayment period, effectively turning into a 30-year loan if not managed carefully.
