HELOC Rates: Where Are They Now and Where Are They Going?

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Today we are going to discuss HELOC Rates: Where are they now and where are they going? HELOC rates have been shifting, and if you’re thinking about tapping into your home’s equity, now is the time to understand where they stand. Over the past year, rates have dropped, and many experts predict they will continue to go down. But should you wait, or is now the right time to get a HELOC? In this guide, we’ll break down where rates have been, where they are now, and what you can expect in the coming months.

Where Have HELOC Rates Been?

Over the last 12 months, HELOC rates have been on a slow but steady decline. The prime rate, which HELOCs are based on, has dropped to 7.5%. This means that if you qualify for a good HELOC, your interest rate should be around 7-8%.

Where Are HELOC Rates Now?

Right now, the average HELOC rate sits around 7.5% to 8%, depending on the lender and your credit profile. Here’s how HELOCs compare to other types of debt:

  • HELOCs: Around 7.5% – 8%
  • Credit Cards: Around 24% – 29%
  • Home Improvement Store Cards: Over 29%

For those looking to consolidate debt, a HELOC is currently about one-third the cost of credit card interest.

Where Are HELOC Rates Going?

Most experts expect rates to continue decreasing over the next 12-24 months. If the Federal Reserve lowers its rates, the prime rate will drop too. Since HELOCs are tied to the prime rate, your interest rate will go down automatically.

Should You Wait for Rates to Drop?

No! If you need a HELOC now, don’t wait. Here’s why:

  • HELOC rates adjust downward when rates drop, so you benefit automatically.
  • The money saved from consolidating high-interest debt now outweighs any small rate decrease in the future.
  • HELOCs are cheap and easy to refinance, so you can switch to a better rate later if needed.

HELOC vs. Cash-Out Refinance: Which is Better?

For most people, a HELOC is a better option than refinancing their mortgage. Here’s why:

  • HELOCs keep your low mortgage rate intact. A cash-out refi could mean going from a 3-4% mortgage rate to 6-7%.
  • HELOCs only apply to what you borrow. You don’t pay interest on unused funds.
  • Cash-out refinances combine your good mortgage debt with bad debt. This increases your overall interest costs.

How to Find the Best HELOC Rates

Not all HELOCs are priced the same. Every lender adds a margin to the prime rate, which affects your final interest rate. To get the best deal:

  • Shop around. Credit unions and regional banks often have the lowest margins.
  • Look for a margin of 0% or lower. Some lenders offer negative margins, meaning your rate could be below prime.
  • Avoid high closing costs. Most HELOCs cost $200-$500, but some lenders charge thousands.

HELOCs Are Great for More Than Just Debt Consolidation

While many use HELOCs to pay off high-interest debt, they’re also useful for:

  • Home improvements – Increase your home’s value or make it more comfortable.
  • Cash flow management – Use it to cover short-term expenses and pay it back quickly.
  • Unexpected expenses – Keep funds available for emergencies.

Don’t Wait – Take Advantage of HELOC Savings Now

If you have high-interest debt, waiting to get a HELOC could cost you hundreds per month in extra interest. Since HELOCs are easy to refinance, there’s no reason to delay. Lock in a lower rate now and benefit even more if rates drop later.

Use our HELOC Shopping Guide (link below) to compare lenders and find the best rate for your needs.

Have Questions?

Leave a comment or reach out, we’re happy to help! Contact us today to find out more!

Watch our most recent video to find out more about HELOC Rates: Where are they now and where are they going?

 

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Hidden Wealth in Your Home: HELOC Qualification Breakdown

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Today we are going to talk about hidden wealth in your home. Unlocking the hidden wealth in your home starts with understanding how a HELOC (Home Equity Line of Credit) works as well as how to qualify for one. Let’s break it down step-by-step, so you can see if this option works for your needs.

What is a HELOC?

A HELOC is like having a financial safety net. It’s a second mortgage that lets you borrow money based on your home’s equity while keeping your existing mortgage in place.

Here’s the key: A HELOC is tied to your home’s lendable equity, which depends on your property value as well as how much you still owe on your first mortgage.

How Lenders Calculate HELOC Amounts

Everything comes down to CLTV (Combined Loan-to-Value). This calculation determines how much equity you can access.

Here’s how it works:

  1. Determine Your Home’s Value


    Find your property’s current market value. Use tools like Zillow or Redfin for a quick estimate or check with a local appraiser.

  2. Know Your Current Mortgage Balance


    Look at your latest mortgage statement to see what you still owe.

  3. Calculate Lendable Equity


    Most lenders allow between 80% and 90% CLTV. Multiply your home’s value by the lender’s CLTV percentage, then subtract your current mortgage balance.

Example:

  • Home Value: $400,000
  • Lender’s CLTV: 85%
  • Current Mortgage: $280,000

Calculation:

  • $400,000 × 85% = $340,000
  • $340,000 – $280,000 = $60,000 of available equity for a HELOC.

Why Choose a HELOC Over a Cash-Out Refinance?

To clarify, HELOCs are often better for smaller, flexible borrowing needs:

First, Lower Costs: No need to refinance your first mortgage, avoiding high closing costs.

Second, Keep Your Low Rate: If your existing mortgage has a great rate (e.g., 3%), you keep it intact.

Finally, Flexibility: Borrow only what you need, when you need it.

In most cases, you can access 5–10% more equity with a HELOC compared to a cash-out refinance.

How to Shop for the Best HELOC

  1. Compare Lenders: Start with local credit unions or mid-sized banks—they often offer the best terms.
  2. Focus on CLTV and Rates: Higher CLTV percentages and lower rates can save you money.
  3. Use Tools to Compare: Download our free HELOC Shopping Scorecard to track offers and find the best deal.

Take Control of Your Home’s Equity

In conclusion, a HELOC offers more than just money, it gives you options. Whether you’re funding home improvements, consolidating debt, or creating an emergency fund, your home’s hidden wealth can help you get there.

Start today by calculating your CLTV and comparing lenders. Smart debt is the key to paying less interest and keeping more money in your pocket.

Contact us today to find out more about: Hidden Wealth in Your Home: HELOC Qualification Breakdown

Watch our most recent video to see the calculations step by step! 

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What Is a HELOC and Why Do You Need One?

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Today we are going to answer the question, “what is a HELOC and why do you need one?” A HELOC, or Home Equity Line of Credit, is a powerful financial tool that lets you tap into the equity in your home. Whether you’re looking to consolidate debt, pay for home improvements, or manage unexpected expenses, a it can help you lower your overall cost of debt, but only if you manage it responsibly.

HELOC Defined:

A HELOC is a mortgage on your property. Unlike credit cards, which are unsecured, it requires you to pledge your house as collateral. This means the loan is secured by a lien on your home, which puts your property at risk if payments are not made.

This option can serve as either a first or second mortgage. For example, if you already have a mortgage on your home, the HELOC acts as a second mortgage. But if your home is paid off, it can serve as a first mortgage. Typically, you’ll qualify for more funds if it’s in the first position.

How Does a HELOC Work?

A HELOC functions much like a credit card. You are approved for a maximum line of credit—for example, $50,000. During the draw period (usually 10 years), you can borrow from this amount as needed. If you take out $10,000, you still have $40,000 available. Once you pay down the balance, those funds become available again.

After the draw period ends, the HELOC enters the paydown period. At this point, you can no longer borrow, and the remaining balance converts to a fixed loan with regular payments.

Example of HELOC Payments:

Payments during the draw period are interest-only. For instance, if you borrow $10,000 from a $50,000 line of credit at an 8% interest rate, your monthly payment would be approximately $67. By contrast, credit cards often require payments three times as high, just in interest! This makes HELOCs a more cost-effective way to manage debt.

5 Benefits:

  1. Lower Interest Rates: HELOCs generally have lower rates than credit cards. For example, transferring $10,000 in credit card debt to a HELOC could reduce your interest cost from $2,400 annually to just $800.
  2. Low Closing Costs: Unlike a full refinance, which can cost $6,000 to $12,000, a HELOC often has closing costs of less than $400 when working with credit unions or banks.
  3. Flexibility: Use your HELOC for anything, home improvements, debt consolidation, or even a vacation. The draw period allows you to borrow and repay funds repeatedly.
  4. Access to Cash: HELOCs let you transfer funds directly to your bank account. For example, if you need to pay a contractor in cash, you can easily move money from your HELOC.
  5. Customizable Payments: During the draw period, you can choose to make interest-only payments or pay extra to reduce your balance faster. This flexibility can help you manage your finances more effectively.

3 Drawbacks:

  1. Risk to Your Home: Since a HELOC is secured by your property, failing to make payments could lead to foreclosure.
  2. Variable Interest Rates: Most HELOCs have variable rates tied to the prime rate. If rates rise, your payments will increase.
  3. Ease of Access: While the ability to borrow easily is a benefit, it can also be a drawback if you’re tempted to overspend.

Qualifications:

Your credit score plays a big role in qualifying for a HELOC. For instance, someone with a 780 score may qualify for a higher loan amount and a better rate than someone with a 680 score. Lenders will also evaluate your income, loan-to-value ratio, and how you plan to use the funds.

For example, using the HELOC for home improvements may make lenders more favorable, as these improvements increase the property’s value.

Where to Get a HELOC:

Local and national credit unions often provide the best rates and lowest closing costs. For instance, some credit unions waive fees if you keep the HELOC open for a few years. Compare offers from multiple lenders to find the best deal, focusing on the margin, the amount added to the prime rate. A lower margin or even a negative margin can save you thousands.

Get Started Today:

A HELOC is a fantastic tool when used responsibly. By lowering your debt costs, you can free up money for other areas of your life. Whether it’s consolidating credit card debt or funding home improvements, a HELOC can help you take control of your finances. Explore your options, shop for the best rates, and make your money work harder for you!

Contact us today to find out more about HELOCs and how they can help you take control of your debt!

Watch our most recent video to find out more about: What Is a HELOC and Why Do You Need One?

 

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What is a HELOC?

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Today we are going to answer the question “what is a HELOC” and help you to determine if it’s the best choice for you. A HELOC, or Home Equity Line of Credit, is like a credit card backed by your home’s value. It’s a flexible way to borrow money when you need it. Instead of taking out a lump sum like a regular loan, a HELOC gives you access to a set amount of money, and you only pay interest on what you use.

Think of it like this: If your home is worth $300,000 and you owe $200,000 on your mortgage, you might have $100,000 in equity. A HELOC lets you tap into that equity, often up to 80% or 90% of the value, depending on your lender.

For example, let’s say you’re approved for a $50,000 HELOC. You can borrow $10,000 for a kitchen remodel now and $5,000 for a vacation later. You only pay interest on the $15,000 you’ve used, not the whole $50,000.

HELOCs can be a game-changer for home improvements, debt consolidation, or even investing in opportunities. But they do come with risks, since your home is collateral, it’s important to borrow wisely.

A HELOC gives you financial flexibility. It’s a tool you can use when you need it, but it’s key to use it responsibly. 

Contact Us Today! 

Is a home equity line of credit right for you? Contact us today to find out more, as well as other ways to use debt to your advantage.

Free Tools For You! 

We also have free tools available! HELOC payment calculator to see which option is best for you! 

Learn more!

Visit our YouTube channel to learn more about using debt instead of letting debt use you! 

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HELOC: How to Get the BEST Interest Rate

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Today we are going to discuss how to get the best HELOC rate. A HELOC, or home equity line of credit, is an excellent tool that you can use to pay off debt or fix up your property. Here at Smart With Debt we want to show you how to get the best interest rate for your HELOC in order to keep more money in your wallet. Let’s go through it step by step.

Step 1: Find out the Index

First and foremost, what is the index? The index is your starting point for your HELOC rate. This base number is the same for everyone. For example, you could have an index of 8.5%. Be aware, this will go up and down because it fluctuates with the market. 

Step 2: Find out the Margin

What is the margin? The margin is the profit that is added to the index. For example, you could have a margin of 0% to 6%, because each lender charges a different margin.  As a result, rates vary per person because it depends on where you get your HELOC. 

Calculating your HELOC rate

Here’s another way to think of it. Think of it like a gas station. Each station pays the same price for the fuel (aka the index). However, each station charges a different profit (aka the margin). The index plus the margin equals the HELOC rate! 

Step 3: Shop around

It is imperative that you shop around in order to find the best HELOC rate for your wallet. By doing a side by side comparison, you can easily see which lender has the best HELOC. Get started with a free HELOC shopping card today! 

We want to help you!

Finding the best HELOC rate can seem daunting! Don’t let the numbers get the best of you and your wallet. Contact us today to discuss whether or not a HELOC is right for you. Most importantly, download our free HELOC shopping card to compare lenders side by side!

Watch our most recent explainer to find out more about: HELOC: How to Get the BEST Interest Rate

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