20-Year HELOC Rates Drop – Forbes Advisor
Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
HELOCs, or home equity lines of credit, are loans that allow you to borrow against the equity in your home, which is the current market value of your home minus the remaining balance of your mortgage. . When you get a HELOC, you can take the available money in installments as needed and pay interest only on what you use.
The average rate on a 10-year HELOC is 4.74%, according to Bankrate.com, while the average rate on a 20-year HELOC is 5.57%.
Related: Best home equity lenders
10-year HELOC rate
This week’s average interest rate for a 10-year HELOC is 4.74%, the same as last week. That compares to the 2.55% 52-week low.
At the current interest rate, a $25,000 10-year HELOC would cost about $99 per month during 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.
Borrowers generally only pay interest during the drawdown period. However, some borrowers may also choose to repay the principal amount. HELOCs have variable interest rates, which means the interest rate can change as you pay it back.
20-year HELOC rate
This week’s average interest rate for a 20-year HELOC is 5.57%, down from 7.14% last week. That compares to the 5.03% 52-week low.
At this rate, a $25,000 HELOC over 20 years would cost a borrower about $116 per month.
HELOCs vs home equity loans
HELOCs are a form of credit called a revolving loan. This means that a borrower can only draw down what is needed from the line of credit, repay that amount, and then draw down again, repeating this process for the life of the loan.
This differs from a home equity loan, which is a lump sum borrowed and repaid in regular installments. Home equity loans also carry fixed interest rates, while lines of credit are variable and can increase over the period a borrower is required to make payments.
This is especially true now that the Federal Reserve intends to raise interest rates several times over the months and years to come. This may make a home loan or other fixed rate product a better option.
How to find the best HELOC rate
It’s always a good idea to start your search for the best HELOC rate with the lender who has your first mortgage, if you have one. But you should also get other quotes.
Look for lenders that offer online prequalification and complete this process with a few lenders. This will give you an idea of their terms and rates, as well as their fees.
HELOC rates are based on the prime rate, which is what banks and other lenders charge creditworthy borrowers. The prime rate is based on the federal funds rate, which is set by the Federal Reserve.
HELOC Rate Information
HELOC rates are more closely tied to banks than prime mortgage rates, which tend to track bond market performance. The Fed, which controls the interest rates banks charge to each other, has signaled to investors that it plans to raise the federal funds rate several times in 2022 and beyond.
Currently, the 52-week high on a 10-year HELOC is 5.64%, while the 52-week low is 2.55%. The 52-week high on a 20-year HELOC is 5.70% and the 52-week low is 5.03%.
Frequently Asked Questions (FAQ)
Why can I use a HELOC?
There are no guidelines on how you should use HELOC funds. Many borrowers use them to upgrade or repair their homes, but education costs or other major purchases are also allowed. Remember that the variable interest rate on a HELOC may mean that other forms of financing make more sense.
How much money can I borrow with a HELOC?
With a HELOC, you can typically borrow up to 80% to 85% of your home’s equity. The value of your home is determined by an independent appraisal.
How can I find out the equity in my property?
Home equity is calculated by taking the appraised value of your home minus anything you owe to a lender, such as a mortgage banker.