Home Equity Line of Credit Rates for This Year

home equity line of credit

Bankrate guide to home equity lines of credit (HELOCs)

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Our goal at Bankrate is to give you the tools you need to make wiser financial decisions. For more than 40 years, we have compared and surveyed financial institutions to help you choose the best products for your needs. Our editorial team, which has won numerous awards, adheres to tight rules to make sure that sponsors do not affect our content. In order to assure accuracy, our content is also meticulously reported and rigorously edited.

Look for a HELOC that has a competitive interest rate, reasonable fees, and repayment terms that suit your needs. The information on loans provided here is current as of the date of publication. For more recent information, see the lenders’ websites. The best lenders are chosen for the list below based on many criteria, including APR, loan amounts, fees, credit standards, and wide availability.

National HELOC interest rate trends

Continued climb for HELOC rates ahead of Fed meeting

The average rate on home equity lines of credit (HELOCs) surged to 8.48 percent, according to Bankrate’s June 7 survey of large lenders.

HELOCs come with variable interest rates, which change based on the prime rate, in turn tied to Federal Reserve policy. Next week, the Fed meets to determine whether to continue hiking rates or take a breather.

 

“As long as the Fed is active, HELOC rates are going to continue to march higher,” says Greg McBride, chief financial analyst for Bankrate.

HELOC rates can also change from week to week because one or more home equity lenders markets an especially generous rate. That’s one reason why it often pays to search around for HELOC offers, at least for a lower introductory rate.

A line of credit isn’t the only way to leverage your home’s equity. Home equity loans come with fixed interest rates. As of June 7, the 15-year home equity loan rate averaged 8.37 percent, while the 10-year equity loan rate averaged 8.3 percent, according to Bankrate’s survey.

Methodology

Bankrate’s experts regularly research, review and rate home equity lenders to help you objectively compare and choose a lender that fits your needs. To determine a home equity lender’s Bankrate Score, Bankrate rates lenders on a scale of one to five stars — with five the highest rating — based on a variety of factors relating to the lender’s products and services. To assign our ratings, we assessed each home equity lender across three core areas-

Availability: The minimum loan amount, time to approval, days to close, minimum draw requirement, minimum credit score and loan types offered

Affordability: The minimum APR, intro APR, discounts for auto-payers and fees

Borrower experience: Online application availability, online account access, customer support options, auto-payment and app availability.

What is a home equity line of credit, or HELOC?

A HELOC is a variable-rate home equity product that works like a credit card — you have access to a credit line that you can draw from and pay back as needed. HELOC rates are tied to a benchmark interest rate. As the prime rate moves up or down, so does your HELOC rate. Payments vary depending on the interest rate and how much money you have used.

How does a HELOC work?

With a HELOC, you’re given a line of credit that’s available for a set time frame (known as the draw period), usually up to 10 years. While most HELOCs have an interest-only draw period, you can make both interest and principal payments to pay off the line of credit faster.

When the line of credit’s draw period expires, you enter the repayment period, which can last up to 20 years. You’ll pay back the outstanding balance that you borrowed, as well as any interest owed. A lender may allow you to renew the credit line.

What is a good HELOC rate?

Home equity line of credit rates are determined by your financial assets and liabilities, your credit score and broader economic factors outside of your control. Generally speaking, any rate below the average HELOC would be considered a good rate.

Home equity rates moved up sharply in 2022, reflecting mostly what the Federal Reserve was doing with interest rates — a trend that could continue into at least the first quarter of 2023. That said, lenders often dangle attractive promotional rates to win your business. Just make sure that you’ll be happy with the new (almost certainly higher) rate when it resets in six months to a year.

Who is a HELOC best for?

Because you have the ability to draw only what you need from a HELOC over 10 to 20 years, it’s best for people who need access to funds over a number of years — for a series of home improvement projects, for example — and who are comfortable using their homes as collateral.

How do I qualify for a HELOC?

In addition to estimating your home equity, lenders look at your credit history, credit score, income and other debts. Most lenders require a combined loan-to-value ratio (CLTV) of 85 percent or less, a credit score of 620 or higher and a debt-to-income (DTI) ratio below 43 percent to approve you for a home equity line of credit.

How do rising interest rates affect HELOCs?

The Federal Reserve implemented historic rate hikes in 2022 to combat inflation, and it’s likely these increases will continue for the time being. This action from the Fed has driven HELOC rates higher. “As long as the Fed is active, HELOC rates are going to continue to march higher,” says Greg McBride, Bankrate’s chief financial analyst. “The important point for homeowners who have a home equity line is that if the Fed raises interest rates another percentage point, your home equity line is going to go up another point.”

Other alternatives to a HELOC

A HELOC is not the right choice for every borrower. Depending on what you need the money for, one of these alternative options may be a better fit:

HELOC vs. reverse mortgage

With a reverse mortgage, you receive an advance on your home equity that you don’t have to repay until you leave the home. However, these often come with many fees, and variable interest accrues continuously on the money you receive. These are also only available to older homeowners (62 or older for a Home Equity Conversion Mortgage, the most popular reverse mortgage product, or 55 and older for some proprietary reverse mortgages).

HELOC vs. personal loan

Personal loans may have higher interest rates than home equity loans, but they don’t use your home as collateral. Like a home equity loan, they have fixed interest rates and disburse money in a lump sum.

How to find the best HELOC rates

Before you start shopping for a HELOC, take some time to improve your credit score. If you carry a big credit card balance, pay it down. If your auto note is almost done, you might pay it off a month or two early. You might also make a few additional mortgage payments to increase your home equity.

Once everything is in order, shop around. To find the best HELOC rate, compare multiple lenders — a rule of thumb is to get quotes from at least three so you can compare offers. Remember, the rate is important, but it’s not the only factor you should consider. Competing HELOC rates are likely to be close, so be sure to also scrutinize fees and terms.

 

 

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