Best HELOC Rates for May 2022

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Your home is your most valuable asset, as the saying goes. And right now, it may be worth more than ever.

Bolstered by rising home prices amid a competitive housing market, the total average equity of American homeowners increased by $3.2 trillion in Q3 of 2021, for an annual increase of 31.1%, according to data analytics firm CoreLogic. The average homeowner gained $56,700 in equity over the same period. This increase in home equity has sparked a resurgence of HELOC offerings among lenders, many of whom had dialed back on home equity lending during the COVID-19 pandemic.

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If you want to tap into your home equity for cash, a home equity line of credit (HELOC) is a great way to do it. HELOCs have relatively low interest rates compared to credit cards and personal loans, making them ideal for financing large expenses like home improvements, or consolidating high-interest debt. As an open line of credit you can continuously draw upon, HELOCs also provide additional flexibility.

If you want to see how a HELOC can fit into your financial plans, here’s everything you need to get started.

Best HELOC Rates for May 2022

Lender NameAPR RangeIntroductory APRLoan AmountDraw PeriodRepayment Period
Fifth Third Bank4% to 25%1.99% for 12 months$10,000 to $500,00010 years20 years
Bank of America4.11% to 24%N/A$15,000 to $1,000,00010 years20 years
Citizens Bank3.25% to 21%N/AStarting from $17,50010 years15 years
U.S. Bank3.7% to 18%N/A$15,000 to $1,000,00010 years20 years
PenFed Credit Union3.75% to 18%0.99% for 6 months$25,000 to $500,00010 years20 years
Connexus Credit Union4.49% to 15.9% 3.49% for 6 monthsStarting from $5,00015 years15 years

The APRs shown above are accurate as of May 3, 2022. The NextAdvisor editorial team updates this information regularly, though it is possible the APRs and exact terms of these HELOC offerings have changed since this page was last updated. 

Read more about these HELOC lenders and why we recommend them

What Is a Good HELOC Rate?

The current average HELOC rate for a $30,000 line of credit is 4.27 as of May 3, 2022, according to Bankrate

While market HELOC rates may fluctuate based on market conditions and the current broader interest rate environment, the specific HELOC rates you can get will largely depend on your loan-to-value ratio, creditworthiness, and other personal factors. 

The rate you get will usually be given as the prime rate — which can fluctuate — plus a margin, which is set by the lender based on your credit profile. If you have a high credit score and low loan-to-value ratio, you’ll have a better chance of getting a rate on the lower side of a particular lender’s rate range. 

Pro Tip

If you’re looking to borrow against your home equity but want a fixed interest rate and a fixed monthly payment, consider a home equity loan. Home equity loans typically have higher starting interest rates than HELOCs, but the interest rate is fixed for the duration of the loan, giving the borrower more stability. 

What Experts Are Saying About HELOCs in 2022

During the height of the COVID-19 pandemic and the ensuing period of economic uncertainty, it became more difficult to get a HELOC as many lenders tightened their credit requirements or stopped offering home equity lending at all. 

In any economic downturn, such as that seen during the pandemic, lenders are much more restrictive with credit, says Greg McBride, chief financial analyst at Bankrate, which like NextAdvisor is owned by Red Ventures. Credit and loans most prone to loss — including unsecured debt and secured debt in second-lien positions, like HELOCs — were among the first to see banks pull back.  

But now, more than two years after the beginning of the pandemic, HELOCs are once again becoming a good option for consumers looking to take advantage of their home equity. “Credit is much more available on home equity than was the case at the onset of the pandemic,” McBride says. 

Lenders are more willing to accept HELOC applications now for two main reasons, McBride explains. “Homeowners have a lot more equity, and there’s a lot less risk for lenders with delinquencies and defaults being low.”

Low mortgage rates, rising demand, and low supply drove up home prices in 2020 and 2021, leaving many homeowners with increased home equity. The average annual gain in home equity per borrower in 2021 was $56,700, according to CoreLogic. Meanwhile, the share of mortgages with negative equity — meaning the loan amount is larger than the amount the house is worth — fell to record lows. 

Aside from increased home equity, there’s another factor that homeowners should take into consideration when deciding whether to get a HELOC this year: rising interest rates.

Mortgage rates reached historic lows during the height of the pandemic, prompting many homeowners to refinance their mortgage to a lower rate or get a cash-out refinance to tap into their home equity. But mortgage rates have steadily increased since the beginning of 2022 due in part to inflation and lenders’ anticipation of the Federal Reserve raising interest rates

“That’s why you are seeing — and will see — a renewed interest in home equity lines of credit,” says McBride. “Because if you’ve already refinanced your mortgage, you’re not going to refinance it again at a higher rate just to get at the equity. You’ll look instead to that second lien, that home equity line of credit, as a way to tap equity.”

It’s important to remember that the broader rate environment will affect HELOC rates as well. Since HELOCs are variable-rate products, it’s important to keep in mind how a rising rate environment like the one we’re currently in could affect your future payments. Before opening a HELOC, make sure your budget is prepared for potential rate increases over the life of your HELOC. Also be sure you know whether your lender has a maximum rate cap, and what it is.  

How Does a HELOC Work?

A home equity line of credit (HELOC) lets you borrow against the available equity in your home — just like a home equity loan. Your home is used as collateral, meaning if you default on your payments, the lender can seize your home. 

A HELOC is a type of revolving credit, similar to a credit card. This means you’ll be able to access funds from your HELOC as you need them, instead of taking out a set amount at the onset like an installment loan. There’s usually a minimum withdrawal amount based on the total amount of your credit line. 

HELOCs typically are divided into two periods: a draw period and a repayment period. During the draw period, you may take funds from your HELOC up to the amount of your credit line. On interest-only HELOCs, you’re only required to make monthly payments toward the accrued interest, not the principal, during the draw period. 

Once the draw period is over, you can no longer withdraw money and you enter the repayment period, where you begin paying back both principal and interest. While terms may vary by lender, the draw period typically lasts five to 10 years, while the repayment period usually lasts 10 to 20 years. 

HELOCs traditionally have variable-rate APRs, meaning your interest rate adjusts over time based on the benchmark U.S. prime rate. The prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, according to the Wall Street Journal

Fixed-Rate HELOCs

Some lenders may offer a fixed-rate HELOC or rate-lock option, but it’s less common than variable-rate HELOCs. Other lenders may allow you to convert some or all of your balance on an existing HELOC to a fixed-rate option.

In a rising interest rate environment, this option can help protect consumers from unexpected increases to their rate — and by extension, monthly payment — in the future. However, fixed-rate HELOCs typically have higher starting interest rates than variable-rate HELOCs.

Fees and Closing Costs

Although taking out a HELOC is less expensive than taking out a new mortgage, it still comes with some closing costs and fees, both one-time and ongoing.

Common fees include:

  • Application or origination fees are charged when you apply for or open a HELOC.
  • Appraisal fees cover the cost of a home appraisal, which is required for most HELOCs as your house serves as collateral for the loan.
  • Annual fees or membership fees are regularly-occurring fees charged by some HELOC lenders to keep the line of credit open.
  • Early termination fees are charged by some lenders if you pay off and close the HELOC before a certain amount of time has passed.

Be sure to check with your lender to find out the specific fees you’ll be charged.

Some lenders may advertise “no-fee HELOCs” or offer to pay some or all of the closing costs and fees on your behalf. These offers can help you save money upfront, but be sure to read the fine print. Often, you’ll be forced to pay back any fees the lender paid on your behalf if you close the HELOC before a certain date.

Common HELOC Uses

The funds from a HELOC can be used for virtually any purpose, but some uses are better than others. Some of the most common uses for a HELOC include:

  • Home improvements: Due to their large loan amounts and relatively low interest rates, HELOCs are a popular option to finance home improvements. You can deduct any interest paid on a HELOC (or home equity loan) if it is used to buy, build, or substantially improve the home that secures the loan. 
  • College expenses: HELOCs can be a way to pay for your or your children’s college expenses, but experts recommend maxing out grants and federal student loans — which have much stronger borrower protections — before turning to any private option, including HELOCs. Keep in mind that unlike a student loan, a HELOC is secured by your house, meaning that if you default, you could lose your home. Be sure to weigh the pros and cons carefully before taking this option. 
  • Debt consolidation: If you have high-interest debt, such as credit card debt or high-interest personal loans, you may be able to save on interest if you use a HELOC — which typically has a lower interest rate — to consolidate that debt. Depending on your personal situation, a balance transfer credit card or debt consolidation personal loan may be a better fit for your goals.
  • Other ongoing expenses: If you have other long-term ongoing expenses, such as medical expenses, a HELOC can be a way to finance them. However, depending on the specific need, other options may be able to give you the funding you need without needing to put up your home as collateral. 

Pros and Cons of HELOCS

Pros

  • Usually have lower interest rates than other financing methods like personal loans or credit cards

  • You can withdraw money anytime during the draw period and you only have to pay for the amount of money you actually use, plus interest

  • There are few restrictions on what the money can be used for

  • There are often discounted rate offers for an introductory period

Cons

  • HELOCs can come with a minimum withdrawal amount

  • The interest rate is variable, meaning your interest rate and monthly payment could increase unexpectedly

  • There can be fees associated with a HELOC: annual fees, application fees, appraisal fees, and other closing costs

  • HELOCs are secured by your house, meaning you could lose your home if you default

How to Apply for a HELOC

  1. Know your financial situation. Before you apply for a HELOC, be sure you have a plan for how you’ll use the funds and how you’ll pay it back. You’ll also want to get an idea of your credit score and current loan-to-value ratio, as those factors can influence whether you qualify for a HELOC and what rates you could get.
  2. Research lenders and compare rates. First, narrow your search down to a list of lenders who meet your needs in aspects other than rates — whether that means they have good customer service, in-person branches near you, or simply offer the specific product you’re interested in. Then, compare quotes from the lenders who meet your basic criteria to find the best rate.
  3. Fill out an application. Most lenders offer an online application for a HELOC, although some may require you to visit an in-person branch or apply over the phone. In the application, you’ll typically need to fill out some information about yourself, the house you’re using to secure the HELOC, and your desired credit line amount. 
  4. Complete the verification process. Depending on what information you fill out in your application, you may need to supply additional verification — such as proof of employment or proof of income — to the lender. The lender may also pull your credit score from the credit bureaus as part of your application, which could temporarily lower your credit score by a few points. Some lenders may also require an appraisal of the home you’re using as collateral to assess its value. 
  5. Wait for the HELOC to be approved. After you’ve submitted your application and all supporting documents, you’ll need to wait for the lender to process and approve your application. This typically takes a few weeks to a month. After you close on your HELOC, your line of credit will be open and you can begin withdrawing funds. 

How to Get the Best HELOC Rate

There are several factors you should consider when searching for a HELOC, to ensure you get the best rate: 

  • Your credit score and history: Lenders will pull your credit score to determine your creditworthiness, just as they would for any other type of credit application. Having good credit, or improving your credit before you apply, can increase your chances of getting a more favorable rate.
  • Your home equity: The more home equity you have, the more it will positively affect your loan-to-value ratio (LTV). LTV is a metric used to measure the relationship between how much you owe on your mortgage and the market value of your home. The more equity you have, the lower your LTV will be and the better you’ll look to lenders. 
  • The lender: Different lenders offer different rates. Make sure to shop around and consider all of the options for HELOC rates, and don’t discount local credit unions or banks.

HELOC vs. Home Equity Loan

Home equity loans are another popular type of home equity financing. With a home equity loan, you take out a one-time loan with a set loan amount, loan term, and interest rate, then pay it back in monthly installments. The disbursement and payment structure works much the same as a personal loan, except a home equity loan is secured by your house while a personal loan is unsecured.

Home equity loans can be good if you want to borrow a single, lump sum of cash and you want a fixed monthly payment that won’t change based on market rate changes. 

Here are some other key differences between a HELOC and a home equity loan:

HELOCHome Equity Loan
Revolving credit lineFixed-term loan 
Variable APR (usually) Fixed APR
Pay only what you spendPay full loan amount
Set draw periodFunds for as long as they last
Ongoing cashLump sum at onset of loan

HELOC vs. Cash-Out Refinance

Cash-out refinances are also a common way to tap into your home equity for cash, but they work a bit differently than home equity loans or HELOCs. While home equity loans and HELOCs act as a second mortgage on your home, a cash-out refinance replaces your current mortgage with a new one. With a cash-out refinance, you’ll take out a mortgage with a larger loan amount than what you currently owe, use it to pay off your current mortgage, and pocket the difference as cash.

When mortgage rates were low during 2020 and 2021, cash-out refinancing was the best option for most people to access their home equity. But with mortgage rates now on the rise, cash-out refinances are becoming less advantageous, especially if you’ve already refinanced recently and don’t want to give up your current mortgage rate. But, they can still be a good option in certain situations, so be sure to crunch the numbers to see what’s best for you. 

Here are some other key differences between a HELOC and a cash-out refinance:

HELOCCash-Out Refinance
A second loan on top of your current mortgageReplaces your current mortgage
Variable APR (usually) Fixed APR (except in the case of an adjustable-rate mortgage)
Two monthly payments: one to your HELOC lender, one to your primary mortgage lenderOne monthly payment to your mortgage lender
Does not affect your primary mortgage’s loan termChanges your primary mortgage’s interest rate and resets the loan term
Ongoing cashLump sum at onset of loan

Best HELOC Lenders of May 2022

Fifth Third Bank

Good for smaller credit line sizes

Although Fifth Third is a national bank, its HELOCs are only available in certain states. You’ll have to visit a branch in person to fill out an application, but this process might not be inconvenient for existing Fifth Third customers. Another nice perk for Fifth Third customers is that Fifth Third Equity Flexline Mastercard® holders can earn 1 Real Life Reward® point for every $3 spent on purchases using their HELOC.

For a primary residence, a Fifth Third HELOC can be up to $500,000, but the maximum for secondary residences is $250,000. Your annual fee is waived for the first year, but $65 after that (unless you’re a Preferred checking customer). Fifth Third will pay your closing costs. There’s a $95 fee to fix your HELOC rate. You can qualify for interest-only payments for the first 10 years, but doing so will mean that you’ll need to pay more during the repayment period.

Fifth Third Bank
States availableIllinois
Indiana
Kentucky
Michigan
North Carolina
Ohio
West Virginia
Florida
Georgia
South Carolina
Tennessee
Loan Amount Range$10,000 to $500,000 for first lien position (maximum of $250,000 for second lien position)
Draw Period10 years
Repayment Period20 years
Maximum LTVNot specified
AutoPay discount?Yes
Fixed rate/rate lock option?Yes (fees apply)
Minimum amount of time HELOC must remain open?Not specified
Closing costs/feesNone
Other requirementsAvailable exclusively for Fifth Third customers with an eligible checking or savings account

Bank of America

Good for additional rate discounts

Bank of America is the second-largest bank in the U.S. with over 4,000 locations, making this lender very accessible. You can access its home equity line of credit offerings online or in person. There are no HELOC application fees, closing costs (on lines up to $1,000,000), or annual fees. There’s also no fee to convert a withdrawal from your HELOC into a fixed-rate loan (fixed-rate HELOC). 

The minimum HELOC amount that can be converted at account opening is $5,000, and the maximum is 90% of your line amount with a minimum loan term of 1 year. Bank of America’s minimum line amount is $25,000. Other lenders offer lower line minimums, so you may want to look elsewhere if your project or reason for getting a HELOC will not require up to $25,000. Lines go up to $1,000,000 for primary residences, or $500,000 for secondary residences. 

Plus, there are a few ways you can qualify for discounts on your HELOC interest rate:

  • Autopay discount of 0.25% for setting up and maintaining regular payments from an eligible Bank of America account.
  • “Initial draw” discount of 0.6% for drawing a minimum of $60,000 at HELOC account opening and maintaining a minimum balance of $60,000 for at least the first 3 full billing cycles (with the exception of your payments).
  • Preferred Rewards members discount of up to 0.375%.
Bank of America
States availableAll 50 states and D.C.
Loan Amount RangeGenerally $25,000 to $1,000,000 (may be $15,000 to $500,000 in some states)
Draw Period10 years
Repayment Period20 years
Maximum LTVMust apply to find out
AutoPay discount?Yes
Fixed rate/rate lock option?Yes
Minimum amount of time HELOC must remain open?10 years — when you pay your HELOC balance down to zero, the account will remain open if it’s still in its draw period. Once your HELOC is in the repayment period, your account will be closed whenever the final balance is paid off.
Closing costs/feesNo application fees, no annual fees, and no closing costs on lines up to $1,000,000 (For line amounts greater than $1,000,000, you may be required to pay certain closing costs)
Other requirementsA full walk-through to determine the value of your home might be needed (though not always). If so, an independent appraiser will contact you to set up the best time to schedule the walk-through.

Citizens Bank

Good for 15-year repayment terms

Headquartered in Rhode Island, Citizens Bank mainly serves homeowners in the Mid-Atlantic region of the United States. Citizens Bank acquired 80 branches of fellow bank HSBC in February 2022, so existing HSBC customers may have new or additional HELOC options once the transition is complete.

Residents of the 15 states in which Citizens Bank HELOCs are available will appreciate the bank’s lack of application fees or closing costs. However, there is a $50 annual fee (waived in the first year) to keep the HELOC open. Applicants may apply in person, online, or over the phone.

HELOC borrowers may choose to make interest-only payments or principal and interest payments during the 10-year draw period. There’s also the flexibility to make additional principal payments at any time during their draw period regardless of repayment type. Those who sign up for automatic payments may benefit from a 0.25% autopay discount.

Citizens Bank
States availableConnecticut
Delaware
Illinois
Indiana
Kentucky
Massachusetts
Maine
Michigan
New Hampshire
New Jersey
New York
Ohio
Pennsylvania
Rhode Island
Vermont 
Loan Amount RangeStarting from $17,500
Draw Period10 years
Repayment Period15 years
Maximum LTVNot specified
AutoPay discount?Yes
Fixed rate/rate lock option?Not specified
Minimum amount of time HELOC must remain open?Not specified
Closing costs/feesNone
Other requirementsAppraisals are required to take out a HELOC, but Citizens Bank will pay for the appraisal

U.S. Bank

Good for no closing costs

With physical locations in 26 states and lending available in 50 states, U.S. Bank is the 6th largest mortgage lender in the country. It offers an extensive menu of mortgage products available to choose from, and it may offer qualified HELOC borrowers an introductory APR during special promotional periods. 

There are three ways to apply for a U.S. Bank HELOC. You can complete a basic application online, over the phone, or by visiting one of 2,000 branches. There are no closing costs, but an annual fee of up to $90 may apply after the first year (and may be waived with a U.S. Bank Platinum Checking Package). Repayment options vary based on creditworthiness, but do include the possibility of interest-only payments. There’s a 0.50% autopay discount.

U.S. Bank
States availableAll 50 states
Loan Amount Range$15,000 to $750,000, depending on your credit history, available equity in the property, and your current monthly debt. The maximum allowable line amount in New York is $100,000. Borrowers may access up to $1 million for properties in California.
Draw Period10 years
Repayment Period20 years
Maximum LTVNot specified, but promotional financing may increase for LTVs over 60%
AutoPay discount?Yes
Fixed rate/rate lock option?Yes
Minimum amount of time HELOC must remain open?30 months to avoid an early closure fee of 1% of the original line amount (maximum $500)
Closing costs/feesNone
Other requirementsBorrowers with a 730 FICO or higher have the best chances for good APR

PenFed Credit Union

Good for residents of D.C. and U.S. territories

The Pentagon Federal Credit Union is a full-service financial institution that was established in 1935. Based in McLean, Virginia, PenFed is now the third-largest credit union in the U.S. It has a presence in all 50 states, plus the District of Columbia, Guam, Puerto Rico, and Okinawa. Prospective members formerly had to make a donation to a military charity, but now membership is open to anyone who makes a $5 deposit into a PenFed savings account. 

When it comes to HELOCs, qualified borrowers could benefit from a promotional APR for the first six months of their draw period. PenFed pays most, but not all, closing costs associated with an interest-only HELOC. Covered costs could include pulling a credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. However, members are responsible for paying all appraisal costs and notary fees, plus city, county, and state taxes if the property is located in one of the following states:

  • Florida
  • Louisiana
  • Maryland
  • Minnesota
  • New York
  • Tennessee
PenFed Credit Union
States availableAll 50 states, plus D.C., Guam, Puerto Rico, and Okinawa
Loan Amount Range$25,000-$500,000
Draw Period10 years (with the option for interest-only payments)
Repayment Period20 years
Maximum LTV90% for owner-occupied homes, 80% for non-owner-occupied homes
AutoPay discount?Not specified
Fixed rate/rate lock option?Yes
Minimum amount of time HELOC must remain open?Not specified
Closing costs/feesAnnual fee of $99 that will be assessed on each account anniversary if $99 in interest was not paid during the preceding 12-month period
Other requirementsMinimum credit score of 660

Connexus Credit Union

Good for longer draw periods

Connexus Credit Union is a full-service financial institution offering mortgages in 47 states. Headquartered in Wausau, Wisconsin, the credit union serves 390,000 members but only has four Connexus branches. Membership is open to anyone who’s a member of the credit union’s affinity groups, residents of certain communities or counties, or anyone who makes a $5 donation to the credit union’s partner nonprofit, the Connexus Association

Connexus provides a unique option for home equity lines of credit because of its non-traditional draw and repayment period. You’ll have 15 years to draw from your HELOC — five more years than the traditional 10-year period. But on the flip side, you’ll also have five fewer years to repay your HELOC since Connexus has a 15-year repayment period (shorter than the traditional 20 years).

Connexus Credit Union
States availableAll states except Maryland, Texas, Hawaii, and Alaska.
Loan Amount RangeStarting from $5,000
Draw Period15 years
Repayment Period15 years
Maximum LTV80% 
AutoPay discount?Not specified
Fixed rate/rate lock option?No
Minimum amount of time HELOC must remain open?Not specified
Closing costs/feesClosing costs range from $175 to $2,000
Other requirementsNo home appraisal is required

How We Chose These Lenders

This list does not represent the entire market. To find the best HELOC lenders, we began by looking at the most commonly reviewed and searched for lenders on the market. Then, we cut the list based on the following criteria:

  • Transparency: We eliminated any lenders that don’t make information on rates and fees easy to find on their websites. However, the rates themselves did not factor into our evaluation. Your rate will depend on personal factors like credit score, so a lender’s full rate range may not be a good indication of the exact rate you can get. We recommend comparing quotes from multiple lenders in order to get the best rate.
  • Accessibility: Since we want this list to be applicable to as many people as possible, we eliminated any banks or credit unions with strict membership requirements that are not available to everyone. Some of the credit unions on our list do have certain membership requirements, but they can easily be fulfilled by the general public regardless of location or affiliation with any group. If you are part of a certain demographic or affinity group — such as veterans — you may benefit from looking at affinity-specific credit unions in addition to the lenders on this list. For example, Navy Federal Credit Union is a well-known credit union serving military personnel that offers HELOCs and other home equity products.
  • Availability: Because HELOC lending tightened greatly during the pandemic, some lenders temporarily stopped accepting HELOC applications and have not yet restored their home equity offerings. We removed those lenders from our list for the time being to reflect the current situation, but we will periodically review this list and make adjustments as lenders change their policies.

Home Equity Line of Credit FAQs

Who is a HELOC good for?

A HELOC can be a good option for homeowners who have built up equity in their home and want to use that equity to secure long-term, ongoing financing at a relatively low interest rate. The better your credit and the more equity you have, the better rate you will likely qualify for.

A HELOC’s flexible nature makes it ideal for ongoing projects or projects where you don’t know the full cost when starting out. However, be sure you’re not overly relying on HELOCs (or any other form of debt) as an alternative to an emergency fund or as a way to finance an unsustainable lifestyle.

You should only get a HELOC if you have a plan and the ability to pay off the debt you accrue using it. For most homeowners, a HELOC is in effect a second mortgage, meaning you could lose your home if you are unable to repay the money you owe on the HELOC. You’ll also be unable to sell your house until the HELOC is paid off in full.

Which is better: A HELOC or a home equity loan?

Whether a HELOC or home equity loan is better depends on how you plan to use the money. A home equity loan is an installment loan against the value of your home, paid to you in a lump sum. That makes it an attractive option for large, one-time expenses, such as getting a new roof or funding a large-scale home renovation.

With a home equity line of credit, or HELOC, you are given credit up to a predefined maximum amount, similar to how a credit card works. You can tap into that credit over a defined period of time for ongoing expenses such as multiple projects spread over a period of time, or to consolidate higher-interest debt.

Is a HELOC a good idea?

Homeowners gained a lot of equity in the past year, thanks to a competitive housing market that drove up home prices. If you want to take advantage of your increased equity and need cash, HELOCs can give you an easy way to access your home equity with interest rates lower than many other types of debt, such as credit cards and personal loans.

Are HELOC rates fixed?

Most HELOCs have variable rates, but you may sometimes have the option to switch it from a variable-rate HELOC to a fixed-rate one. A fixed-rate HELOC locks in some or all of the remaining balance of your variable-rate HELOC at a particular interest rate. Essentially, this converts your HELOC to a fixed-rate loan after your draw period has ended, which can be helpful in a rising rate environment.

Is a HELOC tax-deductible?

If you use your HELOC for home improvements and meet certain requirements, the interest on the HELOC will be tax-deductible. If you use your HELOC for other purposes, such as consolidating debt, the interest is not tax-deductible.

Will a HELOC hurt my credit score?

Like any type of debt, how a HELOC affects your credit score depends largely on how you use it. Failing to make on-time payments will hurt your credit score, and defaulting on the loan altogether will have an even bigger negative impact (and could cost you your home). However, consistently paying your bills on time will help your credit score.

Since a HELOC is a revolving line of credit, it can also affect your credit utilization ratio — your total debts divided by your total available credit. You can keep your credit utilization ratio low by only using a small percentage of your total available credit line.

When you open a new HELOC, the lender will perform a hard credit check, which could lower your credit score by a few points. However, this likely won’t have a huge impact unless you’re opening an excessive number of new accounts.

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