Current HELOC Rates: May 4, 2023

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This week, the average interest rates for a HELOC remain low. This means a HELOC could allow a homeowner to save money on borrowing for construction costs or consolidating debt, when compared to a personal loan or credit card.

Current HELOC Rates

Source: Bankrate

10-year HELOC Rates

Rates for 10-year HELOCs held steady throughout April, keeping just shy of 7%. This is the lowest rate we've seen in the past three months, down from a high of 7.67%. 

20-year HELOC Rates

Rates for 20-year HELOCs have fluctuated a bit more than the shorter-term loan, ranging from a high of 8.36% in mid-March to a low of 7.71% in February. Currently, rates are toward the higher end — at 8.23% — significantly higher than average rates for a 20-year fixed-rate mortgage.

30-year HELOC Rates

Rates for 30-year HELOCs are the lowest of the three, holding steady for the past three months with no fluctuation between weeks. Currently, the rates for the longest and shortest loan terms are very similar. While you can typically take out a HELOC starting at about five years, 30 years is the maximum term.

Why are HELOC Rates so High?

HELOC rates are so high because the rates for home equity lines of credit change somewhat in accordance with the prime rate, which closely follows the federal funds rate that the Federal Reserve has been raising for months to try and control inflation. The federal funds rate is high, and the prime rate is high, so it's not surprising that HELOC rates are high.

While HELOC rates might feel high, they're not as bad as they've been in recent months.

What is a Home Equity Line of Credit?

A home equity line of credit (HELOC) is a type of second mortgage that homeowners can use to get cash to fund home improvement projects, debt consolidation, or other financial goals. It works not unlike a credit card, but the money you're borrowing comes from your home's equity.

For homeowners looking to get more from their home's equity, Insider keeps track of the best HELOC lenders.

Is a HELOC Worth it Right Now?

In this rate environment especially, a HELOC can be worth it if you're looking to leverage your home's value to cover a big purchase like a home renovation. Many homeowners gained a lot of equity over that past few years as home prices increased at an unprecedented rate. But because rates are so high now, tapping into that equity can be expensive. 

Should I get a HELOC? 

If you're looking to tap into your home's equity, a HELOC might be the best way to do so right now — especially considering how much home prices have increased over the past few years. Unlike a cash-out refinance, you won't have to get a whole new mortgage with a new interest rate, and you'll likely get a better rate than you would with a home equity loan.

But HELOCs don't always make sense. It's important to consider the pros and cons.

Pros

• Only pay interest on what you borrow
• Typically have lower rates than alternatives, including home equity loans, personal loans, and credit cards
• If you have a lot of equity, you could potentially borrow more than you could get with a personal loan

Cons

• Rates are variable, meaning your monthly payments could go up if rates increase
• Taking equity out of your home can be risky if property values decline or you default on the loan
• Minimum withdrawal amount may be more than you want to borrow