Home equity lines of credit (HELOC) and home equity loans are currently offering some of the lowest interest rates in years. It’s a great time for homeowners to consider tapping into their home equity to fund various expenses, such as spring home improvements. By shopping around and comparing offers from two or three different lenders, you can secure the lowest interest rate possible for your situation.
According to real estate data analytics company Curinos, the average adjustable rate for a HELOC is currently 7.23%, while the national average fixed rate for a home equity loan is 7.44%. These rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.
HELOCs allow you to access funds as needed from your approved line of credit, while home equity loans provide a lump sum payment upfront. With mortgage rates remaining stagnant, homeowners with equity in their homes may find it challenging to access that value without giving up their low primary mortgage rate. The Federal Reserve estimates that homeowners have a total of $34 trillion in equity in their homes, making HELOCs and home equity loans an attractive option for those looking to leverage their home equity without refinancing their primary mortgage.
It’s important to note that HELOC interest rates are different from primary mortgage rates and are typically based on an index rate plus a margin. For example, if the prime rate is 6.75% and a lender adds a 0.75% margin, the HELOC rate would be 7.50%. Home equity loans, on the other hand, have fixed interest rates.
When shopping for a HELOC or home equity loan, it’s essential to compare rates, fees, and repayment terms from different lenders. Rates can vary significantly, ranging from around 6% to as high as 18%. The national average rates for a HELOC and home equity loan can serve as a benchmark when comparing offers.
Currently, FourLeaf Credit Union is offering a HELOC rate of 5.99% for 12 months on lines up to $500,000. It’s crucial to be aware of introductory rates that may convert to adjustable rates after a certain period.
Ultimately, the decision to take out a HELOC or home equity loan depends on your financial situation and goals. For homeowners with low primary mortgage rates and a significant amount of equity in their homes, now may be an excellent time to consider tapping into their home equity for various expenses. However, it’s essential to carefully consider the terms and repayment schedule to ensure that it aligns with your financial objectives.
