HELOC Rates 2024: Current Home Equity Line of Credit Rates

Today’s current HELOC rates are favorable

Home equity line of credit (HELOC) rates tend to be higher than standard mortgage interest rates. So why are more homeowners choosing HELOCs over cash-out refinances?

One reason is that HELOCs let you cash out only the amount of home equity you need. You don’t have to borrow — and pay interest on — the entire value of your home.

Plus, a HELOC is a credit line you can draw on as needed. And, unlike a cash-out refinance, HELOCs are relatively cheap to set up. So a home equity line of credit often costs less than a cash-out mortgage when all’s said and done.

In this article (Skip to...)

• Current HELOC rates
• Types of HELOC rates
• Best HELOC rates
• Comparing HELOC rates
• HELOC credit limits
• HELOC lenders
• FAQ

Today’s current HELOC rates

As we move further into 2024, homeowners are keeping a close eye on home equity line of credit rates. The general trend in HELOC rates throughout 2023 and into 2024 has been a gradual increase, largely influenced by the Federal Reserve’s monetary policy decisions and the overall economic climate.

The average HELOC rate in 2024 tends to hover around 9% to 9.5% for most borrowers.

Disclosure: Prime rate sourced from The Wall Street Journal.

National average HELOC rates today

HELOC rates are closely tied to the prime rate, which serves as a benchmark for many types of loans. Typically, HELOC rates today are often priced at 0.50% to 1% higher than the prime rate. This margin is key to understanding current home equity loan rates and anticipating future rate movements.

According to recent data from The Wall Street Journal, the prime rate is currently 8.5%. Given the typical pricing structure of HELOCs, this means that HELOC rates today are typically ranging between 9% and 9.5% for most borrowers.

To put this into perspective, let’s consider an example of what an average borrower might expect to receive today:

• A homeowner with a credit score of 740, a home value of $400,000, and an outstanding mortgage balance of $200,000 could potentially secure a HELOC with an annual percentage rate (APR) of approximately 9.8%.
• This rate would allow them to access a credit limit of up to $100,000 in equity, assuming a combined loan-to-value ratio of 75%.

Annual percentage rate, or APR, is the total yearly cost of borrowing expressed as a percentage, including both the HELOC interest rate and any additional fees. Comparing the APRs of different lenders will give you a clearer picture of the true cost of a loan.

What affects HELOC rates?

It’s essential for homeowners to understand that the home equity rates they’re offered will vary depending on several factors, such as their credit score, loan-to-value ratio (LTV), credit line amount, and the lender’s specific terms.

• Credit score plays a significant role, with higher scores generally translating to lower HELOC interest rates.
• Loan-to-value ratio is another crucial factor, as lenders typically prefer a combined LTV of 80% or less when considering both the primary mortgage and the HELOC.
• Credit line amount requested can also impact HELOC rates, with larger lines of credit sometimes carrying higher interest rates.

Types of home equity line of credit rates

When searching for the lowest HELOC rates, it’s important to understand the different types of rate structures available to homeowners. Each type of interest rate structure comes with its own set of advantages and considerations that can significantly impact your borrowing costs. Let’s explore the main types of HELOC rates.

Variable HELOC rates

Variable rate HELOCs are the most common type offered by lenders. Here’s what you need to know:

• The interest rate fluctuates based on a benchmark index, typically the prime rate or Federal Funds rate.
• As the index changes, your rate and monthly payments may increase or decrease.
• Often start with low rates compared to fixed-rate options.
• Provide flexibility but come with the risk of rate increases over time.

Example: If the prime rate is 8.5%, a lender might offer a variable HELOC rate of prime + 1%, resulting in a 9.5% interest rate. This variable rate would adjust as the prime rate changes.

Fixed HELOC rates

While less common, some lenders offer fixed-rate options for HELOCs:

• The interest rate remains constant for the entire loan term.
• Provide predictable monthly payments, making budgeting easier.
• Often have higher initial rates compared to variable options.
• May be offered as a feature to convert a portion of your variable-rate balance to a fixed rate.

Example: A lender might offer a 10-year fixed-rate HELOC at 10.5%. Your rate and payments would remain the same for the entire 10-year period, regardless of market changes.

Hybrid HELOC rates

Some lenders offer hybrid home equity products that combine features of both variable and fixed-rate HELOCs:

• Introductory rates, also known as “teaser rates,” are a common type of hybrid rate. They offer a lower fixed rate for an initial period (often 6–12 months) before converting to a standard variable rate.
• Some hybrid options allow you to switch between fixed and variable rates during the life of the HELOC.
• Provides flexibility to lock in HELOC rates when they’re favorable.
• Terms can vary significantly between lenders, so it’s important to read the disclosures carefully.

Example: A hybrid HELOC might offer an introductory rate of 5.99% for the first 12 months, after which it converts to a variable rate based on the prime rate plus a margin.

How to get the best HELOC rates

Securing the best HELOC rates in 2024 is a top priority for homeowners looking to tap into their home equity.

To ensure you get the most competitive rates, consider the following tips:

• Shop around and compare offers from multiple lenders, including your current mortgage lender
• Maintain a strong credit score (740 or higher) and a low debt-to-income ratio (DTI)
• Keep your combined loan-to-value ratio (CLTV) at 80% or below
  • CLTV is calculated by dividing the total of your mortgage balance and desired HELOC amount by your home’s value
  • A lower CLTV demonstrates lower risk to lenders, potentially resulting in better rates
• Consider a shorter draw period, as longer draw periods may come with higher rates
• Be prepared to provide documentation of your income, assets, and debts
• Evaluate whether a variable or fixed-rate HELOC best suits your needs
  • Variable rates may start lower but can fluctuate over time
  • Fixed rates may be slightly higher but offer more predictability
• Negotiate with lenders and ask if they can match or beat competitor rates
• Be aware of any fees associated with the HELOC, such as annual fees or closing costs
• Consider automatic payments or a direct deposit relationship with the lender, which may qualify you for rate discounts

By following these tips and maintaining a strong financial profile, you can increase your chances of securing the best HELOC rates. Remember to carefully compare offers, negotiate with lenders, and choose the option that best fits your long-term financial goals.

How HELOC interest rates compare to other loan types

Understanding how HELOC rates stack up against other financing options can help you make an informed decision about which loan type best suits your needs. Let’s compare current home equity loan rates to several common alternatives.

HELOC rates vs home equity loan rates

HELOC rates are typically variable and often start lower than the best home equity loan rates. However, home equity loans usually offer a fixed interest rate, providing predictable payments. HELOCs offer more flexibility in borrowing, while home equity loans provide a lump sum upfront. Compare both to find the best fit.

HELOC rates vs mortgage refinance rates

Cash-out refinance rates are typically lower than HELOC rates because they’re essentially mortgage rates. While a cash-out refinance offers a lump sum and replaces your entire mortgage, HELOCs provide a revolving line of credit. Consider your needs, current mortgage rate, lien position, and potential closing costs when choosing.

HELOC rates vs personal loan rates

HELOC rates are usually lower than personal loan rates because they’re secured by your home. Personal loans, while unsecured and thus riskier for lenders, offer fixed rates and set repayment terms. HELOCs provide more flexible borrowing options but put your home at risk.

HELOC rates vs mortgage rates

HELOC rates are typically significantly higher than primary mortgage rates. Mortgages offer longer terms and are considered less risky for lenders. However, HELOCs provide more flexible access to funds and often have lower closing costs compared to taking out a new mortgage.

Understanding HELOC rates: A comprehensive guide

A HELOC, or home equity line of credit, allows homeowners to convert the equity in their home into accessible cash. This equity, which is the portion of the home you own outright, increases as you pay off your current mortgage balance and as the property’s value rises. With a HELOC, you can transform a part of this home equity into a flexible credit line, providing funds that are available for use as needed.

Homeowners often use HELOCs for home renovations, making them especially popular in states with active real estate markets such as New York, California, and Texas.

How does a HELOC work?

A HELOC has two main phases: the draw period and the subsequent repayment period. During the draw period, you have the flexibility to withdraw funds from your credit line for various needs. Once you enter the repayment period, additional withdrawals are no longer possible, and you must start repaying the borrowed loan amount on a monthly basis.

Draw period

The draw period is when you can access funds from your HELOC, up to the limit set by your available home equity. Similar to a credit card, you can borrow, repay, and reborrow within this limit.

A typical draw period lasts for about 10 years, although some lenders may offer different durations. During this 10-year draw period, you can make interest-only payments on the amount you withdraw, which doesn’t affect the outstanding balance of the credit line. The principal amount can be deferred until the start of the repayment period.

Repayment period

Once the draw period concludes, the repayment period begins. Here, you’re required to pay back the total amount borrowed, plus interest. This repayment typically spans 10 to 20 years, with many lenders offering a 20-year repayment period. During this time, you’ll make fixed monthly installments.

It’s important to note that HELOC rates are variable, meaning both the interest rate and monthly payments might fluctuate over the 20-year repayment period, depending on the prevailing interest rates and the total amount borrowed.

HELOC credit limits in 2024

When considering a home equity line of credit, one of the most important factors to understand is the credit limit. The credit limit is the maximum amount of money a borrower can access through their HELOC, and it’s determined by a combination of factors, including the home’s value, outstanding mortgage balance, and the lender’s risk assessment.

In 2024, the average HELOC credit limit varies depending on the lender and the borrower’s specific circumstances. However, most lenders typically allow homeowners to borrow up to 80% or 85% of their home’s value, minus the outstanding mortgage balance.

• For example, if a home is valued at $500,000 and the outstanding mortgage balance is $300,000, the homeowner may be able to secure a HELOC with a credit limit of up to $100,000 or $125,000, depending on the lender’s policies.

It’s important to note that while some lenders may offer higher credit limits, borrowers should carefully consider their financial situation and ability to repay before accepting a larger credit line.

Borrowers can expect lenders to conduct thorough assessments of their credit history, income, and debt-to-income ratio when determining the credit limit they are willing to offer.

Ultimately, the credit limit a borrower can expect in 2024 will depend on their personal finances and the lender’s risk appetite. Homeowners should shop around and compare offers from multiple lenders to find the most suitable HELOC credit limit for their needs and financial circumstances.

How much does a HELOC cost?

HELOC closing costs typically range from 2% to 5% of the loan’s total amount. It’s wise to budget extra for additional fees for origination, home appraisal, credit report, title search, document preparation, loan recording, and notary fees, along with any annual fees.

However, many lenders offer HELOCs without any closing costs, though they may require the credit line to remain open for a specified duration.

Some HELOCs offer an introductory rate, which can provide a lower interest rate initially. HELOCs may also come with annual maintenance fees, automatic payments options, and potential prepayment penalties.

Choosing the best HELOC lender

Choosing the right HELOC lender doesn’t have to take a lot of effort. However, when evaluating potential lenders, there are several key factors to consider.

• Competitive HELOC rates: The HELOC interest rates offered by lenders can significantly impact the overall cost of your loan. Look for competitive home equity line of credit rates and compare them across different lenders. Remember, even a small difference in the interest rate can have a substantial effect on your monthly payments and the total amount paid over the life of the loan.
• Fees: In addition to HELOC rates, be aware of any fees associated with the loan. This can include application fees, origination fees, appraisal fees, closing costs, and annual fees. Some lenders might offer lower interest rates but charge higher fees, so it’s important to consider the total cost.
• Loan terms: Examine the terms of the HELOC, such as the length of the draw period, the repayment period, and any penalties for early repayment.
• Customer service: Quality customer service is important. A lender that offers responsive, helpful support can make borrowing much smoother. Read customer reviews and testimonials to gauge the lender’s reputation for service.
• Flexibility and additional features: Some lenders might offer extra features like the ability to convert a portion of your HELOC to a fixed-rate loan or offer different types of repayment and rate options.

You might discover that your best rate for a HELOC is available through your current bank or a federal credit union, since many financial institutions provide rate discounts to existing customers. Streamlining your loan repayments with the same institution where your checking account or savings account are held can be advantageous.

FAQ: HELOC Rates

Next steps: Compare current HELOC rates

HELOC rates are generally higher than mortgage rates. But you pay interest only on what you borrow, meaning HELOC payments are often much lower than mortgage payments.

Both mortgage types have pros and cons, so consider your loan options carefully.

Check in with several lenders to learn what HELOC rates you qualify for. You can begin the process by clicking the links below.