Rates for home equity lines of credit and home equity loans are near multi-year lows. With the next Federal Reserve meeting still one month away — and further interest rate cuts not likely soon — second mortgage rates are expected to remain mostly unchanged.
Today’s national average monthly HELOC rate is 7.23%, down just two basis points from one month ago. The average rate on a home equity loan is 7.44%, down 12 basis points from last month, according to data analytics company Curinos.
Both rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of 70%.
Home equity interest rates are priced to a different benchmark than primary mortgage rates. First-lien mortgage rates are guided by the 10-year Treasury, while second mortgage rates are based on the prime rate plus a margin. The prime rate is currently 6.75%. If a lender added a 0.75% margin, the HELOC rate would be 7.50%.
A home equity loan may have a different margin because it is a fixed-interest product.
Lenders have pricing flexibility with second mortgage products, such as HELOCs or home equity loans, so it pays to shop around. Your rate will depend on your credit score, the debt you carry, and the amount of your credit line relative to your home’s value.
And average national HELOC rates can include “introductory” rates that may last for six months or one year. After that, your interest rate will become variable, likely beginning at a substantially higher rate.
Again, because a home equity loan has a fixed rate, it’s unlikely to have an introductory “teaser” rate.
MORE: Read our guide to the best home equity loan lenders.
The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat.
Today, FourLeaf Credit Union is offering a HELOC rate of 5.99% for 12 months on lines up to $500,000. That’s an introductory rate that will convert to a variable rate of 7.25% in one year. When shopping for lenders, be aware of both rates.
The best home equity loan lenders may be easier to find, because the fixed rate you earn will last the length of the repayment period. That means just one rate to focus on. And you’re getting a lump sum, so no draw minimums to consider.
And as always, compare fees and the fine print of repayment terms.
Rates vary significantly from one lender to another, making it difficult to pinpoint a single, definitive number. The current national average for a HELOC is 7.23% — and 7.44% for a home equity loan. Those can serve as a baseline when shopping rates from second mortgage lenders.
It’s likely a good idea to consider a HELOC or a home equity loan now. You don’t give up that great primary mortgage rate that you’re paying on your house, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Just about anything, really.
If you withdraw the full $50,000 from a home equity line of credit and pay a 7.50% interest rate, your monthly payment during the 10-year draw period would be about $313. That sounds good, but remember, with a HELOC, the rate is usually variable, so it changes periodically, and your payments will increase during the 20-year repayment period. A HELOC essentially becomes a 30-year loan.
