HELOC Rates FAQs & Answers
With the current housing market, homeowners are capitalizing on increased home equity and looking into how they can use that value for other areas in their life. A home equity line of credit, or HELOC*, allows you to tap into the equity in your home and use it for renovations or a major purchase. If you don’t have the cash on hand to complete home improvements, take a vacation, or have other bills to pay, a HELOC gives access to the money that’s already in your home.
Take a look at our answers to common questions, and then connect with our team to start your HELOC application today!
What goes into a HELOC rate?
The rate on a HELOC is the amount of interest that is being charged on the loan, which is a percentage of the principal. Usually, the rate is determined on an annual basis, or annual percentage rate (APR). Lenders use various factors to determine your interest rate, such as your credit score and the current market.
Home equity lines of credit have two phrases, the draw phrase and the repayment phrase. The draw phrase is the first 10 years where you’re withdrawing from the line of credit and paying the interest rate. The repayment phrase is the last 20 years where you can no longer withdraw from the line of credit and pay the principal on top of the interest.
What goes into home equity line of credit rates?
HELOC interest rates are only available at Guaranteed Rate with a fixed interest rate.
A home equity line of credit with a fixed interest rate allows you to lock in your loan so that your payments won’t fluctuate with the interest rate market. This enables borrowers to know that their costs are fixed after the draw period.
How does a HELOC rate compare to a mortgage rate?
A mortgage is used to finance the purchase of a home while a HELOC is used after you have a mortgage and good home equity. With both loans you use your home as a collateral.
However, HELOC rates tend to be higher than mortgage loan rates. A HELOC rates is higher because if your home goes into foreclosure, the mortgage lender is paid before the HELOC lender. The HELOC lender has to consider more risk, so they often have higher rates.
How important is my credit score for a HELOC rate?
Credit score** is an aspect that your lender will look at when determining if they will loan you the money that you are requesting. The higher your score the better your chance at being approved for a HELOC loan. If your score is not that great, it still doesn’t mean you cannot get approved. If all other areas are good (debt-to-income, sufficient funds, etc) then you may still receive the loan.
What other factors go into HELOC rates?
The other factors that can impact the interest rate on a home equity line of credit really aren’t that different from the factors that impact a mortgage rate, with the difference that a HELOC rate is based on the prime rate instead of the mortgage rate market.
Your credit score, the appraisal of your home, interest rates, and debt-to-income ratio, and other factors are looked into by your lender when applying for a HELOC.
Where can I get the current HELOC rates?
Guaranteed Rate maintains HELOC rates with updates throughout the day as rates adjust. Discover the current rates for a home equity line of credit, and get started on your renovations or major purchase!
I have questions about home equity. How can I connect to a HELOC expert near me?
A home equity line of credit allows you to take out a large sum of money to use for anything, whether it is home improvements, medical expenses, or some other large expense. We have experts that are ready to help you with any questions you may have about home equity. Let us help you get started today.
* Guaranteed Rate home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Utah, Kentucky, South Carolina, Hawaii, Texas, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Guaranteed Rate for more information and to discuss your individual circumstances. Restrictions Apply.
**Guaranteed Rate does not provide credit counseling or credit repair services.