January 4, 2023—10-Year HELOC Rates Move Up To A New High – Forbes Advisor

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The average rate on a 10-year HELOC, or home equity line of credit, is 7.37%, the highest it has been over the past year, according to Bankrate.com. At the same time, the rate on a 20-year HELOC is 7.92%, up 11 basis points from last week.

Home equity lines of credit let homeowners 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 offer owners the flexibility to make use of cash only as needed, and to pay interest only on what’s used.

Related: Best Home Equity Loan Lenders

HELOC Rates Today

10-year HELOC Rates

The interest rate for a 10-year HELOC averaged 7.37% this week. That’s up drastically from 5.95% the previous week and 3.96% at the lowest point over the last 52 weeks.

At today’s interest rate of 7.37%, during the draw period, a $25,000 10-year HELOC would cost approximately $154 per month during the 10-year draw period.

HELOCs have a set draw period, often 10 years, followed by a repayment period that can be equal or different than the draw period. During the repayment period, the interest rate may change. That’s different than with home equity loans, where amounts are disbursed all at once, but carry a fixed interest rate for the life of the loan.

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

20-year HELOC Rates

The interest rate for a 20-year HELOC averaged 7.92% this week. That’s up from 7.81% last week and 5.14% at the lowest point over the past 52 weeks.

At the current interest rate, a $25,000 20-year HELOC will cost you $165 per month during the draw period.

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 (usually 10 or 20 years). You repay the entire balance and interest during the repayment period (usually 20 years). Home equity loans require homeowners to take their funds all at once and repay the balance with fixed monthly payments.

This can make a home equity loan a better option if you have an extensive project and need one-time funding. Home equity loans have fixed rates, while the rates on HELOCs are variable.

How to Find the Best HELOC Rate

It’s always a good idea to start your search for the best HELOC rate with the lender who has your first mortgage, if you have one. But you should get some other quotes, as well.

Look for lenders who offer prequalification online, and complete that process with a few lenders. That will give you a sense of their terms and rates, as well as their fees.

HELOC rates are based on the prime rate, which is what banks and other lenders charge creditworthy borrowers. The prime rate is based on the federal funds rate, which is set by the Federal Reserve.

HELOC Rate Insights

HELOC rates are tied more closely to banks than are first-mortgage rates, which tend to track the performance of the bond market. The Federal Reserve, which controls the interest rates that banks charge each other, has signaled to investors that it expects to raise the fed funds rate several times in 2022 and beyond.

The current average 10-year HELOC rate is 7.37%, but within the last 52 weeks, it’s gone as low as 3.96% and as high as 7.37%. On a 20-year HELOC, which has a current average rate of 7.92%, the 52-low is 5.14% and the high is 9.35%.

Frequently Asked Questions (FAQs)

How do I know how much home equity I have?

Your home equity is the value of the property, less anything you may owe to someone else, such as a mortgage lender. The value is determined by an appraisal.

How much money can I borrow with a HELOC?

Most lenders will let you borrow up to 80% or 85% of the equity in your home. The value of your home is determined by an appraisal.

Will taking out a HELOC impact my credit score?

As with any credit product, the credit check that lenders do will reduce your credit score temporarily. But as long as you make debt repayments on time, you can recover from that initial hit quickly.

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


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