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Another week, another drop in home equity line of credit (HELOC) interest rates. That was again the welcome news this week after Bankrate reported yet another decline in HELOC rates. Now at just 8.04%, rates came down slightly from the recent 8.06% average. But the overall trend is remarkable for homeowners considering their home equity now. Not only did HELOC rates largely decline in 2024, but they fell to 18-month lows in January, two-year lows in February and have dropped multiple times this March, making now a great time to secure a low rate.
To better understand why a HELOC is particularly timely and advantageous to open now, in today’s unique interest rate climate, it helps to compare this product to the alternatives. So, how much cheaper is a HELOC now when compared to other borrowing options? That’s what we’ll detail below.
See how low of a HELOC rate you could qualify for here.
How much cheaper is a HELOC than the alternatives now?
At an average rate of 8.06% now, HELOCs are currently cheaper than home equity loans (averaging 8.37%), personal loans (averaging 12.37%) and credit cards (averaging around 23% now). Compared to the latter option, HELOCs are almost three times cheaper. But what does that equate to in dollars and cents? While the long-term repayments are difficult to determine with precision for both HELOCs and credit cards, thanks to their variable rates, even an approximation underlines the benefits of HELOCs now. For reference, here’s what 10-year repayments would look like for those borrowing $30,000 (assuming a constant rate):
- HELOC at 8.04%: $364.62 per month
- Home equity loan at 8.37%: $369.87 per month
- Personal loan at 12.37%: $436.85 per month
- Credit card at 23%: $640.64 per month
And that credit card repayment doesn’t even account for compound interest, which will make that monthly payment much higher. Still, both credit cards and personal loans won’t require you to put your home up as collateral in these exchanges, so that factor should be weighed carefully against any potential savings.
Compare your HELOC options online now.
What about home equity levels?
A HELOC is only as good as the funding source being utilized. Fortunately, right now is also a good time for home equity levels as they’re up 6% year-over-year. With the average homeowner currently in possession of around $313,000 worth of equity – and lenders typically mandating that a 20% buffer remain leftover – homeowners still have a six-figure sum of money to work with now. And, should home prices rise in your neighborhood, or if you complete strategic home repairs and renovations, that equity level could rise, perhaps in a rapid fashion. So consider using this time to calculate your home equity amount to determine how much you have to potentially borrow.
The bottom line
With home equity levels high and HELOC rates low, this March is a great time to explore your HELOC options. Just remember to shop around (it may be beneficial to use a different bank than your existing mortgage lender) and calculate repayments tied to a series of realistic future scenarios. This will better ensure borrowing success both this March and over the full HELOC draw and repayment periods.
