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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 | 8.58% |
| 20-year | 8.23% |
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?
Ahome 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, aHELOCmight be the best way to do so right now — especially considering how muchhome priceshave increased over the past few years. Unlike acash-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 ahome equity loan.
But HELOCs don't always make sense. It's important to consider the pros and cons.
HELOC 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
HELOC 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
Mortgage Reporter
Molly Grace is a mortgage reporter for Business Insider with over six years of experience writing about mortgages and homeownership.ExperienceIn addition to her daily mortgage rate coverage, Molly also writes mortgage lender reviews and educational articles on homebuying and analyzes data and economic trends to give readers actionable and up-to-date information about the housing market.She also tracks affordable mortgage and down payment assistance programs offered throughout the country to keep her readers informed of homebuyer programs available to them.Before Business Insider, Molly was a blog writer for Rocket Companies and helped to create Rocket Mortgage’s Shorty Award-winning podcast Home. Made.Molly is passionate about covering personal finance topics with empathy. Her goal is to make homebuying knowledge more accessible, especially for groups that may think homeownership is out of reach.ExpertiseMolly is an expert in the following topics:
- Mortgages and mortgage lenders
- Home equity
- The housing market
- The economy and the forces that impact mortgage rates
- Budgeting and saving
- Credit
- Insurance
- Retirement savings
EducationMolly earned a bachelor's degree in journalism from Indiana University.She is based in Michigan and has a dog and two cats.
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