May 4, 2022 – 10-Year HELOC Rate Rise – Forbes Advisor

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

A home equity line of credit (HELOC) allows homeowners to tap into the equity in their home through a secured loan. When you get a HELOC, you can take the available money in installments as needed and pay interest only on what you use.

For a 10-year HELOC, the average rate is 4.20%. On a 20-year HELOC, the average rate is 5.88%.

Related: Best home equity lenders

10-year HELOC rate

The average interest rate on a 10-year HELOC is 4.20%, compared to 4.11% the previous week. This week’s rate is above the 52-week low of 2.55%.

At the current interest rate of 4.20%, during the draw period, a $25,000 10-year HELOC would cost about $88 per month.

HELOCs have a fixed drawdown period, often 10 years, followed by a repayment period of the same duration. During the repayment period, the interest rate may change. This is different from home equity loans, where amounts are disbursed all at once, but carry a fixed interest rate for the term of the loan.

Borrowers generally only pay interest during the drawdown period. However, some borrowers may also choose to always repay the principal amount.

20-year HELOC rate

The average interest rate on a 20-year HELOC is 5.88%, down from 6.29% last week. This week’s rate is above the 52-week low of 5.03%.

At the current interest rate of 5.88%, a $25,000 20-year HELOC would cost about $123 per month during the draw period.

HELOC Rate Information

If you want to tap into the equity in your home, now is the time to do it. The Federal Reserve has signaled that it plans to raise interest rates several times in 2022. This usually results in higher HELOC rates.

The current 10-year average HELOC rate is 4.20%, but over the past 52 weeks it has been as low as 2.55% and as high as 5.64%. On a 20-year HELOC, which has a current average rate of 5.88%, the low of 52 is 5.03% and the high is 6.29%.

HELOCs vs home equity loans

HELOCs are a form of credit called a revolving loan. This means that a borrower can only draw what is needed from the line of credit, repay that amount, and then draw again, repeating this process for the life of the loan.

This differs from a home equity loan, which is a lump sum borrowed and repaid in regular installments. Home equity loans also carry fixed interest rates, while lines of credit are variable and can increase over the period a borrower is required to make payments.

This is especially true now that the Federal Reserve intends to raise interest rates several times over the months and years to come. This may make a home loan or other fixed rate product a better option.

How to apply for HELOC

If you already have a mortgage, the process of applying for a HELOC will sound familiar.

You’ll want to make sure your credit reports are up to date and your score is as strong as possible. You must be prepared to show proof of employment, your tax returns and other assets. Then you should shop around for the best lender. It’s always a good idea to start with the lender who holds your first mortgage, if you have one, but you’ll probably want other options as well.

Applying for a HELOC will involve a reimbursable fee. You will likely have to pay an appraisal, set-up fee, and processing fee. Make sure you know these costs before you apply, as they can make a HELOC a less attractive option than other ways to build equity in your home.

Frequently Asked Questions (FAQ)

Why can I use a HELOC?

HELOCs do not need to be used for home-related purchases, although many borrowers use them for repairs or upgrades. They can also be used for education costs or major purchases. Remember that the money you borrow is subject to a variable interest rate that may increase over time. This may mean that there are better ways to finance certain things, such as student loans with fixed interest rates.

How can I find out the equity in my property?

The equity you have in your home is the value of the home, as determined by an appraisal, minus anything you currently owe to a lender on the home, such as through a mortgage.

Will taking out a HELOC impact my credit rating?

As with any credit product, the credit check performed by lenders will temporarily lower your credit score. But as long as you pay off your debts on time, you can recover quickly from that first hit.

It’s also important to note that because a HELOC is secured by your home, failing to pay it off in a timely manner could put you at risk of losing the home in addition to damaging your credit score.


Comments are closed.