chavalit0777/Getty Images
Home Equity Borrowing has traditionally been one of the cheapest ways to access large sums of money. And this profitability has been particularly pronounced in recent years due to rising interest rates on everything from mortgages and personal loans to credit cards, which are now near a record high of 23% in average. However, home equity loans And Home Equity Lines of Credit (HELOC) are still in the a single digit. Now with a middle finger drop in interest rates already released earlier in September, and with other potential discounts being discussed for November and December, they could get even cheaper.
Currently, home equity loans are less expensive than HELOCs. And they have the added benefit of a fixed interest rateso borrowers can easily determine their exact monthly costs. But what would be a $20,000 Home Equity Loan monthly cost now that interest rates have been reduced? This is what we will detail below.
Start by seeing how low a home equity loan rate you could get here.
How much would a $20,000 per month home equity loan cost now that rates are reduced?
Unlike HELOCs, which have variable rates that change monthly, making budgeting difficult to predict, the rate on a home equity loan will stay the same throughout the repayment period unless refinanced. Knowing that, here’s what borrowers could expect to pay over two common repayment periods using current averages for each:
- Home equity loan rate fixed over 10 years at 8.50%: $247.97 per month
- Home equity loan rate fixed over 15 years at 8.41%: $195.89 per month
It is essential to note that home equity loan rates change frequently. The rates above, for example, were 8.56% for the 10-year option and 8.49% for the 15-year loan earlier this week. It is therefore useful to closely monitor the climate to find opportunities to exploit. Every basis point reduction helps, especially when you’re looking for a fixed-rate product that will take 10 years or more to pay off.
Get started with a home equity loan now.
What about HELOCs?
In today’s downturn, some may consider looking at a HELOC instead of a home equity loan. This is because HELOC variable rates can and likely will decrease each month as rates fall. And HELOCs won’t need to be refinanced for borrowers to get that lower rate, because they will simply adjust on their own.
That said, HELOC rates can go up as easily as they can go down, so borrowers will need to weigh this inherent risk against the security of a home equity loan. And, right now, HELOCs have an average rate of 8.94%, about half a percentage point higher than the average home equity loan rate. So it may be less beneficial to wait for the rate to drop than to simply secure a lower home equity loan rate.
The essentials
A $20,000 home equity loan can cost qualified borrowers between $195.89 and $247.97 per month, depending on the repayment term chosen. But interest rates are currently falling and home equity loan rates are not immune as they have already fallen several times in September. So monitor the market closely, research lenders and get your paperwork in order now so you’re better prepared to get a low rate when you find one.
Do you have any other questions? Explore your best home equity loan options online today.
