Compare Home Equity Line of Credit (HELOC) Rates in December 2024

 Written by Rene Bermudez | Edited by Crissinda Ponder | Updated December 6, 2024

HELOC rate trends this month: Are rates going up or down?

HELOC rates, like interest rates, are relatively high right now compared to where they sat before the pandemic. However, HELOC rates don’t necessarily move in the same direction that mortgage rates do, says Jacob Channel, LendingTree’s senior economist. That’s because they’re directly tied to a benchmark called the prime rate. When the federal funds rate rises or falls, both the prime rate and HELOC rates tend to follow.

The Federal Reserve made its second cut to the federal funds rate this year on November 7th and, owing to this, Channel predicts that we’ll see HELOC rates drop this month by around 25 basis points. That said, he’s careful to add that “not every consumer is going to see the exact same 25 basis point cut on their HELOC rate. The exact rate you get on a HELOC will vary from lender to lender and based on your personal financial situation.”

1. Boost your credit score. Pay off credit card balances (or keep them low) and make payments on time before applying for a HELOC. Lenders typically give borrowers with higher credit scores the best HELOC rates.
2. Borrow less of your home’s value. A lower loan-to-value (LTV) ratio often comes with lower HELOC rates — in other words, only borrow what you need, especially if you plan to sell your home soon. The more equity you use with a HELOC, the less you’ll get to cash out when you sell.
3. Shop around. Look at HELOC rates from at least three to five lenders, and don’t forget lenders you already bank with. Comparison shopping can save you thousands of dollars over the long haul, according to LendingTree data. If you don’t know where to begin, check out our lender list above.

Most home equity lines of credit come with variable interest rates, which means that their rates — and monthly payment amounts — can change over time.

Each lender determines how an individual HELOC’s interest rate is calculated, but the same factors are always included.

Factors that affect home equity line of credit rates

Borrowing 80% or less of your home’s value is likely to get you lower HELOC rates, although most HELOC lenders let you borrow up to 85%. The lower the percentage of equity you borrow, the better your rate will be.

A 780 score or higher is recommended to get the lowest HELOC rates offers. However, some lenders will allow a 620 minimum credit score.

Your DTI ratio measures your gross monthly income relative to your monthly debt, and keeping it low will help drive down your home equity line of credit rate. The less monthly debt you have compared to your income, the better. HELOC lenders will usually allow a maximum 43% DTI ratio.

Similar to adjustable-rate mortgages, HELOCs typically have interest rates that change on a specific schedule. Lenders are required to tell you how they’ll calculate your rates before you close on the loan. There are three factors that figure into your rate adjustments:

• The index is the moving part of the formula that determines your HELOC rate. Common indexes for HELOCs are the U.S. prime rate and the Constant Maturity Treasury (CMT).
• The margin is a set amount added to the index to calculate your interest rate. This gap between what the market determines and what you pay is how lenders make money on a HELOC.
• The ceiling sets a limit on how high your rate can rise at any time during the loan term.

Your LTV ratio measures how much of your home’s value you’re financing. Most lenders will require you to maintain at least 15% equity in your home, which limits your maximum LTV to 85%. There are some lenders who offer high-LTV HELOCs with LTVs of up to 100% — however, you usually have to accept a higher interest rate.

 Learn more about HELOC pros and cons.

Average 30-year HELOC monthly payments

Average rates disclaimer Rates are calculated based on conditional offers for both home equity loans and home equity lines of credit with 30-year repayment periods presented to consumers nationwide by LendingTree’s network partners in the past 30 days for each loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.

Home equity loan vs. HELOC rates

Home equity loan rates are often slightly higher than HELOC rates, but they have an advantage: the rates are fixed rather than variable. If you prefer a simpler loan with stable monthly payments, you may want to consider a home equity loan instead of a line of credit.

 Learn more about HELOCs vs. home equity loans and how to choose.

Cash-out refinance vs. HELOC rates

Cash-out refinance rates are usually lower than HELOC rates and are likely to be the lowest of all of your equity-tapping loan options. A cash-out refinance is a “first” mortgage, and lenders can usually offer lower rates for these because it lowers the risk that they aren’t repaid in a foreclosure.

 Need help deciding which option for tapping home equity is best for you? Read our comparison of cash-out refinances vs. home equity loans vs. HELOCs.