Interest rates for home equity lines of credit and home equity loans have seen notable declines in the past year. The average HELOC rate, which stood above 8% in January of last year, has decreased by 81 basis points. Home equity loan rates have dropped by 40 basis points over the same period.
Data from real estate analytics firm Curinos shows the average HELOC rate is now 7.25%, a decrease of 19 basis points from the previous month. The national average rate for a home equity loan is 7.56%, three basis points lower than one month ago. These figures apply to applicants with credit scores of at least 780 and a combined loan-to-value ratio under 70%.
With primary mortgage rates showing little movement, homeowners who have built equity while holding favorable first mortgage rates may find themselves unable to access that value through refinancing. For those unwilling to sacrifice their low primary mortgage rates, HELOCs and home equity loans present alternative solutions.
The Federal Reserve estimates American homeowners hold approximately $36 trillion in home equity. Second mortgages allow homeowners to access this accumulated wealth.
Home equity interest rates differ from primary mortgage rates, typically consisting of an index rate plus a margin. The prime rate, a common index, recently fell to 6.75%. A lender adding a 0.75% margin would result in a 7.50% HELOC rate.
Lenders maintain flexibility in pricing second mortgage products, making comparison shopping advisable. Individual rates depend on credit scores, existing debt levels, and the relationship between credit line amounts and home values.
National average HELOC rates may include introductory offers lasting six months to one year, after which rates become adjustable and often increase substantially. Home equity loans generally lack introductory rates, offering fixed rates for the loan's duration.
Homeowners can retain their primary mortgages while obtaining second mortgages. Leading HELOC lenders provide low fees, fixed-rate options, and substantial credit lines. HELOCs permit flexible use of equity up to credit limits, with funds available for withdrawal and repayment as needed.
LendingTree currently advertises HELOC APRs as low as 6.36% for $150,000 credit lines. However, HELOCs typically feature variable rates that fluctuate over time, requiring borrowers to consider potential payment increases.
Finding competitive home equity loan lenders may be simpler due to their fixed-rate structure, which remains constant throughout repayment. These loans provide lump sums without draw minimums. Comparing fees and repayment terms remains essential.
Current national averages show HELOC rates at 7.25% and home equity loan rates at 7.56%, though individual rates vary significantly by lender and borrower qualifications. Rates may range from below 6% to over 18% depending on creditworthiness and shopping diligence.
For homeowners with low primary mortgage rates and substantial equity, current conditions may represent an advantageous time to consider HELOCs or home equity loans. These products allow access to equity for purposes like home improvements without sacrificing existing mortgage rates.
A $50,000 HELOC at a 7.50% interest rate would require approximately $313 in monthly payments during a 10-year draw period. However, variable rates mean payments can change periodically and increase during subsequent repayment periods, as HELOCs typically function as 30-year loans. These products work best when balances are repaid relatively quickly.