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A home equity line of credit (HELOC) is a revolving loan that allows homeowners to use the equity in their home as collateral.
HELOCs are loans that allow you to borrow against your home’s equity—the current market value of your home minus your remaining mortgage balance. When you get a HELOC, you can take the money available in installments as you need it, and pay interest only on what you’re using.
According to Bankrate.com, the average rate on a 10-year HELOC is 5.49% and the average rate on a 20-year HELOC is 7.26%.
Related: Best Home Equity Loan Lenders
Current HELOC Rates
10-year HELOC Rates
This week’s average interest rate for a 10-year HELOC is 5.49%, versus 5.49% last week. That compares to the 52-week low of 2.55%.
At today’s rate, a $25,000 10-year HELOC would cost a borrower approximately $114 per month during the 10-year draw period.
It’s followed by the repayment period, when interest and principal must be paid. Home equity lines come with variable interest rates, so your rate can rise during the repayment years. A HELOC’s term is the same as its repayment period, so a 10-year home equity line gives a borrower 10 years to pay back the loan.
Borrowers typically pay only interest during the draw period but can pay down the principal too, although it’s not required.
20-year HELOC Rates
This week, the average interest rate on a 20-year HELOC is 7.26% compared to 7.25% last week and 5.14%, the low over the past year.
At this rate, a $25,000 20-year HELOC would cost a borrower approximately $151 per month.
How Do I Qualify for a HELOC?
To qualify for a HELOC, you’ll need to go through many of the same steps you go through to get a mortgage. In general, you’ll typically need a maximum debt-to-income (DTI) ratio of 43%; a minimum credit score of 620; at least 15% to 20% equity in the home; and a history of making on-time mortgage payments, if you have a home loan.
You’ll generally also have to get an appraisal so that your lender has a third-party assessment of your home’s value. As a reminder, the amount of equity you have is determined by the value of the home minus any amounts owed to lenders.
HELOC Rate Insights
HELOC rates are tied more closely to banks than are first-mortgage rates, which tend to track the performance of the bond market. The Federal Reserve, which controls the interest rates …….