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The average rate on a 10-year HELOC (home equity line of credit), hit a new high—6.20%, according to Bankrate.com. At the same time, the rate on a 20-year HELOC is 7.19%, down 9 basis points from last week.
Home equity lines of credit let homeowners convert their equity—the appraised value of the home minus anything owed to the mortgage lender—into cash. Often referred to as HELOCs, these products offer owners the flexibility to make use of cash only as needed, and to pay interest only on what’s used.
Related: Best Home Equity Loan Lenders
Current HELOC Rates
10-year HELOC Rates
This week, the average interest rate on a 10-year HELOC is 6.20%, a slight jump from the previous week, when it was 6.11% and 2.55%, the low over the past year.
At today’s interest rate of 6.20%, during the draw period, a $25,000 10-year HELOC would cost approximately $129 per month during the 10-year draw period.
HELOCs have a set draw period, often 10 years, followed by a repayment period that can be equal or different than the draw period. During the repayment period, the interest rate may change. That’s different than with home equity loans, where amounts are disbursed all at once, but carry a fixed interest rate for the life of the loan.
Borrowers usually pay only interest during the draw period. However, some borrowers may choose to always pay down the principal amount, too.
20-year HELOC Rates
This week, the average interest rate on a 20-year HELOC is 7.19% compared to 7.28% last week and 5.14%, the low over the past year.
At the current interest rate, a $25,000 20-year HELOC will cost you $150 per month during the draw period.
HELOCs vs. Home Equity Loans
Though both tap into your home equity and are backed by your house or other property, HELOCs and home equity loans have some key differences.
A HELOC lets you draw money as you need it and pay interest only on what you borrow during the draw period (usually 10 or 20 years). You repay the entire balance and interest during the repayment period (usually 20 years). Home equity loans require homeowners to take their funds all at once and repay the balance with fixed monthly payments.
This can make a home equity loan a better option if you have an extensive project and need one-time funding. Home equity loans have fixed rates, while the rates on HELOCs are variable.
How to Find the Best HELOC Rate
It’s most …….