Average HELOC and Home Equity Loan Rates for the Week of June 8, 2022

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Rates on home equity loans and lines of credit (HELOCs) moved in different directions this week.

These are the average rates as of June 8, 2022:

type of loan This week’s rate Last week’s rate Difference
$30,000 HELOC 4.45% 4.35% 0.10%
$30,000 10-year home equity loan 6.71% 6.73% 0.02%
$30,000 15-year home equity loan 6.68% 6.69% 0.01%

How these rates are calculated

These rates come from a survey conducted by Bankrate, which like NextAdvisor is owned by Red Ventures. Averages are determined from a survey of the top 10 banks in the top 10 US markets.

What’s Happening to Home Equity Loans and HELOC Rates?

Experts say you should expect interest rates on home equity loans and HELOCs to rise through the end of 2022. For HELOCs that base their variable rate on the prime rate, those changes are fairly easy to predict, since the Prime rate tends to follow increases shortly. fixed-term interest rates by the Federal Reserve. The Fed is expected to keep raising its benchmark rate to combat high inflation. “We are in a rising rate environment,” Vikram Gupta, head of fair housing at PNC Bank, told us. “It’s tied to an index that’s going up, ergo the rate will go up.”

Interest rates for home equity loans are pegged more like mortgage rates, and are also expected to continue to rise as banks’ borrowing costs rise. One factor that could slow that down is if recession fears affect interest rates, Rob Cook, vice president of marketing, digital and analytics at Discover Home Loans, told us. “My view is that rates will be flat or trend higher over the course of this year.”

Another notable trend with home equity loans is that consumers are increasingly turning to these products to borrow money. Part of that is due to recent dramatic increases in mortgage rates, which have made cash-out refinances less attractive. Cash-out refinances were very common in recent years as mortgage rates were at record lows and home prices rose, but mortgage rates have risen about two percentage points since the start of the year, which makes it much less likely that consumers will want to take on a worse mortgage rate just to get some cash.

What are Home Equity Loans and HELOCs?

When your home is worth more than you owe on mortgages and other home loans, that difference is called equity. With a home equity loan, or HELOC, you use that collateral as collateral to borrow money, often for large home improvement projects or other major expenses.

pro tip

Be careful when taking out home equity loans. If the value of your home falls and you try to sell it, you may end up owing more than you receive at closing.

Home Equity Loans and HELOCs work differently:

Home Equity Loans They work similarly to a fixed-rate mortgage, in which you borrow a lump sum of cash up front and pay it back in installments over a set number of years at a set interest rate.

HELOC they are more like credit cards, in that the bank gives you a maximum amount you can borrow at one time during a withdrawal period (a line of credit) and you can take something out, pay it back, and borrow more until the end of the withdrawal period. You will pay interest only on what you borrow. The interest rate is usually variable, meaning it will change over time from the going rate, usually based on a benchmark such as the Prime Rate published by the Wall Street Journal.

What consumers need to know about home equity loans and HELOCs

The most important thing to know about home equity loans and HELOCs is that, like a mortgage, they are secured against your home. That means if you don’t pay the money back, the bank can take your house. That makes it vital to be careful when you borrow. “If it’s not a need and it’s just some kind of desire or longing, you really should ask yourself: Is this something that is wise?” Linda Sherry, director of national priorities for Consumer Action, a national advocacy group, told us.

It’s also good to understand that just because your home has increased in value doesn’t mean it will stay that way forever. While real estate values ​​generally tend to rise over time, they can fall. Your market could also see prices drop while national trends are up. “I think you have to look at it as if the amount you could sell your house for might go down in the future and you don’t want to borrow too much because you’d have to pay back an unusually large amount at closing. adds up,” says Sherry. “You could end up underwater in a really bad scenario, where at closing you owe more than you were able to actually sell the house.”

If you’re aware of the risks and know you can pay it back, home equity loans and HELOCs can provide lower interest rates than other types of loans. Experts say it’s wise to be careful with any type of loan, and only do so in situations where you’re sure you’ll have the cash in the future to repay.

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