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HELOCs (home equity lines of credit) let homeowners convert the equity in a residential property into cash through a secured loan.
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 4.74% and the average rate on a 20-year HELOC is 6.79%.
Related: Best Home Equity Loan Lenders
10-year HELOC Rates
This week’s average interest rate for a 10-year HELOC is 4.74%, versus 4.74% 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 $99 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.
Typically, a borrower pays only interest during the draw period.
20-year HELOC Rates
The interest rate for a 20-year HELOC averaged 6.79% this week. That’s up from 5.57% last week and 5.14% at the lowest point over the past 52 weeks.
At the current interest rate, a $25,000 20-year HELOC would cost approximately $141 per month during the draw period.
What Is a HELOC?
A home equity line of credit (HELOC) allows you to borrow money against the equity in your home. A HELOC lender has a second lien on your home—or a first lien if you have no mortgage. That means the lender could seize the home if you don’t make repayments on time.
A line of credit, rather than a lump-sum loan, allows homeowners to borrow as much or as little cash as needed and repay those amounts. You only need to pay interest on what you use, and you can draw and repay as often as you want during the term of the HELOC.
HELOC draw periods generally last 10 years and need to be paid back within 10 to 20 years. They can usually be for 80% to 85% of the home’s value.
HELOC Rate Insights
With the Federal Reserve raising its fed funds rate, borrowers may see HELOC …….