Here’s what a $150,000 HELOC costs monthly now that rates have dropped

In the interest rate climate of recent years, borrowers could be forgiven if they sold products with variable rates. These products have become less attractive as inflation soared and the Federal Reserve issued a series of rate hikes to keep it under control. This action resulted in higher interest rates on all loan products and made monthly payments on variable rate products increasingly expensive and difficult to budget for.

But that was then.

Now with inflation at its lowest level in 3 years and hovering barely above the Federal Reserve’s 2% target, the Fed is preparing to embark on a series of interest rate cuts. The first 50 basis point reduction was published in September. Further reductions also appear likely for November and December. And now borrowers looking for a large but inexpensive source of financing once again have options, including Home Equity Lines of Credit (HELOC). The average owner being in possession of approximately $330,000 in equity now, a HELOC of about half that amount could both help them cover a series of major expenses while allowing them to retain a good portion of the equity for future use.

But how much will a $150,000 per month HELOC cost now that rates have dropped? This is what we will calculate below.

Find out what HELOC interest rate you could qualify for here.

Here’s what a $150,000 HELOC costs monthly now that rates have dropped

THE average HELOC interest rate is 8.73% as of October 14. Here is what monthly payments would be linked to two currents repayment deadlinesassuming that the rate remains constant throughout the duration of the credit line:

• 10-year HELOC at 8.73%: $1,878.29 per month
• HELOC 15 years at 8.73%: $1,497.40 per month

So even though a $150,000 HELOC now comes with relatively inexpensive monthly payments, they could become even more affordable as the year progresses. Here’s what they would be if today’s interest rates fell 25 basis points, as many expect the federal funds rate to fall next month:

• 10-year HELOC at 8.48%: $1,858.18 per month
• HELOC 15 years at 8.48%: $1,475.35 per month

And here’s what they would be like if they fell in December again (HELOC Rates Change Monthly) by 25 additional basis points:

• 10-year HELOC at 8.23%: $1,838.19 per month
• HELOC 15 years at 8.23%: $1,453.47 per month

So if you open a $150,000 HELOC now, you could see your monthly payments decrease by about $40 with 10-year loans and a little more with 15-year loans. That said, HELOC rates are unlikely to drop by a specific amount like the federal funds rate, so these numbers could look slightly different once the rate cuts are made official.

Start exploring your current HELOC options online now.

Risks to be aware of

As noted above, it would be a mistake to assume that HELOC rates will move exactly like the federal funds rate. So don’t assume that rates fall exactly in proportion to this rate. It’s also important to remember that a variable rate works both ways, and the rate (and your payments) can go up as quickly as it can go down. Finally, it is essential to remember that your home serves as collateral in these unique borrowing circumstances. So crunch the numbers with a variety of realistic rates, so you only borrow as much as you can easily afford to repay. If you borrow too much, you could jeopardize your homeownership.

The essentials

Currently, a $150,000 HELOC comes with approximate monthly payments of between $1,500 and $1,880 for qualified borrowers. And while these payments are likely to decline as interest rates are cut, they could also increase if unforeseen economic factors cause a pause in rate cuts. So prepare for a number of scenarios in advance. By calculating your potential costs now, you will be better positioned for success with your home equity loan, both now and in the months and years to come.