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The average rate on a 20-year HELOC, or home equity line of credit, is 5.57%, down 1.57% from last week, according to Bankrate.com. Meanwhile, the rate on a 10-year HELOC is 4.74%, the same as last week.
Related: Best Home Equity Loan Lenders
10-year HELOC Rates
This week, the average interest rate on a 10-year HELOC is 4.74%, the same as it was last week.
At today’s rate, a $25,000 10-year HELOC would cost a borrower approximately $99 per month during the 10-year draw period.
HELOC draw periods and repayment periods may be the same or different. HELOCs have variable interest rates, meaning that the interest rate may change as you are paying it back.
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
The interest rate for a 20-year HELOC averaged 5.57% this week. That’s down from 7.14% last week and up from 5.03% at the lowest point over the past 52 weeks.
At today’s interest rate of 5.57%, a $25,000 20-year HELOC would cost approximately $116 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
With the Federal Reserve raising its fed funds rate, borrowers may see HELOC rates move higher this year. Typically, HELOC rates move in step with rate increases by the Fed.
The current average 10-year HELOC rate is 4.74%, but within the last 52 weeks, it’s gone as low as 2.55% and as high as 5.64%. On a 20-year HELOC, which has a current average rate of 5.57%, the 52-low is 5.03% and the high is 5.70%.
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. You repay the entire balance and interest during the repayment period. Home equity loans require homeowners to take their funds all at once and repay the balance with fixed …….
Source: https://www.forbes.com/advisor/home-equity/heloc-rates-may-31-2022/