Latest news with #HELOC
CBS News
5 hours ago
- Business
- CBS News
$200,000 home equity loan vs. $200,000 HELOC: Which is less expensive now?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before borrowing hundreds of thousands of dollars worth of home equity, owners should calculate their potential repayment costs. Getty Images/iStockphoto The average home equity level has been consistently rising in recent years, and according to recent reports, it has remained at a steadily high level. The cumulative home equity level in the United States hit a record high of $17.6 trillion in the first quarter of 2025, based on a report released earlier in June. The average homeowner, meanwhile, has over $300,000 worth of equity that they can borrow from with a home equity loan or home equity line of credit (HELOC). Accounting for the 20% equity threshold many lenders prefer borrowers maintain in their home at all times, that still leaves more than $200,000 worth of equity to utilize right now. And with inflation stubborn, if significantly cooled, interest rates still high and economic concerns broad now, this could be one of the better ways to borrow a large, six-figure sum of money. To ensure borrowing success, however, which is critical when utilizing your home as the funding source, you should first calculate your potential repayment costs. Failure to pay here could result in your home being foreclosed on. So you'll want to know exactly what you'll pay long term. And with rates on home equity loans and HELOCs different, both in how high they are and how they're structured, it's particularly important to compare the potential costs of both before getting started. But which is less expensive now: a $200,000 home equity loan or a $200,000 HELOC? That's what we'll examine below. Start by seeing how much home equity you could potentially borrow here. $200,000 home equity loan vs. $200,000 HELOC: Which is less expensive now? In June 2025, the repayment costs of a home equity loan and HELOC, no matter the amount borrowed, are essentially the same. With the median home equity loan rate at 8.25% and the average HELOC rate at 8.25%, you won't see a material difference in repayments right now. But that's this month, not long-term. Since home equity loan rates have fixed rates that won't change until refinanced and HELOCs have variable rates that change over time, this similarity is not likely to stay consistent. Here's what they would look like calculated against 10- and 15-year repayment periods now, assuming the HELOC rate remains unchanged: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.27%: $2,455.18 per month $2,455.18 per month 15-year HELOC at 8.27%: $1,942.61 per month And here's how they would compare if HELOC rates decline by 25 basis points during this time: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.02%: $2,428.67 per month $2,428.67 per month 15-year HELOC at 8.02%: $1,913.61 per month And here's what they would look like if HELOC rates rise by 25 basis points from today's averages: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.52%: $2,481.85 per month $2,481.85 per month 15-year HELOC at 8.52%: $1,971.82 per month In short, a $200,000 home equity loan is marginally less expensive than a $200,000 HELOC is now. But that dynamic can and almost assuredly will change over a multiple-year repayment period. Borrowers will need to weigh those changes, then, against what they can lock in with a fixed home equity loan rate instead. And remember that home equity loans and HELOCs can always be refinanced in the future, should the rate climate or your borrowing needs change, so don't get too focused on long-term rate change scenarios, either. Compare your HELOC and home equity loan rate offers here to learn more. The bottom line $200,000 home equity loans and HELOCs come with similar payments now but they may not stay that way for very long, thanks to the latter's variable rate. That noted, HELOCs come with interest-only payment requirements for borrowers who want to utilize their equity that way during the draw period, so interest rates may be less of a concern than they'd be with a home equity loan which requires full monthly repayments immediately thanks to the disbursement of the funds in a single, lump sum. Compare both options carefully before getting started, then, to better ensure borrowing success both now and in the years to come.
Yahoo
17 hours ago
- Business
- Yahoo
HELOCs rise but home equity loans are steady as Fed leaves interest rates unchanged
The Federal Reserve stood pat on interest rates for the fourth meeting in a row, and home equity loans were flat — but HELOCs bumped up a bit. The average rate on the $30,000 HELoan remained at 8.25 percent for the third straight week. Meanwhile, the average rate on a $30,000 home equity line of credit rose five basis points to 8.27 percent, according to Bankrate's national survey of lenders. While the central bank took a cautionary stance on inflation and the impact of President Trump's tariffs this time, it also signaled that two interest rate cuts could be in the cards by the end of 2025. Forecasts by the CME FedWatch tool predict the Fed lowering lower rates by a half point by year's end. 'That would likely push home equity loan and line of credit rates down by a similar amount,' says Ted Rossman, senior industry analyst at Bankrate. 'There's a good chance rates will remain pretty flat through the summer and cuts could come into play more in the September to December timeframe.' Current 4 weeks ago One year ago 52-week average 52-week low HELOC 8.27% 8.20% 9.17% 8.58% 7.90% 5-year home equity loan 8.25% 8.23% 8.60% 8.42% 8.23% 10-year home equity loan 8.41% 8.38% 8.74% 8.55% 8.38% 15-year home equity loan 8.31% 8.32% 8.73% 8.49% 8.32% Keep your financial options open and put your equity to use with a flexible HELOC. Explore HELOC offers Rates on HELOCs and home equity loans are being driven primarily by two factors: lender competition for new customers and the Federal Reserve's actions. The Fed especially impacts the cost of variable-rate products like HELOCs. While they've ticked up lately, HELOCs and home equity loans have fallen substantially from the highs they hit at the beginning of 2024, with HELOC rates in particular reaching lows not seen since 2023. Bankrate Chief Financial Analyst Greg McBride forecasts that rates will continue to decline in 2025 — especially those on HELOCs, potentially to their lowest level in three years. Learn more: How the Federal Reserve affects HELOCs and home equity loans Because HELOCs and home equity loans use your home as collateral, their rates tend to be much less expensive — more akin to current mortgage rates — than the interest charged on credit cards or personal loans, which aren't secured. Average rate HELOC 8.27% Home equity loan 8.25% Credit card 20.12% Personal loan 12.65% Of course, the individualized offer you receive on a particular HELOC or new home equity loan reflects additional factors like your creditworthiness and financials. Then there's the value of your home and your ownership stake. Lenders generally limit all your home-based loans (including your mortgage) to a maximum 80 to 85 percent of your home's worth. Even if you are able to secure a good rate from a lender, home equity products are still relatively high-cost debt, notes Rossman. 'With average home equity loan and line of credit rates in the 8 percent range right now, that's close to the border of what distinguishes between lower- and higher-cost debt,' he says. 'It's not nearly as low as the sub-4 percent rates we saw three years ago, but not as high as the 10+ percent rates that we observed a year and a half ago.' Home equity trends Real estate is Americans' second-most popular long-term investment, according to Bankrate's 2025 Long-Term Investment Survey. 1.2 million homeowners with mortgages have negative equity in their homes (the outstanding loan balance totals more than their homes are worth), according to Cotality. Originations of home equity products (HELOCs, home equity loans and cash-out refinances) rose 11% in the fourth quarter of 2024, according to TransUnion. U.S. mortgage-holders collectively possessed $11.5 trillion worth of tappable home equity in the second quarter of 2025, according to the latest ICE Mortgage Monitor. Methodology The national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We've conducted this survey in the same manner for more than 30 years, and because it's consistently done the way it is, it gives an accurate national apples-to-apples comparison. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Should I use a HELOC to pay off credit card debt?
A HELOC (home equity line of credit) can be a useful tool for paying off credit card debt, as it often has a lower interest rate and a long repayment period. Using a HELOC to pay off debt comes with risks, such as the potential to accrue more debt or even lose your home if you can't make payments. You should explore other avenues like home equity loans, cash-out refis and personal loans — and their associated interest rates — before choosing a HELOC. You have a lot of credit card debt, and you'd love to pay it off all at once. A home equity line of credit (HELOC) could be the answer. It's basically borrowing money from a new source to settle the sums you owe the old source — exchanging one debt for another. But this new debt can be easier to deal with. Not that it doesn't carry its own concerns. Here's what you need to know about using a HELOC for paying off your credit cards: the pros and the cons. The strategy is simple: You apply for a HELOC — a line of credit based on your home equity, the percentage of your home you own outright (not mortgaged). Once the credit line is established, you draw against it, and use these funds to pay off your credit card balances. Keep in mind: Tip: Some HELOCs come with their own checks or debit cards. Or, you can simply transfer the funds to a bank account and pay off the plastic from there, via a check or online at the card issuer's website. You'll have to repay the money you borrowed from your HELOC, of course, but you'll generally have a long period in which to make the payments: a decade or two. And your HELOC will likely have a much lower interest rate than your credit cards or a personal loan. There are several benefits to using a home equity line of credit to pay off credit cards. Nearly one-third (30 percent) of homeowners cite debt consolidation as a good reason to tap their home equity, according to Bankrate's Home Equity Insights Survey. It was the second most popular rationale, in fact. Instead of paying off credit card debt bit by bit (with either the snowball method or the avalanche method, for example), a HELOC lets you eliminate it immediately or within a few months. If you are currently feeling overwhelmed by the outstanding balances, using a HELOC can provide significant mental relief. The average credit card interest rate is more than 20 percent. In contrast, the average HELOC interest rate is hovering just above 8 percent as of mid-June 2025. Keep in mind that these are variable interest rates, which means they can go up or down depending on the prime rate. Even if your HELOC interest rate rises, though, it's still likely to be much lower than your credit card's APR (which will also fluctuate with the prime rate, remember). By paying off those high-interest balances, you'll have a lot more discretionary income, of course. Your FICO credit score should also increase with the absence of debt on your record. Because a HELOC is secured by your home, its balance doesn't count in computing your credit utilization ratio, one of the factors determining your score. (The HELOC itself will appear on your credit report, though.) Using a HELOC to consolidate debt isn't without its risks. HELOC debt is secured debt, which means that if you don't pay it off in full, the lender has the right to claim whatever you put down as collateral. With a HELOC, that's your home. When you take out a HELOC, you run the risk of foreclosure if you miss payments or can't pay back the principal within the designated time period. Credit card debt, by contrast, is unsecured — meaning, the card issuer can make scary noises, but can't seize anything of yours in payment.) Nobody pays off their credit cards with the intention of immediately digging a new debt hole. But if you don't practice healthy financial habits, you could find yourself right back where you started, sooner rather than later. If you use a HELOC to pay off your credit cards and then start building up unpaid balances again, you'll have both the credit card debt and the HELOC debt to pay back. Plus, during the HELOC's draw period, you might be tempted to use any leftover credit, accruing even more debt. It can be easy to lose track of how much you're spending, too. Many HELOCs allow you to repay just interest during their draw periods. If you surrender to that temptation, your monthly payments will abruptly zoom when you enter the repayment period, because they'll now include both principal and interest. And if interest rates have risen as well, you might find your monthly obligation double or triple its previous amount — which can be a big blow to the budget if you didn't prepare for the increase. Both HELOCs and home equity loans (HELoans) can be effective ways to pay off debt. In the case of credit card debt, though, the HELoan may have a slight edge. Presumably, you know (or can calculate) the exact outstanding amount on your cards. And presumably, you'd want to clear it as soon as possible because those high APRs multiply balances at a rapid clip. This situation is well-suited for a home equity loan, which disburses a single lump sum that gets repaid in fixed-rate monthly installments. In contrast, with their fluctuating interest rates and long draw periods, HELOCs work well when you're not sure of the exact sum you'll need, or for expenses that get incurred over a long period (like college tuition or a contractor's bill on a long-term construction project). Home equity loans' interest rates are comparable to HELOCs. (As of this writing, they are averaging 8.45 percent.) Of course, you are locked into paying that rate for the loan's lifetime. While you can use either in most situations, HELOCs are more advantageous for some expenses, while home equity loans work better for others. Expense Preferable tool Why it makes sense Emergency HELoan This is probably a fixed sum that would be better to repay ASAP Business start-up HELOC Expenses are indefinite and will run over an extended period Credit card balances HELoan You can add up exactly how much you'll need to pay off all your plastic, which you'd presumably do all at once College tuition HELOC You can withdraw funds as needed just to pay for a semester, quarter or half-year Months-long, multi-faceted home renovation project HELOC Periodic draws ideal for paying contractor in installments; you have reserves if project has cost overruns Medical bill HELoan Better to pay this bill in total, sooner rather than later HELOCs aren't the only debt-settling tool in town. Most of these alternatives mean you won't have to put your home up as collateral, but they do have drawbacks. Debt consolidation loan: Roll all your credit bills together and pay them with a single debt consolidation loan, one with a lower interest rate. A reputable debt counseling service can help you do this, in addition to providing guidance on how to manage your finances and pay off your balances over time. This move can have negative consequences for your credit score, though. Personal loan: Unsecured personal loans can be easier and quicker to obtain than home equity products. On the downside, their interest rates are higher, even if you have a strong credit score (720 or above). Also, their terms are usually shorter. Balance transfer credit card: Moving outstanding debt from one credit card to a new one can help you take advantage of low promotional interest rates: You might even find a card with a 0 percent APR. Just make sure you'll be able to pay off the balance before that introductory rate period expires, usually within a year or two. Cash-out refinance: With a cash-out refinance, you're tapping your home equity, swapping out your old mortgage for a new, larger one and taking the difference in cash. Cash-out refis carry lower interest rates than HELOCs – but there's also the hassle of having to apply and go through underwriting all over again, plus paying closing costs. Learn more: Home Equity Loan Or HELOC Vs. Cash-Out Refinance While a HELOC can be a smart way to tackle credit card debt, it's not the best move for everyone. Using a HELOC to settle credit card balances can make good fiscal sense if you own a substantial stake in your home outright — giving you a lot of money to borrow — and the interest rates on your outstanding card debt are in the high double digits. That said, this strategy comes with its risks, including the risk of losing your home. Also, bear in mind that HELOCs can be tough to get: They demand at least a 'very good' credit score — which, if you've got a mountain of debt, you may not have. If you've got a good amount of home equity to tap, and can score a low interest rate, it could be the best choice. But be sure to compare the APRs and understand the repayment terms and fees. You don't want to get blindsided — not when it's your home on the line. Can I use a HELOC for other expenses besides credit card debt? Yes, lenders typically don't have any restrictions on what you can use HELOCs for. Homeowners use HELOCs for a variety of expenses, including home renovations, education expenses and to start or grow a business. Do I have to pay off my credit card debt all at once with a HELOC? No, you don't have to pay off of your credit card debt all at once with a HELOC. It's a revolving line of credit: You can choose how much of it to use and when and to use it (in line with any rules the lender has about withdrawals, of course). But the sooner you settle those high-APR credit card balances, with their ever-multiplying amounts, the better. How can I avoid the temptation to re-borrow after using a HELOC to pay credit cards? Treat your HELOC like a loan rather than a line of credit and set up a structured plan to pay it back, even before the repayment period begins. Reduce your reliance on credit by creating a realistic budget. Limit yourself to using just one or two credit cards (to better keep track of your spending) and shifting to using cash or debit cards for everyday expenses.
CBS News
2 days ago
- Business
- CBS News
$50,000 HELOC vs. $50,000 home equity loan: Which is cheaper this June?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before borrowing money from their home this June, homeowners should first calculate their potential repayment costs. Getty Images Borrowing $50,000 can't always be done easily or inexpensively. With the average credit card interest rate over 21% now, just shy of a record high, securing a $50,000 credit limit may not only be difficult, it'll be costly. Personal loans, meantime, come with interest rates much lower than credit cards, but at an average rate of 12.65%, they also may not be the most cost-efficient way to borrow a five-figure sum of money right now. If you're a homeowner, however, you may have an affordable way to access $50,000 or more at your fingertips. With a home equity line of credit (HELOC) or a home equity loan, homeowners can borrow from their accumulated equity with relative ease. And, right now, with home equity levels rising and the average amount comfortably over $300,000, this may be your optimal way to borrow. But these products don't operate in identical ways and, as such, don't have identical interest rates. So it's important to start your home equity borrowing journey by calculating the potential repayment costs associated with both products. Between a $50,000 HELOC and a $50,000 home equity loan, then, which will be cheaper if opened this June? We'll do the math below. See how much home equity you could borrow here now. $50,000 HELOC vs. $50,000 home equity loan: Which is cheaper this June? To determine the costs of each, borrowers will need three primary figures: the amount of money being borrowed, the interest rate associated with each and the length of the repayment period. Fortunately for homeowners, interest rates on both have declined significantly over the past year or so and could continue to fall in the months ahead if interest rate cuts are issued as many expect. That noted, HELOC interest rates are variable and can change monthly based on market conditions, while home equity loan rates are fixed and will remain the same unless refinanced by the homeowner. In other words, while rates on both products are similar now (8.22% for HELOCs and 8.25% for home equity loans), they're unlikely to remain as closely aligned over time. Here, then, is what each costs if secured now, for borrowers with good credit: 10-year home equity loan at 8.25%: $613.26 per month $613.26 per month 15-year home equity loan at 8.25%: $485.07 per month 10-year HELOC at 8.22%: $612.47 per month $612.47 per month 15-year HELOC at 8.22%: $484.20 per month So, by borrowing $50,000 with either option this June, your payments will essentially be the same. But the difference in the rate structures and repayments is critical to understand. HELOCs may or may not remain as inexpensive as they are right now, thanks to that changing rate. While HELOC rates are still down from where they were last September, for example, they've since jumped a bit in recent weeks. And, with a HELOC, borrowers will be required to make interest-only payments for the initial draw period, giving them more flexibility before full payments are required in the repayment period. Home equity loans, on the other hand, come with predictability thanks to the fixed rate, which could be welcome in today's unique economic climate. But payments here will be required immediately since the home equity loan funds will be disbursed in a single lump sum versus the HELOC's borrow-as-you-go structure. So, there's a lot to consider before getting started. To better determine which product makes the most sense for your financial circumstances, it can be beneficial to speak with a home equity lending expert who can answer your questions and guide you toward the more appropriate option. Speak with a home equity loan specialist today. The bottom line This June, a $50,000 home equity loan comes with similar monthly repayment costs as a $50,000 HELOC. That means borrowers will need to dig a bit deeper to determine the true, long-term affordability by evaluating the potential for HELOC rates to change over time and by measuring the interest-only payments that the product comes with versus the full repayment costs the loan does. By measuring these items closely and by calculating their costs against a variety of potential rates, they can better determine long-term affordability and, importantly, get started with the home equity borrowing process now while home values are high and rates are relatively stable.
Yahoo
3 days ago
- Business
- Yahoo
HELOC rates today, June 17, 2025: Home equity line of credit rates barely budge
HELOC interest rates moved just a little higher today, yet home equity line of credit lenders aren't looking for any interest rate discounts from the Federal Reserve tomorrow. Still, second mortgage products remain in high demand. Since the Fed's first short-term interest rate cut last September, the prime rate, which banks use for their most preferred customers, has moved from 8% to 7.50%. HELOC lenders use the prime interest rate as a guidepost to all of their lending rates. The Fed hasn't triggered a rate cut so far this year, so lending rates have remained in a narrow lane. Now, let's check today's HELOC rates. Dig deeper: HELOC vs. home equity loan: Tapping your equity without refinancing This embedded content is not available in your region. According to Zillow, rates on 10-year HELOCs gained a meager five basis points to 6.75% today. The same rate is also available on 15- and 20-year HELOCS. VA-backed HELOCs were barely higher, up one basis point to 6.35%. Homeowners have a staggering amount of value tied up in their houses — more than $34 trillion at the end of 2024, according to the Federal Reserve. That's the third-largest amount of home equity on record. With mortgage rates lingering in the high 6% range, homeowners are not likely to let go of their primary mortgage anytime soon, so selling the house may not be an option. Why let go of your 5%, 4% — or even 3% mortgage? Accessing some of the value locked into your house with a use-it-as-you-need-it HELOC can be an excellent alternative. HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which today is 7.50%. If a lender added 1% as a margin, the HELOC would have a rate of 8.50%. However, you will find reported HELOC rates are much lower than that. That's because lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home. And average national HELOC rates can include "introductory" rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate. You don't have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit. The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat. Meanwhile, you're paying down your low-interest-rate primary mortgage like the wealth-building machine you are. This embedded content is not available in your region. Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000. That's an introductory rate that will convert to a variable rate later. When shopping lenders, be aware of both rates. And as always, compare fees, repayment terms, and the minimum draw amount. The draw is the amount of money a lender requires you to initially take from your equity. The power of a HELOC is tapping only what you need and leaving some of your line of credit available for future needs. You don't pay interest on what you don't borrow. Rates vary so much from one lender to the next that it's hard to pin down a magic number. You may see rates from nearly 7% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are. For homeowners with low primary mortgage rates and a chunk of equity in their house, it's probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Of course, you can use a HELOC for fun things too, like a vacation — if you have the discipline to pay it off promptly. A vacation is likely not worth taking on long-term debt. If you take out the full $50,000 from a line of credit on a $400,000 home, your payment may be around $395 per month with a variable interest rate beginning at 8.75%. That's for a HELOC with a 10-year draw period and a 20-year repayment period. That sounds good, but remember, it winds up being a 30-year loan. HELOCs are best if you borrow and pay back the balance in a much shorter period of time.
