How much does a $80,000 HELOC cost monthly?
Borrowers looking for ways to access large sums of money often have limited options to choose from. Home equity is one of the top ways to do so, especially now that the average homeowner has around $300,000 worth of equity to utilize. And in today's unique rate climate, in which rates on popular alternatives like personal loans and credit cards are in the double digits, home equity borrowing allows owners a cost-effective financial solution. They can do so either in a lump sum (a home equity loan) or a credit line (home equity line of credit, or HELOC).
Before borrowing this way, however, it's critical to understand that the home in question will serve as collateral. So you should only borrow as much as you can comfortably afford to pay back. To determine your budget, however, you should first calculate the potential costs.
An $80,000 HELOC, for example, won't necessarily overburden your budget. And with hundreds of thousands of equity remaining, on average, you won't burn through all of your home's worth, either. But what exactly will a $80,000 HELOC cost monthly? And why is this arguably the better alternative to home equity loans right now? That's what we will calculate below.
Find out exactly how much home equity you have to use here now.
How much does a $80,000 HELOC cost monthly?
Right now, home equity loans have slightly higher interest rates than HELOCs. But that may not be an issue for many homeowners as the former has a fixed rate while the latter has a variable rate, which could soon fall if rate cuts are issued. That noted, it's difficult to precisely determine how much an $80,000 HELOC will cost monthly, as rates over the repayment period will adjust, sometimes significantly.
Using today's average HELOC rate of 9.17%, however, here's what borrowers can expect to pay each month timed to two different repayment periods:
- 10-year HELOC at 9.17%: $1,020.78 monthly for a total of $42,493.73 in interest paid
- 15-year HELOC at 9.17%: $819.52 monthly for a total of $867,514.23 in interest paid
For comparison, here's what you would pay for a $80,000 home equity loan for the full life of the loan (not accounting for refinancing):
- 10-year home equity loan at 8.73%: $1,001.75 for a total of $40,210.41 in interest paid
- 15-year home equity loan at 8.71%: $797.67 for a total of $63,580.65 in interest paid
Learn more about your current home equity options online today.
Questions to ask
Home equity borrowing comes with inherent risks, as noted above. However, it can be a smart and effective way to meet your financial goals if you take a strategic approach. This means having the answers to questions like:
- Is the lower fixed home equity loan rate better than the higher HELOC rate if rates on HELOCs are expected to drop while home equity loans will remain fixed?
- What will you pay to refinance your home equity loan to a lower rate in the future? And how will those costs match up against what you may have saved by using a HELOC instead?
- How much are HELOC rates expected to drop and when?
- Is it worth waiting for the rate environment to improve or should you go with the lowest rate possible right now?
- What do you need the funds for? If used for eligible home repairs and renovations, the interest on a home equity loan and HELOC may be tax deductible, rendering the questions surrounding interest rates now moot. But if you use it for other purposes, you won't be eligible for the write-off.
Only you will know the answers to these personal financial questions. But it's important to answer them clearly and accurately to get the most effective use out of either home equity borrowing option.
The bottom line
Both home equity loans and HELOCs have competitive rates right now, with the latter slightly higher but with the inherent ability to adjust over time. And in today's economy with rates expected to fall shortly, it could be the preferable option for many homeowners. Just be sure to carefully consider the pros and cons of both to make the most informed decision both now and for the repayment period ahead.
