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The average rate on a 20-year HELOC, or home equity line of credit, is 7.05%, down 19 basis points from last week, according to Bankrate.com. Meanwhile, the rate on a 10-year HELOC is 6.17%, up 1 basis point from last week.
A home equity line of credit (HELOC) gives homeowners access to cash when they need it and requires interest to be paid only on what is used, based on the appraised value of their home.
Related: Best home equity lenders
HELOC rates today
10-year HELOC rate
The interest rate for a 10-year HELOC averaged 6.17% this week. That’s a slight increase from 6.16% last week and 2.55% at the 52-week low.
At the current rate, a 10-year HELOC of $25,000 would cost a borrower about $129 per month over the 10-year draw period.
A HELOC has a fixed drawdown period, often 10 years, followed by a repayment period. The duration of the HELOC is generally the same as its repayment period. So a 10-year HELOC can give you 10 years to use the funds and 10 years to repay. HELOCs have variable interest rates, which means the interest rate can change as you pay it back.
Generally, a borrower only pays interest during the drawing period, but they can also repay their principal during this period if they wish.
20-year HELOC rate
This week’s average interest rate for a 20-year HELOC is 7.05%, down from 7.24% last week. That compares to the 5.14% 52-week low.
At the current interest rate, a $25,000 20-year HELOC will cost you $147 per month during the draw period.
HELOC Rate Information
If you want to tap into the equity in your home, now is the time to do it. The Federal Reserve has signaled that it plans to raise its federal funds rate several times in 2022. This usually leads to higher HELOC rates.
Currently, the 52-week high on a 10-year HELOC is 6.20%, while the 52-week low is 2.55%. The 52-week high on a 20-year HELOC is 7.51% and the 52-week low is 5.14%.
HELOCs vs home equity loans
While both tap into your home equity and are backed by your home or other property, HELOCs and home equity loans have key differences.
A HELOC allows you to withdraw money as needed and only pay interest on what you borrow during the drawdown period (usually 10 or 20 years). You repay the entire balance plus interest during the repayment period (usually 20 years). Home equity loans require homeowners to take their funds all at once and pay off the balance with fixed monthly payments.
This can make a home equity loan a better option if you have a large project and need one-time financing. Home equity loans have fixed rates, while HELOC rates 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, as they already know your home and your credit profile, and may be tempted to offer you an offer or discount. But you should always shop around too.
You may want to research lenders who can prequalify you online. This way, you will get an idea of their HELOC rates and terms, as well as the fees they will charge during the application process.
HELOC rates follow 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.
Frequently Asked Questions (FAQs)
Why can I use a HELOC?
The money you borrow with a HELOC can be used for all kinds of things, not just home improvements. Many owners use the proceeds for other large purchases, education costs and more. It is important to remember that funds borrowed with a HELOC are subject to variable interest rates, which may increase over time. This may mean that other forms of more fixed rate financing for things like education are a better bet.
How can I find out the equity in my property?
Home equity refers to the amount you own – the appraised value of the property minus anything you owe someone else, such as a mortgage lender.
Will taking out a HELOC impact my credit rating?
As with any credit product, HELOC lenders will perform a credit check as part of your application, which will cause a temporary dent in your credit score. However, as long as you repay on time, you can recover quickly.
Remember that a HELOC is secured by your home, which means that failing to make timely repayments will not only hurt your credit score, it could mean you lose your home.
