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 passed on products with variable rates. These products became less attractive as inflation soared and the Federal Reserve issued a series of rate hikes to keep it in check. That action caused interest rates on all borrowing products to rise and it made monthly payments on products with variable rates increasingly expensive and difficult to budget for.

But that was then.

Now, with inflation at a 3-year low and hovering barely above the Federal Reserve’s target 2% goal, the Fed is preparing to embark on a series of interest rate reductions. The first 50 basis point cut was issued in September. Additional cuts look likely for November and December, too. And, now, borrowers looking for a big but inexpensive source of funding have options again, including home equity lines of credit (HELOCs). With the average homeowner in possession of around $330,000 worth of equity now, a HELOC for approximately half that amount could both help them cover a series of large expenses while still allowing them to maintain a healthy portion of equity for future use. 

But what will a $150,000 HELOC cost monthly now that rates have dropped? That’s what we’ll calculate below.

See 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’s what monthly payments would be tied to two common repayment periods, assuming that the rate remains constant for the full life of the credit line:

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

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

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

And here’s what they would be if they fell again in December (HELOC rates change monthly) by another 25 basis points:

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

So, if you open a $150,000 HELOC now, you could wind up seeing your monthly payments drop by approximately $40 with 10-year loans and by a bit more with 15-year loans. That said, HELOC rates are unlikely to fall by the precise amount that the federal funds rate does, so these numbers could look slightly different once rate cuts are formalized.

Start exploring your current HELOC options online now.

Risks to know

As noted above, it would be a mistake to assume that HELOC rates will move precisely as the federal funds rate does. So don’t assume rate drops in exact proportion to that rate. It’s also important to remember that a variable rate works both ways and the rate (and your payments) could rise as quickly as the could fall. Finally, it’s critical to remember that your home serves as the collateral in these unique borrowing circumstances. Crunch the numbers with a variety of realistic rates, then, so you only borrow as much as you can easily afford to repay. If you borrow too much, you could jeopardize your homeownership in the process.

The bottom line

Right now, a $150,000 HELOC comes with approximate monthly payments between $1,500 and $1,880 for qualified borrowers. And while those payments are likely to fall as interest rates are cut, they could rise as well, should any unforeseen economic factors cause rate cuts to be paused. So be prepared for a number of scenarios in advance. By calculating your potential costs now, you’ll better position yourself for home equity borrowing success both currently and in the months and years ahead.