August 31, 2022 – 10-Year HELOC Rates Hit 52-Week High – Forbes Advisor

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The average rate on a 10-year HELOC (home equity line of credit) hit a new high of 6.11%, according to Bankrate.com. Meanwhile, the rate on a 20-year HELOC is 7.28%, down 5 basis points from last week.

Home equity lines of credit allow homeowners to 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 give owners the flexibility to use the money only as needed and only pay interest on what is used.

Related: Best Home Equity Lenders

Current HELOC rates

10-year HELOC rate

The interest rate for a 10-year HELOC averaged 6.11% this week. That’s a slight increase from 6.09% last week and 2.55% at the 52-week low.

At the current rate, a 10-year HELOC of $25,000 would cost a borrower about $127 per month over the 10-year draw period.

After the drawdown period, there is a repayment period during which the interest rate may increase. HELOCs have variable interest rates, unlike home equity loans, which are taken out as a lump sum. They have repayment periods which may be equal to or different from the draw period. Generally, the term of a HELOC is the same as its repayment period – a 10-year HELOC gives you 10 years to pay off the loan.

Typically, a borrower only pays interest during the drawdown period.

20-year HELOC rate

This week, the average interest rate on a 20-year HELOC is 7.28% compared to 7.33% last week and 5.14%, the lowest of last year.

At this rate, a $25,000 HELOC over 20 years would cost a borrower about $152 per month.

How do I qualify for a HELOC?

Qualifying for a HELOC is similar to qualifying for a first mortgage. Borrowers can typically have a maximum debt-to-income ratio (DTI) 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 typically require a third-party appraisal of the property’s value, as this helps determine the home’s equity.

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 its federal funds rate several times in 2022. This usually leads to higher HELOC rates.

The current 10-year average HELOC rate is 6.11%, but over the past 52 weeks it has fallen to 2.55% and 6.11%. On a 20-year HELOC, which has a current average rate of 7.28%, the low of 52 is 5.14% and the high is 7.51%.

HELOCs vs home equity loans

HELOCs, like credit cards, are called revolving credit products. It refers to a borrower’s ability to withdraw money, pay it back, and get more out of it. This process can be repeated throughout the life of the line of credit, which in most HELOCs is 10 years.

This makes HELOCs quite different from home equity loans, which require the homeowner to specify a certain lump sum to borrow and then repay it in regular installments. But home equity loans come with fixed interest rates, while lines of credit have variable rates.

This may make credit lines less attractive now, as the Federal Reserve embarks on a cycle of repeatedly raising interest rates over the coming months and years.

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?

Home equity is calculated by taking the appraised value of your home minus anything you owe to a lender, such as a mortgage banker.

Will taking out a HELOC impact my credit rating?

Yes, you will likely see a small dent in your credit score after applying for a HELOC because lenders do a credit check to see if you are a creditworthy borrower. But as long as you repay on time, your score should recover quickly.

Remember that HELOCs are secured by your property, which means that failure to pay in a timely manner could put you at risk of losing your home.


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