Compare Home Equity Line of Credit (HELOC) Rates in June 2023

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Home Equity Line of Credit Rates









Written by Denny Ceizyk | Edited by Crissinda Ponder | Updated June 1, 2023

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners.

What is a home equity line of credit (HELOC)?

A home equity line of credit (HELOC) is like a credit card secured by your home’s equity. Your payment is only based on the amount you use; you can pay it down to zero whenever you want and can reuse it as needed. You may even be able to make interest-only payments each month — which comes in handy if you want to keep monthly expenses low and plan to pay off the balance quickly.

Pros and cons of a HELOC

  You’re only charged interest on the amount you use   Your rate is variable and could increase over time
  You don’t pay any interest on the unused portion of your credit line   You’ll need a higher credit score than standard loans to get the best rate
  You can make interest-only payments if your lender offers the option  After the interest-only draw period ends, a balloon payment may be due, making the HELOC unaffordable
  Your lender may offer a low introductory rate for the first six months  You may have to pay annual membership and maintenance fees
  You can deduct mortgage interest on your taxes if HELOC funds go toward home improvements  You could lose your home if you can’t repay the balance owed

How to compare HELOC rate offers with LendingTree

  1. Enter your current home address and current loan balance
  2. Compare HELOC rates offered by lenders matched to your request
  3. Choose the best offer after reviewing and comparing each Truth-in-Lending disclosure you receive 

    Are HELOC rates going up or down?

    You may have noticed mortgage interest rate forecasts calling for lower rates this year — unfortunately that isn’t the prediction for HELOC rates.  Because they’re tied to the prime rate, they don’t necessarily move in the same direction that mortgage rates do, says Jacob Channel, senior economist for LendingTree. The prime rate rose from 7.75% to 8% in March 2023 after the Fed raised the fed funds rate.  If job reports continue to show strength and inflation remains high, HELOC rates will probably continue to increase, even if mortgage rates fall or stay the same, Channel adds.

    How to get the best HELOC rates

    • Boost your credit score. Pay off credit card balances or keep them low and make on-time payments 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. A lower CLTV ratio often comes with lower HELOC rates. In other words, only borrow what you need, especially if you plan to sell your home in the near future.
    • Shop around. Check out HELOC rates from at least three to five lenders. Your local bank may offer special HELOC rates or closing cost discounts if you tie the credit line to your checking or savings account.

    How do HELOC rates work?

    Most home equity line of credit 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, which makes them more volatile — especially in rising rate environments.

    Factors that affect HELOC rates

    There are a number of factors that determine HELOC 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, although most HELOC lenders allow you to borrow up to 85%.

    2. Your credit score

    A 740 score or higher is recommended to get the lowest HELOC rate offered. However, some lenders allow a 620 minimum.

      IMPORTANT UPDATE: Credit score requirements may be changing

    Effective May 1, 2023, Fannie Mae changes to how rates are priced include a new minimum 780 credit score for the best rates on first mortgages. That could mean home equity lenders will also set the bar higher for the best HELOC rates after the Fannie Mae changes go into effect.

    3. Your debt-to-income (DTI) ratio

    A low DTI ratio (which measures 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 (43% is the standard benchmark for HELOC lenders).

    4. The index used for interest rate adjustments

    Similar to adjustable-rate mortgages, the index is the moving part of your HELOC rate. 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 monthly 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

    This cap sets a limit on how high your rate can rise during your HELOC term.


    • Your loan-to-value (LTV) ratio measures how much of your home’s value you’re financing. In most cases, borrowers have a first mortgage, which means the HELOC is added as a second mortgage. Lenders may refer to your “combined LTV (CLTV) ratio,” which is the percentage of your home’s value you’re borrowing with your first mortgage and HELOC combined.

    Here’s a quick example of how LTV and CLTV work if you have a $400,000 house with a $300,000 loan balance and then take out a $20,000 HELOC.

    • • The LTV ratio of your first mortgage is 75% ($300,000 divided by $400,000 = 75%)
    • • The CLTV of your first and second mortgage is 80% ($320,000 divided by $400,000 = 80%)

    HELOC rates vs. home equity loan rates: Which rates are better?

    If you just need a lump sum of money, you may want to consider a home equity loan. Home equity loan rates are typically fixed, and the best home equity lenders usually offer terms ranging from five to 30 years. If you’ll need funds for unpredictable expenses related to a business or fixer-upper home project, a HELOC may come with a teaser rate that saves you extra money if you need cash for a short-term goal.

    Use the table below to help with your decision-making:

    HELOC rates are better if:Home equity loan rates are better if:
    You want a rate that is based only on the portion of the credit line you useYou plan to use all your funds at once and want the security of a fixed rate
    You don’t mind a variable rate because you’ll be paying off the balance quicklyYou want to cover a large, one-time expense like college tuition or a business venture
    You want an interest-only option to keep payments as low as possibleYou can afford slightly higher rates than the initial rates offered on a HELOC


    HELOC rates vs. cash-out refinance rates: Which rates are better?

    Another way to tap equity is with a cash-out refinance, which replaces your existing mortgage with a larger loan amount so that you can pocket the difference. Since it’s a “first” mortgage, lenders usually offer lower rates because they’ll be first in line to get repaid if you can’t make your payments and they foreclose on your home.

    A HELOC is a “second mortgage,” and lenders charge a higher rate to cover the risk that they might not get paid in a foreclosure.

    HELOC rates are better if:Cash-out refinance rates are better if:
    You have a low rate on your first mortgage and don’t want to pay it offYou can get a better rate than you currently have and take cash out
    You don’t want to pay interest on a large loan amountYou want lower rates than you’ll get on a HELOC
    You only need extra money for a short time and can pay off the balance quicklyYour credit scores are too low to qualify for the HELOC amount you want


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

    If you need help deciding if a HELOC, home equity loan or cash-out refinance is the best match for your financial plans, check out the table below.

    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 HELOCs 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

    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.
    Keep 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.

    Frequently asked questions

    Yes, if you use the credit line to meet short-term financing goals that will help improve your overall financial picture and fully understand the HELOC’s repayment terms. Always shop around for HELOC rates and quotes with multiple lenders.

    There may be a slight drop in your score when you apply for a HELOC, but if you apply with multiple lenders within a 45-day window, the credit checks usually count as one inquiry, according to the Consumer Financial Protection Bureau (CFPB).

    You may need a home appraisal, although some lenders may waive the requirement.

    Interest on a HELOC may be deductible if the money you tap is used for home improvement projects.

    Yes, but you’ll typically pay a higher interest rate — that means your payment on the amount you draw will be higher than a comparable, variable-rate HELOC. However, you won’t have to worry about rising rates in the future, which is especially important if you’re living on a fixed income.