How to get a good HELOC rate
With inflation still in the background and fresh concerns over the banking sector, many Americans find themselves in need of new ways to make ends meet. While traditional credit options like credit cards and personal loans may be the first to come to mind, homeowners have a wider range of options. This includes cash-out refinancing, reverse mortgages, home equity loans and home equity lines of credit (HELOCs). In short, if you're a homeowner sitting on a significant amount of equity, your home may be the best low-interest credit option out there.
To get the most out of a HELOC, however, you'll want to make sure to secure the lowest rate on the market. Fortunately, there are multiple ways homeowners can get a good HELOC rate, three of which we will explore in this article.
You can easily check your HELOC interest rates online today.
How to get a good HELOC rate
Here are three strategies that can help you secure a good HELOC interest rate:
Shop around
It may seem obvious that when looking for a financial product or service, you should shop around to find the best option. But when it comes to HELOCs and home equity loans, many homeowners resort to using their current lender first. However, you don't automatically need to use the lender you have your existing mortgage with. Many banks and institutions would be happy to have your business and may be willing to offer an attractive interest rate to get it. So be sure to shop around to see what kind of rates you're eligible for. A good baseline is to get interest rates from at least three institutions, although you may feel you can get a better idea by exploring even more than that.
Just make sure you do accurate research so you can establish an apples-to-apples comparison. So, if you're looking for a HELOC for $100,000 from one lender, make sure you get interest rates for that exact amount from a second and third lender, too. This way, you'll know exactly who is offering you the best deal.
You can shop around for HELOCs online right now.
Improve your credit score
The best terms and rates will always go to applicants with the highest credit scores and cleanest credit histories. HELOCs are no different. So, if you know you're planning on taking out a home equity line of credit, make sure to do as much as you can as early as you can to boost your credit score. This can mean paying down debt (ideally, paying it off in full). But it can also mean not adding to your existing debt. And don't apply for additional loans or credit that could result in a hard credit inquiry and a subsequent decrease in your credit score. Your credit history goes a long way in determining the ultimate rate you get, so keep it in the best shape possible.
Look for fixed-rate options
HELOCs, unlike home equity loans, generally come with a variable interest rate. While this may be favorable if you start with a low rate, it can quickly become burdensome if rates increase. And with the current unpredictability surrounding interest rates and the larger economy, that may not be a risk worth taking. Instead, do your research and look for fixed-rate options. They won't be as plentiful, but if you spend the time and compare lenders and offers, you may be able to find one willing to provide you with a low, fixed rate. This will ensure that payments will be predictable (which is good for your overall budget) and will protect you from any negative rate actions that may take place in the future.
The bottom line
For many homeowners looking to pay for new expenses, a HELOC may be their best option. A HELOC generally comes with lower interest rates than other credit alternatives. To secure a good HELOC rate, homeowners should first shop around and compare rates from multiple lenders (not just the one they currently have their mortgage with). They should also do as much as they can to boost their credit score. And they should spend the time to look for fixed-rate options, which can protect them should interest rates rise in the future.
Get started by comparing your local HELOC options here now!
