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HELOC rates are a little higher than current mortgage rates, but despite rising in recent weeks, they could still allow a homeowner to save money on borrowing for construction costs or consolidating debt when compared to personal loan rates or credit card rates.
Current HELOC Rates
| HELOC | Rate |
| 10-year | 8.04% |
| 20-year | 8.16% |
Why are HELOC Rates So High?
HELOC rates are so high because the rates for home equity lines of credit change somewhat in accordance with the prime rate, which closely follows the federal funds rate that the Federal Reserve has been raising for months to try and control inflation. The federal funds rate is high, and the prime rate is high, so it's not surprising that HELOC rates are high.
At its most recent meeting in September, the Fed chose to pause its rate hikes, and it could keep rates steady for the rest of the year
What is a Home Equity Line of Credit?
A home equity line of credit (HELOC) is a type of second mortgage that homeowners can use to get cash to fund home improvement projects, debt consolidation, or other financial goals. It works not unlike a credit card, but the money you're borrowing comes from your home's equity.
For homeowners looking to get more from their home's equity, Insider keeps track of the best HELOC lenders.
Is a HELOC Worth it Right Now?
In this rate environment especially, a HELOC can be worth it if you're looking to leverage your home's value to cover a big purchase like a home renovation. Many homeowners gained a lot of equity over that past few years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive.
Should I Get a HELOC?
If you're looking to tap into your home's equity, a HELOC might be the best way to do so right now — especially considering how much home prices have increased over the past few years. Unlike a cash-out refinance, you won't have to get a whole new mortgage with a new interest rate, and you'll likely get a better rate than you would with a home equity loan.
But HELOCs don't always make sense. It's important to consider the pros and cons.
Pros
- Only pay interest on what you borrow
- Typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
- If you have a lot of equity, you could potentially borrow more than you could get with a personal loan
Cons
- Rates are variable, meaning your monthly payments could go up if rates increase
- Taking equity out of your home can be risky if property values decline or you default on the loan
- Minimum withdrawal amount may be more than you want to borrow