Home equity line of credit (HELOC) interest rates have fallen to their lowest level since 2022, now averaging just above 6%, according to Bankrate data.
HELOC Rates Decline
The average HELOC interest rate this week declined to 7.04%. Qualified borrowers may find rates comfortably in the 6% range by shopping around. This positions HELOCs as one of the cheapest ways to borrow home equity and one of the most affordable ways to borrow money especially for those seeking to borrow around $20,000.
Borrowing $20,000 should be achievable for many homeowners, leaving a comfortable equity cushion for future needs. However, a home functions as collateral in this exchange, as with a traditional home equity loan, so repayment ability is critical.
Monthly Costs for a $20,000 HELOC
Calculating HELOC costs requires considering the variable interest rate, which changes monthly based on market conditions. However, with rates declining over the past 18 months, HELOCs present a potentially favorable borrowing option.
- 10-year $20,000 HELOC at 7.04%: $232.63 per month
- 15-year $20,000 HELOC at 7.04%: $180.21 per month
For comparison, a 10-year $20,000 HELOC last spring, when rates were 7.94%, would have cost $242.02 per month. In October 2024, with rates at 8.94%, the same loan would have cost $252.70 per month.
While rates have fallen, a HELOC’s rate can also increase. Calculating costs in both directions is critical to ensure affordability.
The Bottom Line
With rates approaching the 6% range, borrowing $20,000 with a HELOC is now cheaper than it has been in years. Monthly payments range from approximately $180 to $233. Many lenders offer interest-only payments during the HELOC’s draw period, potentially lowering initial payments.
Frequently Asked Questions
What is a HELOC?
A HELOC is a home equity line of credit, a type of loan where your home serves as collateral.
Will my HELOC rate change?
Yes, HELOCs have a variable interest rate that will change monthly based on market conditions.
What is the draw period of a HELOC?
The HELOC’s draw period is the time during which you can borrow money. Some lenders mandate interest-only payments during this period.
Considering the current rate environment, how might a HELOC fit into your overall financial strategy?
Keep reading