10-Year HELOC Rates Move Up To A New High – Forbes Advisor

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The average rate on a 10-year HELOC (home equity line of credit), hit a new high—6.11%, according to Bankrate.com. At the same time, the rate on a 20-year HELOC is 7.28%, down 5 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

Current HELOC Rates

10-year HELOC Rates

The interest rate for a 10-year HELOC averaged 6.11% this week. That’s a slight jump from last week, when it was 6.09%, and from its lowest point over the last 52 weeks, when it was 2.55%.

At the current interest rate, a $25,000 10-year HELOC would cost approximately $127 per month during the 10-year draw period.

A HELOC has a set draw period, often 10 years, that’s followed by a repayment period. The HELOC’s term is generally the same as its repayment period. So, a 10-year HELOC may give you 10 years to use the funds and 10 years to repay. HELOCs have variable interest rates, meaning that the interest rate may change as you are paying it back.

Generally, a borrower pays only interest during the draw period, but they can also repay their principal during that time if they wish.

20-year HELOC Rates

The interest rate for a 20-year HELOC averaged 7.28% this week. That’s 7.33% last week.

At this rate, a $25,000 20-year HELOC would cost a borrower approximately $152 per month.

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 Do I Qualify for a HELOC?

HELOC qualifications may be somewhat stricter than those for initial mortgages, and each lender might have different requirements that also depend on your creditworthiness and home equity. As a basic guide, homeowners typically need: a maximum debt-to-income (DTI) ratio of 43%; a minimum credit score of 620; a history of on-time mortgage payments; and at least 15% to 20% equity in the home.

In order to determine how much equity the homeowner does have in the property, lenders will require an appraisal. That serves as a trusted third-party assessment of the home’s value.

HELOC Rate Insights

If you’re interested in tapping home equity, now is the time to do it. The Federal Reserve has signaled that it expects to raise its fed funds rate several times in 2022. This generally causes HELOC rates to move up.

Currently, the 52-week high on a 10-year HELOC is 6.11%, while the 52-week low is 2.55%. The 52-week high on a 20-year HELOC is 7.51% and the 52-week low is 5.14%.

Frequently Asked Questions (FAQs)

What can I use a HELOC for?

There are no guidelines about how you must use HELOC funds. Many borrowers use them for home upgrades or repairs, but education costs or other large purchases are also allowed. Don’t forget that the variable interest rate on a HELOC may mean that other forms of financing make more sense.

How much money can I borrow with a HELOC?

You can usually borrow as much as 80%-85% of the equity you have in your home with a HELOC. You’ll need an appraisal to determine the value.

How do I know how much home equity I have?

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

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