Getty Images/iStockphoto
A variable interest rate on a borrowing product can be risky when interest rates are climbing, as they have been for much of the last two and a half years. But as interest rates cool, these products become less prohibitive and, for many borrowers, they may actually become advantageous. Home equity lines of credit (HELOCs) are one such product.Â
In 2022 and 2023, taking out a HELOC was dangerous for homeowners, as rates on the line of credit were likely to increase each month as the Federal Reserve embarked on an interest rate hike campaign. Now, however, with one interest rate cut of 50 basis points already issued in September and additional reductions likely for when the Fed meets again in November and December, HELOCs are once again a powerful borrowing tool for millions of homeowners.
And with the average home equity amount sitting close to $330,000 now, homeowners have a lot to work with. A $60,000 HELOC would allow them to maintain a healthy portion of that equity for potential further use while still being able to pay for some large expenses right now. Before pursuing a HELOC, however, homeowners should do their due diligence to best determine what it could cost to repay each month. So, how much does a $60,000 HELOC cost monthly now that rates are cut? That’s what we’ll break down below.
See what HELOC rate you’d be eligible for here now.
How much does a $60,000 HELOC cost monthly now that rates are cut?
The average HELOC interest rate is 8.74% as of October 10. But HELOC rates change frequently, although, once opened, borrowers can expect them to adjust just once per month. Here’s what a $60,000 HELOC would cost each month, then, tied to two common repayment periods, assuming the rate remains static:
- 10-year HELOC at 8.74%: $751.64 per month
- 15-year HELOC at 8.74%: $599.31 per month
HELOC rates don’t move precisely in tandem with the Federal Reserve. That said, due to their variable rate nature and the likelihood of a 25 basis point cut in November and December, borrowers would be well-served by calculating their potential costs if HELOC rates drop by those same amounts soon. Here’s what monthly payments would look like if today’s rates drop by 25 basis points:
- 10-year HELOC at 8.49%: $743.59 per month
- 15-year HELOC at 8.49%: $590.49 per month
And here’s what it would cost monthly if rates drop by half a percentage point from where they are now:
- 10-year HELOC at 8.24%: $735.60 per month
- 15-year HELOC at 8.24%: $581.74 per month
So while HELOCs are affordable now, they’re poised to become even less expensive as the economy evolves and additional interest rate cuts are issued. If you’re looking for a cost-effective way to borrow a large sum of money now, then, a HELOC could be the smart way to do so.
Get started with a HELOC online now.
What about reverse mortgages?
Reverse mortgages allow homeowners to receive monthly payments from their lender, deducted from their home equity. Any borrowed amount will need to be repaid if the homeowner dies or if the home is sold. But borrowers won’t need to worry about an evolving rate climate and, thus, higher or lower monthly payments as they would with a HELOC.Â
That said, reverse mortgages are generally reserved for homeowners age 62 and older. Additional lender requirements may further limit the pool of eligibility. So do your research and speak to your current lender as well as some others to best determine if this makes sense for your current financial situation.
Learn more about your reverse mortgage options here.
The bottom line
A $60,000 HELOC comes with inexpensive monthly payments now and they could fall further in the months to come as additional rate cuts are issued. It’s important to remember, however, that rates on these products can fluctuate and they can rise as easily as they can fall, so don’t take on too much risk on the assumption that they will remain on a downward trend. And only borrow as much as you can easily afford to repay as your home will serve as the collateral in these unique borrowing circumstances.
