Is a HELOC a good idea?

A HELOC can be a good idea if used for home improvement projects that increase the value of your home. Because a HELOC lets you take out what you need when you need it, it’s best for ongoing projects or expenses. A HELOC is not a good idea if you don't have a steady income or a financial plan to pay off the loan. Since you use your home as collateral, if you fail to make the payments in full and on time, you risk losing your home.

Are HELOC rates fixed?

Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes for an additional fee.

Is a HELOC tax deductible?

Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and a $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed. If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law. A good way to do this is by taking advantage of prequalification forms, which let you see your potential rates and eligibility with a lender without impacting your credit score.

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

Choosing between a HELOC and a home equity loan comes down to your financial situation, needs and priorities. A HELOC usually has a longer repayment period and allows you to take only the money you need, when you need it, so it's best for people who have ongoing expenses or those who prefer to pay back debt at their own pace. A home equity loan, on the other hand, offers more predictability in terms of monthly payments, since you'll receive a large sum of money upfront and pay it back in monthly installments with a fixed interest rate. Home equity loans are usually best for people who need a lump sum right away and want a predictable monthly payment.

Will a HELOC hurt my credit score?

Due to the fact that HELOCs are revolving lines of credit, they can impact, and even hurt, your credit. When you apply, typically the lender will run a hard inquiry to assess your creditworthiness, and that can have a small impact on your credit score. While a hard inquiry may cause your credit score to drop a few points, you should be able to recover those points if you make timely payments on your HELOC balance. That said, a HELOC will more significantly hurt your credit score if you fail to make on-time payments or if you miss payments altogether. You also run the risk of losing your home, since a HELOC uses it as collateral. Minimum requirements generally include a credit score of 620 or higher, a maximum loan-to-value ratio of 80 percent or 85 percent and a documented source of income.

Are HELOC interest rates higher than home equity or personal loans?

HELOC interest rates tend to be lower than interest rates for home equity loans and personal loans. However, HELOC rates also tend to be variable, meaning that rates could increase depending on decisions from the Federal Reserve. As rates continue to rise, a HELOC with a variable interest rate might be a riskier proposition for some.

Can you pay off a HELOC early?

Depending on your lender, you can pay off a HELOC early without being penalized. If you’d like to prepay, try to do it within the interest-only period so you avoid paying more during the repayment time frame. However, some lenders do charge prepayment penalties that could cost up to a few hundred dollars.

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Best home equity line of credit (HELOC) rates for December 2024

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What are today's average HELOC rates?

LOAN TYPE	AVERAGE RATE	AVERAGE RATE RANGE
HELOC	8.53%	7.93% – 10.31%

To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. The rates shown above are calculated using a loan or line amount of $30,000, with a FICO score of 700 and a combined loan-to-value ratio of 80 percent.

Note: The above APRs are current as of December 11, 2024. The exact APR you might qualify for depends on your credit score and other factors, such as whether you're an existing customer or enroll in auto-payments.

National HELOC interest rate trends

HELOC rates drop to new 2024 lows ahead of Fed meeting

The average rate on a home equity line of credit (HELOC) fell to 8.53 percent as of Dec. 11, its lowest level in almost a year and a half, according to Bankrate’s nationwide survey of large lenders.

Home equity credit lines have variable interest rates that change based on the prime rate, which is tied to moves in Federal Reserve monetary policy. HELOC rates have been on a downward trajectory ever since the Fed delivered a half-point rate cut in September and a quarter-point reduction in November. The last Fed meeting of 2024 is scheduled for Dec. 17-18.

HELOC rate averages can also change because one or more home equity lenders markets an especially generous rate for a promotional period. That’s one reason why it often pays to search around for HELOC offers, at least for a lower introductory rate.

HELOCs are more attractively priced compared to unsecured personal loans, which currently average 12.29 percent. If you’re looking to finance a renovation and have equity to tap, a line of credit could be less expensive than a home improvement loan. It’d also save you from a cash-out refinance, which could mean giving up a low rate on your mortgage in exchange for a new one.

As rates decline, more people are opting to tap into the value of their homes via a home equity line of credit. According to ATTOM, HELOCs comprised 17.8 percent of loans in the third quarter of 2024, almost four times the amount recorded in the beginning of 2021.

A line of credit isn’t the only way to leverage your home’s equity. Another option: home equity loans, or second mortgages, which come with fixed interest rates. As of Dec. 11, the average rates for a 10-year, $30,000 loan and a 15-year, $30,000 loan dropped to 8.53 percent and 8.45 percent, respectively, according to Bankrate’s survey.

How to get the best HELOC rate

When shopping for a HELOC, look for a competitive interest rate, repayment terms that meet your needs and minimal fees. Loan details presented here are current as of the publication date. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.

Before you start shopping for a HELOC, make sure you meet lenders’ requirements. Then, take some time to improve your credit score. If you carry a big credit card balance, pay it down. If your auto loan note is almost done, you might pay it off a month or two early. You might also make a few additional mortgage payments to increase your home equity.

Once everything is in order, shop around. To find the best HELOC rate, compare multiple lenders — a rule of thumb is to get quotes from at least three. Remember, the rate is important, but it’s not the only factor you should consider. Competing HELOC rates are likely to be close, so be sure to also scrutinize fees and terms to get a sense of the APR, and make sure you’re not comparing apples to oranges.

Best home equity line of credit (HELOC) rates in December 2024

LOAN TYPE	CREDIT LINE AMOUNT	TERM PERIOD	CURRENT APR
Comerica Bank	$10,000–$500,000	30 years	6.24%
Bethpage Federal Credit Union	Up to $500,000	10-year draw, 20-year repay	6.99%
BMO	$25,000-$150,000	10-year draw/ 20-year repay for variable-rate HELOC; 5-20-year repay for fixed-rate HELOC	7.42% (fixed) / 8.13% (variable)
Bank of America	$15,000–$1 million	10-year draw, 20-year repay	6.49%
Rate	$25,000–$400,000	Up to 30 years	6.95%
Third Federal Savings	$10,000–$300,000	10-year draw, 30-year total repay period	7.24%
TD Bank	Starting at $25,000	10-year draw, 20-year repay	7.74%
Connexus Credit Union	Starting at $5,000	15-year draw, 15-year repay	8.62% standard HELOC / 9.12% interest-only HELOC

Note: The above APRs are current as of December 5, 2024. The exact APR you might qualify for depends on your credit score and other factors, such as whether you're an existing customer or enroll in auto-payments.

Comerica Bank

Bankrate Score

Lender: Comerica Bank
Interest Rates: Starting at 6.24% APR (special introductory rate)
Approval Time: N/A
Max LTV Ratio: 80%
Minimum Credit Score: N/A
Available Term Lengths: 30 years
Line of Credit Amount: $10,000-$500,000
Fees: Comerica’s fees vary by state. For example, California has an early termination fee of 2 percent of the credit limit with a maximum fee of $500 if the account is closed within the first three years.

- Low introductory APR for the first six months of the HELOC.
- An ongoing 0.25% discount on the APR if you maintain automatic payments from a Comerica deposit account.
- An $80 annual fee will be waived in the first year for California customers and $50 annual fee for customers in Florida, Michigan and Arizona. Customers in Texas have no annual fee.
- No title fees and no cost for the initial property valuation for credit line amounts of $500,000 or less.
- Six months after opening the account, the promotional rate jumps around three percentage points, potentially doubling your monthly payments. (The maximum rate is 18 percent.)
- Customers who close their account within the first two or three years (depending on the state) incur an early termination fee of 2 percent of the credit limit.
- Comerica only offers HELOCs in five states; Arizona, California, Florida, Michigan and Texas.

Bethpage Federal Credit Union

4.2

Bankrate Score

Lender: Bethpage Federal Credit Union
Interest Rates: 6.99% APR (for 12 months)
Approval Time: 6-10 weeks
Max LTV Ratio: 75%
Minimum Credit Score: 720
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: Up to $1,000,000
Fees: If you close your HELOC within 36 months, you'll need to repay the closing costs you would've paid. Hazard insurance and flood insurance may be required.

- Bethpage does not charge annual fees, application fees, appraisal fees or origination fees.
- Closing costs are covered for lines of credit up to $500,000.
- You can convert some or all of your variable-rate HELOC to a fixed-rate loan at no cost.
- HELOCs have a low introductory rate that jumps after a year.
- Should you close your HELOC within three years of opening it, you will have to repay any waived closing costs.
- Membership in Bethpage’s credit union is required to get a HELOC, along with a savings account minimum of $5.

Bank of America

3.5

Bankrate Score

Lender: Bank of America
Interest Rates: Starting at 6.49% APR (special six-month introductory rate)
Approval time: 5-7 weeks
Max LTV Ratio: 85%
Minimum Credit Score: Unavailable
Available Term Lengths: 10-year draw period with a 20-year repayment period
Line of Credit Amount: Starting at $15,000 to $1,000,000
Fees: Early closure fee of $450, plus taxes and fees, applies to accounts closed within 36 months

- BofA offers a variety of rate discounts, which can add up to more than 2 percentage points off your interest rate — saving you a lot over the life of your HELOC.
- You can convert some or all of your balance to a fixed-rate loan, without a fee.
- HELOCs have no annual fees, application fees, or closing costs on lines of credit of up to $1,000,000.
- The best rate discounts are reserved for Preferred Rewards members and those who make large draws from their HELOCs.
- The low introductory rate will jump almost 3 percentage points after a six-month promotional period.
- If you close your HELOC within three years, you owe Bank of America any closing costs it paid, plus a $450 fee. (Does not apply to lines of credit less than $25,000 or properties in Maryland.)

Third Federal Savings

4.5

Bankrate Score

Lender: Third Federal Savings
Interest Rates: 7.24% APR
Approval Time: Not Specified
Max LTV Ratio: 80% (for loan amounts up to $200,000)
Minimum Credit Score: Not specified
Available Term Lengths: 30 years
Line of Credit Amount: $10,000 to $300,000
Fees: You don’t need to worry about application or origination fees with Third Federal, and you can pay off your debt early without a penalty. The only charge you’ll incur is a $95 annual fee. However, HELOCs do carry a minimum monthly payment of $100.

- If you find a lower rate with a competitor, you may qualify for a rate match or a $1,000 check.
- Third Federal offers both fixed-rate and adjustable-rate home equity loans.
- There are no application fees or origination fees on HELOCs or home equity loans.
- Third Federal’s rate guarantee is only good for comparable HELOCs and home equity loans (including criteria like the term, loan amount and lien position) for the same property.
- The company’s HELOCs are not available in all states.
- HELOC borrowers are charged a $95 annual fee, although it’s waived the first year.

BMO

4.5

Bankrate Score

Lender: BMO
Interest Rates: 7.42% (fixed) / 8.13% (variable)
Approval Time: Not Specified
Max LTV Ratio: 70%
Minimum Credit Score: 650-680
Available Term Lengths: 10-year draw period and 20-year repayment term for HELOC (5-year to 20-year repayment term for fixed-rate HELOC)
Line of Credit Amount: $25,000-$150,000
Fees: BMO advertises both home equity loans and HELOCs with no application fees and low-to-no closing costs. If you close your account within three years, the bank might charge a fee to recoup closing costs, though. Additionally, the variable-rate HELOC comes with a $75 annual fee during the draw period, and there’s a $75 fee every time you convert a part of your balance to a fixed-rate after closing.

- HELOCs and home equity loans have no application fees and low or no closing costs.
- Option to convert to a fixed-rate HELOC (all or part of balance), and to switch back to variable rate.
- Clients cite a simple application process and speedy funding times.
- You’ll typically need a minimum credit score of 650-680 to qualify for a HELOC.
- If you close your HELOC account within the first three 36 months, the bank may charge a fee to recover closing costs paid on your behalf.
- Its variable-rate HELOC has a $75 annual fee during the draw period and an additional $75 charge every time you convert a fixed-rate lock option after closing.

TD Bank

4.1

Bankrate Score

Lender: TD Bank
Interest Rates: 7.74% APR
Approval Time: 2.5 days
Max LTV Ratio: 90%
Minimum Credit Score: 660
Available Term Lengths: 10-year draw, 20-year repayment
Line of Credit Amount: Starting at $25,000
Fees: There’s a $50 annual fee on loans over $50,000 and a $99 origination fee. The 2% termination fee (max $450) applies if you pay the line of credit off and close it within 24 months. You will also have to pay closing costs on lines over $500,000.

- TD Bank typically ranks high in customer satisfaction and offers low rates on its HELOCs.
- Borrowers receive a 0.25% rate discount if they have a TD Bank checking account.
- You have the option to fix the interest rate on all or part of your outstanding balance at any time during the draw or repayment periods.
- TD Bank’s $50 annual fee applies to HELOC draws over $50,000.
- If you pay off and close the account within 24 months, you may have to pay a 2% termination fee (max $450).
- TD Bank charges a $99 origination fee and closing costs for lines of credit more than $500,000.

Connexus Credit Union

3.5

Bankrate Score

Lender: Connexus
Interest Rates: 8.62% standard HELOC / 9.12% interest-only HELOC
Approval Time: within 30 days of applying
Max LTV Ratio: 90%
Minimum Credit Score: 640
Available Term Lengths: 15-year draw period with a 15-year repayment term
Line of Credit Amount: Starting at $5,000
Fees: Connexus’ HELOC doesn’t have an annual fee, but membership in the credit union is required. Depending on loan terms and property location, closing costs can range from $175 to $2,000.

- Connexus offers an extremely competitive introductory interest rate of 5.99%.
- Many applications can be entirely processed online in a few minutes, with no appraisal needed.
- You will work with one dedicated team member throughout the process.
- No annual fees on home equity products.
- You have to join the credit union to get a HELOC or home equity loan.
- Connexus charges closing costs of $175 to $2,000 based on the loan terms and property location.
- The company imposes a $12 fee if you don’t maintain the required homeowners insurance on your property and a returned loan payment fee of $15 or $9 if you pay by phone.
- Connexus HELOCs are not available in Alaska, Hawaii, Maryland or Texas.

Rate

3.3

Bankrate Score

Lender: Guaranteed Rate
Interest Rates: 6.95% APR
Approval Time: 5-10 minutes
Max LTV Ratio: 85%
Minimum Credit Score: 620
Available Term Lengths: Two-year to five-year draw period, up to 30-year repayment period
Line of Credit Amount: $25,000-$400,000 (Minimum of $25,001 in Alaska)
Fees: Guaranteed Rate charges a 1.99% origination fee for a HELOC. This charge is deducted from the line of credit, however; you don’t need to bring any money to closing.

- With a remote closing (if permitted in your state), you could receive your HELOC funds in as little as five days.
- The HELOC application is completely digital and takes up to 10 minutes to complete.
- Application approval generally takes five minutes but is subject to income and employment verification and the property's condition.
- The HELOC is not offered in the following states: New York, Kentucky, West Virginia, Delaware and Maryland.
- The draw period for its HELOC is two to five years, depending on the term selected (5, 10, 15 or 30 years.)
- The company charges a 1.99% origination fee that can be rolled into the cost of the loan.

Methodology

To determine this best HELOC rates list, we surveyed over 30 lenders offering home equity lines of credit. The top HELOC rates displayed here may be special introductory rates, and represent the lowest advertised APR (annual percentage rate) based on a borrower with a credit score of 700 or higher and a combined loan-to-value (CLTV) ratio of 80 percent obtaining a 30-year, $30,000 home equity line of credit.

Note that the lenders listed here are based solely on their offering the lowest APR, and are not necessarily the best overall HELOC lenders Bankrate has scored. Learn more about Bankrate’s lender review methodology.

What is a home equity line of credit, or HELOC?

A HELOC is a variable-rate home equity product that works like a credit card — you have access to a credit line that you can draw from and pay back as needed. HELOC rates are tied to a benchmark interest rate. As the prime rate moves up or down, so does your HELOC rate. Payments vary depending on the interest rate and how much money you have used.

How does a HELOC work?

With a HELOC, you’re given a line of credit that’s available for a set time frame (known as the draw period), usually up to 10 years. While most HELOCs have an interest-only draw period, you can make both interest and principal payments to pay off the line of credit faster.

When the line of credit’s draw period expires, you enter the repayment period, which can last up to 20 years. You’ll pay back the outstanding balance that you borrowed, as well as any interest owed. A lender may allow you to renew the credit line.

How do I qualify for a HELOC?

In addition to estimating your home equity, lenders look at your credit history, credit score, income and other debts. Most lenders require a combined loan-to-value ratio (CLTV) of 85 percent or less, a credit score of 620 or higher and a debt-to-income (DTI) ratio below 43 percent to approve you for a home equity line of credit.

Your home equity is the key factor lenders look at when deciding if you will qualify for a HELOC. Remember, your equity serves as collateral for the HELOC, and lenders require that you have enough of an ownership stake in your property. While the criteria differ among lenders, some may let you tap as much as 90 percent of your home’s value. But to do so, you also must meet very stringent credit and debt-to-income requirements. — Linda Bell, Senior Writer, Home Lending

Pros and cons of HELOCs

HELOCs combine relatively low interest rates with the flexibility to borrow what you need when you need it. If you need money over an unpredictable period of time, a line of credit is ideal. However, there are always risks when you take out a loan, especially one that's secured by your home. Here are some of the key considerations for getting a HELOC.

PROS

Lets you tap home equity without disturbing the primary mortgage (nice if you’ve locked in a low rate).
Typically lower upfront costs than home equity loans.
Lower interest rates than with credit cards.
Usually low or no closing costs.
Interest charged only on the amount of money you use.

CONS

Lenders may require minimum draws.
Interest rates can adjust upward or downward.
Lenders may charge a variety of fees, including annual fees, application fees, cancellation fees or early closure fees.
Late or missed payments can damage your credit and put your home at risk.

Alternatives to a HELOC

A HELOC is not the right choice for every borrower. Depending on what you need the money for, one of these alternative options may be a better fit:

HELOC vs. home equity loan

While similar in some ways — they both allow homeowners to borrow against the equity in their homes — HELOCs and home equity loans have a few distinct differences. A HELOC functions like a credit card with a revolving line of credit and typically has variable interest rates. A home equity loan functions more like a second mortgage, providing funds upfront in a lump sum at a fixed rate of interest.

HELOC vs. cash-out refinance

A cash-out refinance replaces your current home mortgage with a larger home loan. The difference between the original mortgage and the new loan is disbursed to you in a lump sum. The main difference between a cash-out refinance and a HELOC is that a cash-out refinance requires you to replace your current mortgage, while a HELOC leaves your current mortgage intact; it adds an additional debt to your finances.

HELOC vs. reverse mortgage

With a reverse mortgage, you receive an advance on your home equity that you don't have to repay until you leave the home. However, these often come with many fees, and variable interest accrues continuously on the money you receive. These are also only available to older homeowners (62 or older for a Home Equity Conversion Mortgage, the most popular reverse mortgage product, or 55 and older for some proprietary reverse mortgages).

HELOC vs. personal loan

Personal loans may have higher interest rates than home equity loans, but they don't use your home as collateral. Like a home equity loan, they have fixed interest rates and disburse money in a lump sum.

FAQs about home equity lines of credit

When you’re shopping for a lender, you should consider a variety of factors. Does the lender’s requirements around loan-to-value and credit score fit your financial profile? Do you prefer doing business with a brick-and-mortar lender or an online company? What are the policies concerning prepayment, refinancing and adjusting the credit line limit? You also should research the company’s geographic availability and consumer reviews.

Read our Reviews: Home Equity Lender Reviews
Like credit cards, HELOCs typically have variable interest rates, meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes for an additional fee.
Interest paid on a HELOC is tax deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and a $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed.

If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the tax law.
Depending on your lender, you can pay off a HELOC early without being penalized. If you’d like to prepay, try to do it within the interest-only period so you avoid paying more during the repayment time frame. However, some lenders do charge prepayment penalties that could cost up to a few hundred dollars.

Home equity lenders reviewed by Bankrate

Why trust Bankrate?

At Bankrate, our mission is to empower you to make smarter financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure our content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy.

Best home equity line of credit (HELOC) rates for December 2024

What are today's average HELOC rates?

National HELOC interest rate trends

HELOC rates drop to new 2024 lows ahead of Fed meeting

How to get the best HELOC rate

Best home equity line of credit (HELOC) rates in December 2024

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What to watch out for:

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What to watch out for:

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What to watch out for:

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What to watch out for:

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What to watch out for:

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What to watch out for:

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What to watch out for:

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Methodology

What is a home equity line of credit, or HELOC?

How does a HELOC work?

How do I qualify for a HELOC?

Pros and cons of HELOCs

PROS

CONS

Alternatives to a HELOC

HELOC vs. home equity loan

HELOC vs. cash-out refinance

HELOC vs. reverse mortgage

HELOC vs. personal loan

FAQs about home equity lines of credit

What should I look for in a HELOC lender?

Are HELOC rates fixed?

Is a HELOC tax deductible?

Can you pay off a HELOC early?

Home equity lenders reviewed by Bankrate

Why trust Bankrate?