10-Year HELOC Rates Hit New High – Forbes Advisor

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The average rate on a 10-year HELOC, or home equity line of credit, is 6.09%, the highest it has been in the past year, according to Bankrate.com. Meanwhile, the rate on a 20-year HELOC is 7.36%, up 21 basis points from last week.

Home equity lines of credit allow homeowners to convert their equity – the appraised value of the home less 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 average interest rate on a 10-year HELOC is 6.09%, a slight jump from the previous week, when it was 5.96%. This week’s rate is the highest in a year.

At the current interest rate of 6.09%, during the draw period, a $25,000 10-year HELOC would cost approximately $127 per month during the 10-year draw period.

A HELOC has a fixed drawdown period, often 10 years, followed by a repayment period. The duration of the HELOC is generally the same as its repayment period. So a 10-year HELOC can give you 10 years to use the funds and 10 years to repay. HELOCs have variable interest rates, which means the interest rate can change as you pay it back.

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

20-year HELOC rate

This week’s average interest rate for a 20-year HELOC is 7.36%, down from 7.15% last week. This compares to the 5.14% low over 52 weeks.

At the current interest rate of 7.36%, a $25,000 20-year HELOC would cost about $153 per month during the draw period.

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

HELOC rates are more closely tied to banks than prime mortgage rates, which tend to track bond market performance. The Federal Reserve, which controls the interest rates that banks charge themselves, has signaled to investors that it plans to raise the federal funds rate several times in 2022 and beyond.

Currently, the 52-week high on a 10-year HELOC is 6.09%, 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%.

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.

That could make credit lines less attractive now, as the Federal Reserve embarks on a cycle of repeatedly raising interest rates over the next few months and years.

Frequently Asked Questions (FAQ)

How can I find out the equity in my property?

Home equity refers to the amount you own – the appraised value of the property minus anything you owe someone else, such as a mortgage lender.

How much money can I borrow with a HELOC?

You can typically borrow up to 80% to 85% of your home’s equity with a HELOC. You will need an appraisal to determine the value.

Will taking out a HELOC impact my credit rating?

Lenders will perform a credit check when you apply for a HELOC, as with any credit product, and it will temporarily lower your credit score. But if you make timely repayments, your credit score will recover quickly.

It’s important to keep in mind that any HELOC is secured by your home, like a mortgage. This means that failure to make timely repayments could put you at risk of losing the property.

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