How much does a $10,000 HELOC cost monthly now that rates are falling?
If you were looking to access your home equity in recent years, you may have steered clear of home equity lines of credit (HELOCs). And the reasoning was clear: HELOCs have variable interest rates subject to change for borrowers every month. That's an advantage when interest rates are cooling but a distinct disadvantage when they're on the rise, as they were for much of 2022 and 2023.
But as inflation cooled and other economic factors improved, interest rates came down again. The Federal Reserve issued its first cut to the federal funds rate in more than four years in September with a larger-than-anticipated 50 basis point reduction. And they issued another cut in November, albeit in a smaller 25 basis point amount. Expectations are also high that they'll continue to cut rates in December, assuming this week's inflation report was an outlier instead of the first of a broader trend.
Against this new backdrop, then, it's again beneficial to access your equity via a HELOC. And with the average home equity amount around $330,000 currently, a line of credit for $10,000 would still leave you with a substantial amount of funding in the future while still allowing you to cover some major expenses right now. Before getting started, however, it's important to calculate the potential monthly costs to accurately determine your ability to pay. Below, we'll do the math.
See how low of a HELOC interest rate you'd be eligible for here.
How much does a $10,000 HELOC cost monthly now that rates are falling?
To accurately calculate the potential costs of a $10,000 HELOC it's important to note two factors. For starters, a $10,000 HELOC may not be as readily available as HELOCs in larger amounts as some lenders won't offer a line of credit this low. This is typically the minimum HELOC amount, according to Experian. So be sure to shop around to find one that does. Secondly, the variable rate nature of HELOCs makes them impossible to predict long-term as the rate will inevitably change, particularly over a 10- or 15-year repayment period.
That said, here's how much a $10,000 HELOC will cost monthly now, tied to those repayment periods and the assumption that the rate will remain constant:
- 10-year HELOC at 8.70%: $125.06 per month
- 15-year HELOC at 8.70%: $99.65 per month
And while HELOC rates don't move directly in tandem with the federal funds rate, borrowers may find it helpful to gauge what their future payments would be should HELOC rates fall by 25 basis points, too. Here's what those payments would then look like:
- 10-year HELOC at 8.45%: $123.72 per month
- 15-year HELOC at 8.45%: $98.18 per month
And here's what they would be if they move upward by that same amount now that inflation looks sticky again:
- 10-year HELOC at 8.95%: $126.41 per month
- 15-year HELOC at 8.95%: $101.13 per month
As these figures demonstrate, a $10,000 HELOC is relatively inexpensive right now and could become even cheaper in the short term. But even if rates rise slightly in the months to come, monthly payments for a HELOC in this amount will still be affordable. Still, no one knows with certainty where interest rates are heading long-term, so if you know you need the financing and want to use your home equity as the source, it makes sense to apply for a HELOC now versus later.
Get started with a HELOC online today.
The bottom line
A $10,000 HELOC comes with approximate monthly payments of between $100 and $125 right now. But it also comes with the inherent potential for those payments to rise or fall every month, so be prepared for that inevitability. And make sure that you can afford these payments tied to a series of realistic potential interest rates. After all, your home serves as collateral in this borrowing exchange, so you'll want to do all you can to avoid losing it.
