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Compare Home Equity Line of Credit (HELOC) Rates

You can tap equity with a reusable, variable-rate line of credit and only make payments on the balance you charge for a set time.

How to use our HELOC rate tool

  1. Gather your info — in most cases, you’ll need:
  • Your current home address
  • Your current loan balance (your latest mortgage statement should show this)
  1. Compare HELOC rates
  • Lenders contact you based on your information with their best HELOC rates and offers
  1. Choose a lender
  • Review the Truth in Lending Disclosure you receive from each lender and ask how to lock in your rate

How AboutRates helps you shop HELOC rates

Our HELOC rate tool gives you access to HELOC lenders with the click of a button. The alternative is to research three to five lenders on your own, contact them individually online or by phone and follow up until you’ve gathered enough information to make a decision.

What is a home equity line of credit?

A home equity line of credit — HELOC for short — is a credit line against your home equity. It works like a credit card at first: You can use the line as needed and pay interest only on the amount charged, and a HELOC’s rates are typically variable.

Most HELOC lenders offer an interest-only payment option for the first 10 years of the credit line (known as the “draw period”). You’ll pay the monthly interest charges only, but the balance owed stays the same. When the draw period ends, the “repayment period” begins, and any balance due is typically repaid over a 15- to 20-year term in fixed installments.

What is an interest-only HELOC?

The term “interest-only HELOC” refers to the interest-only option most HELOC lenders offer with a home equity line of credit. Some borrowers prefer to make regular principal and interest payments to reduce their loan balance. However, the interest-only option comes in handy if you need short-term payment savings and plan to pay off the balance quickly

How do HELOC rates work?

Most HELOC rates are tied to the prime rate, a variable interest rate that’s determined by individual banks. Many banks set their prime rates based on the federal funds rate targets established by the Federal Reserve — though this makes them more volatile, especially in rising rate environments.

There are a number of factors that determine home equity line of credit rates.

  1. Your home equity. The more equity you leave in your home, the better your HELOC rate will be. Borrowing 80% or less of your home’s value is likely to get you lower rates.
  2. Your credit score. A 740 score or higher is recommended to get the lowest HELOC rate offered.
  3. Your debt-to-income (DTI) ratio. A low DTI ratio (DTI ratios measure your gross monthly income relative to your monthly debt) will also help drive your HELOC rate down. The less monthly debt you have compared to your income, the better.
  4. The index used for interest rate adjustments. The lender must provide information about how much and how frequently the index (e.g., the prime rate) has changed in the past.
  5. The margin used for adjustments. A HELOC margin is a set amount added to your index that determines your HELOC rate. The higher the margin, the more your payment could increase over time.
  6. The teaser rate. You may be offered a lower rate for an introductory period. For example, a lender might discount the rate for the first six months. After the teaser rate ends, though, the rate typically increases based on the margin and index in your agreement.
  7. The periodic cap. This number tells you how much and how often your rate can change at a given time.
  8. The lifetime cap. The cap sets a limit on how high your rate can rise during your HELOC term.

How to get the best HELOC rates

  • Spruce up your credit score. Keep credit card balances low and pay everything on time before you apply for a HELOC. Lenders typically reward higher-credit-score borrowers with the best HELOC rates.
  • Borrow less of your home’s value. Your loan-to-value (LTV) ratio measures how much of your home’s value you’re financing. Lower LTVs often come with lower HELOC rates.
  • Shop around. Check out HELOC rates from at least three to five lenders. Your local bank may offer special deals on a HELOC if you tie it to your checking or savings account.

Pros and cons of HELOC rates

Pros Cons

  You’re only charged interest on the amount you use

  You don’t pay any interest on the unused portion of your credit line

  You can make interest-only payments if your lender offers the option

  Your rate is variable and could increase over time

  You’ll need a higher credit score than standard loans to get the best rate

  After the interest-only draw period ends, a balloon payment may be due, making the HELOC unaffordable

When should I get a HELOC?

A HELOC can help you accomplish a variety of financial goals. It may make sense to take out a HELOC if:

  • You’re planning smaller home improvement projects. You can draw on your credit line for home renovations over time, instead of paying for them all at once.
  • You need a cushion for medical expenses. A HELOC gives you an alternative to depleting your cash reserves for unexpectedly hefty medical bills.
  • You need extra funds to manage side-hustle inventory costs. For example, a big influx of customer orders may require a big inventory buy, and a HELOC may help you cover the costs.
  • You’re involved in fix-and-flip real estate ventures. Buying and fixing an investment property can drain cash quickly; a HELOC leaves you with more capital to buy other properties.
  • You need to bridge the gap in variable income. A line of credit gives you a financial cushion during sudden drops in commissions or self-employed income.

THINGS YOU SHOULD KNOWKeep in mind that getting a HELOC means you’re using your home as collateral to secure the credit line. If you plan to sell your home in the near future, you’ll make less on the sale if you borrow against your home equity. And if you fall on hard financial times, you could lose your home to foreclosure if you fail to repay what you owe.

HELOC rates vs. home equity loan rates

If you prefer the stability of a fixed-rate payment and don’t mind receiving the entire loan balance in one lump sum, check out a home equity loan.

You should know that home equity loan rates are typically higher than HELOC rates and often don’t come with an interest-only payment option. But despite the higher rates, a home equity loan may be worth it if:

  • You prefer the stability of a fixed-rate payment
  • You’re using the funds to pay off revolving, variable-rate credit card debt
  • You need the cash for a large, one-time expense, such as college tuition or a funding a startup

HELOC rates vs. cash-out refinance rates

You’ll typically pay a significantly lower fixed rate for a cash-out refinance than you will for a HELOC. A cash-out refinance is taking out a new mortgage at a larger loan amount than you currently owe and pocketing the difference. Since it’s a “first” mortgage, lenders typically offer lower rates because they know they’ll be first in line to be repaid if you can’t make your payments and they have to foreclose on your home.

A HELOC, on the other hand, is a “second” mortgage, and HELOC lenders are paid after the first mortgage in a foreclosure, which could be risky if home values have dropped. HELOC lenders offset that risk by charging higher interest rates.

HELOC vs. home home equity loan vs. cash-out refinance: Which should you choose?

Use the table below to help you decide if a HELOC, home equity loan or cash-out refinance rate is a match for your financial plans.
Interest rate featuresHELOCHome equity loanCash-out refinance
Fixed or variableVariableFixedFixed*
Interest-only payment option?YesNoNo
Rate competitivenessHigher rates than cash-out refinance loans; 
lower rates than home equity loans		Higher rates than home equity and cash-out refinance loansLower rates than HELOCs and home equity loans
Interest rate chargesCharged on balance used during draw periodCharged monthly immediately after loan closesCharged monthly immediately after loan closes