Compare Home Equity Line of Credit (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.

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.

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.

• 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.

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.

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

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.

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.