The national average interest rate on home equity lines of credit continues to fall. By 2026, the year will begin with the lowest HELOC rates in more than three years. That’s a big advantage for homeowners looking to access the value of their homes in the new year.
According to data from Curinos, the average monthly HELOC rate is 7.44%. This rate is based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value (CLTV) ratio of 70%.
As mortgage rates refuse to budge, homeowners with home equity and a favorable primary mortgage rate may feel the frustration of not being able to access that increasing value in their home.
For those unwilling to give up their low home loan rate, a home equity line of credit may be a viable solution.
The Federal Reserve estimates that homeowners have $36 trillion of equity locked up within the walls of their homes. A HELOC second mortgage allows American homeowners to take advantage of record-high equity.
HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is usually the prime rate, which has just fallen to 6.75%. If a lender added 0.75% as margin, the HELOC would have a rate of 7.50%.
Lenders have flexibility with the pricing of a second mortgage product, like a HELOC or home equity loan, so it’s worth shopping around. Your rate will depend on your credit score, the amount of debt you have, and the size of your line of credit compared to the value of your home.
And average national HELOC rates may include “introductory” rates that may last only six months or a year. After that, your interest rate will be adjustable, probably starting with a substantially higher rate.
You don’t have to give up your low-rate mortgage to access the equity in your home. Maintain your primary mortgage and consider a second mortgage, such as a home equity line of credit.
The best HELOC lenders offer low fees, a fixed-rate option, and generous lines of credit. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to the limit of your line of credit. Take out a little; return it. Repeat.
Meanwhile, you are paying off your primary mortgage with low interest rates.
Today, LendingTree offers a HELOC APR as low as 6.36% on a $150,000 line of credit. However, remember that HELOCs typically have variable interest rates, meaning your rate will fluctuate periodically. Make sure you can afford the monthly payments if your rate increases.
And as always, compare the fees, payment terms and minimum withdrawal amount. The withdrawal is the amount of money a lender requires you to initially withdraw from your equity.
The power of a HELOC is to take advantage of only what you need and leave part of your line of credit available for future needs. You don’t pay interest so you don’t borrow.
Rates vary so much from lender to lender that it’s hard to pin down a magic number. You may see rates from just under 6% to as high as 18%. It really depends on your creditworthiness and how diligent you are as a buyer.
For homeowners with low primary mortgage rates and a lot of equity in their home, it’s probably one of the best times to get a HELOC. You don’t give up that great mortgage rate and you can use the cash withdrawn from your equity for things like home improvements, repairs and upgrades. Of course, you can also use a HELOC for fun things, like a vacation, if you have the discipline to pay it off quickly. Taking a vacation with long-term debt is probably not worth it.
If you draw down the entire $50,000 on a line of credit on your home and pay an interest rate of 7.50%, your monthly payment over the 10-year draw period would be approximately $313. That sounds good, but remember that the rate is usually variable, so it changes periodically and your payments will increase over the 20-year repayment period. A HELOC essentially becomes a 30-year loan. HELOCs are better if you borrow and pay off the balance in a much shorter period.