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The average rate on a 10-year HELOC, or home equity line of credit, is 6.09%, the highest it has been over the past year, according to Bankrate.com. Meanwhile, the rate on a 20-year HELOC is 7.36%, up 21 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
The average interest rate on a 10-year HELOC is 6.09%, a slight jump from the previous week, when it was 5.96%. This week’s rate is the highest it’s been in a year.
At today’s interest rate of 6.09%, during the draw period, a $25,000 10-year HELOC would cost approximately $127 per month during the 10-year draw period.
A HELOC has a set draw period, often 10 years, that’s followed by a repayment period. The HELOC’s term is generally the same as its repayment period. So, a 10-year HELOC may give you 10 years to use the funds and 10 years to repay. HELOCs have variable interest rates, meaning that the interest rate may change as you are paying it back.
Typically, a borrower pays only interest during the draw period.
20-year HELOC Rates
This week’s average interest rate for a 20-year HELOC is 7.36%, versus 7.15% last week. That compares to the 52-week low of 5.14%.
At today’s interest rate of 7.36%, a $25,000 20-year HELOC would cost approximately $153 per month during the draw period.
How Do I Qualify for a HELOC?
Qualifying for a HELOC is similar to qualifying for a first mortgage. Borrowers typically can have 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 on-time mortgage payments, if applicable.
Lenders also usually require a third-party appraisal of the property’s value, since that helps determine how much equity is in the home.
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 that banks charge each other, has signaled to investors that it expects to raise the fed funds rate several times in 2022 and beyond.
Currently, the 52-week …….