If you want to rent a home with a Home Equity Credit Line (HELOC), it is important to shop for one for the most competitive interest rates, but for other favorable terms. HELOC has several costs and factors that affect the cost of a loan over its lifespan: advance penalty, draw period, minimum draw amount, interest-only payments, annual and “lock-in rate” fees.
When it comes to getting a good rate, several factors work. You need a strong credit score, but the lender takes into account your debt-to-income ratio and your overall financial health.
In this post, we’ll explain 10 key tips to get the best HELOC rates, as well as the outlook for the remaining HELOC rates for 2025.
10 Tips for Getting the Best HELOC Rates
1. Maintain good trust
Takeout: The higher your credit score, the lower your fees will help you do what you can to raise it before applying.
Having a great credit score is one of the key ways to win competitive interest rates when applying for HELOC. That is the main thing that lenders consider when deciding how much to charge you.
A credit score of 700 or higher may still be approved by a homeowner with a score of 620, but they are likely to qualify for the highest interest rate.
Sacha Radie, a real estate agent and real estate advisor at Compass in Atlanta, said: “They want to make sure they’ve been repaid. The lower your credit score, the higher your interest rates will be.” The credit score also determines which loan products you qualify for.
Consider the following steps to help you improve your credit score when applying for HELOC:
- Check credit report and challenge the error
- Keep your credit card balance low
- Make all credit payments on time
- Avoid taking new debt or credit cards just before applying (opening an account will reduce your score)
2. Accumulate sufficient fairness
Takeout: If your home has substantial fairness, your Hellock rate may be low.
The amount of stock you have at home (fully owned interest) will determine the size of your home equity credit line and affect the HELOC rate you can get. The more fair you are, the less likely you are to look to the lender and have been incurred in debt on your home.
Having a decent amount of stock also means having a loan-to-value ratio (low CLTV). CLTV is determined by adding your current loan balance and desired credit line and splitting it with the value of your home. For HELOCS, lenders typically prefer CLTVs of less than 85%.
“The lower the value from the loan, the lower the risk to the lender, so pricing will be a little better,” says Heather Kyle, a former loan officer at Waterstone Mortgage Corporation in Virginia.
To find out how much household capital you have, find an online estimate of the value of your home and deduct the balance being paid on your mortgage. Here is an example:
- $325,000 (Home Value) – $215,000 = $110,000 (Stock Amount)
- $110,000/$325,000 (home value) = 0.338 (33.8% stake)
3. Consider different types of lenders
Takeout: Your own bank or credit union is a great place to start looking for HELOC, but it’s always best to compare prices from at least a few other lenders to make sure you get the most competitive terms.
Your current lender may offer you a substantial amount at HELOC, but don’t stop there. Compare estimates from other players, including:
Each type of lender has its own advantages. For example, online lenders can generally have lower operating costs, which can lead to lower interest rates, but local banks and credit unions will better understand the local market and offer more personalized services or rates, especially if they are already doing business at the institution. To get the best HELOC rate, get at least three quotes when considering your options.
“When comparing lenders, compare all the factors, not just the rate,” says Kyle. “Even if you have lenders who may have a slightly higher rate, (they) may have lower fees and may have better repayment terms.
4. Understand the adoption rate
Takeout: Know how HELOC interest rates change during the draw and repayment period.
When you think you’ve found a large HELOC rate, find out how long it lasts and how it changes over time. HELOCs usually come with an adjustable rate during draw periods that fluctuate in sync with Prime Rates or other benchmark indexes. However, some lenders may offer a fixed rate for the first temporary period, which is sometimes referred to as a teaser rate.
“Some lenders will only provide a very attractive adoption rate for the first six to 12 months, meaningfully increasing it after that period,” said Vikram Gupta, former executive vice president and head of home equity at PNC Bank.
Find out how long the adoption rate will last and what rates will be after that period, especially if you are planning to withdraw funds over several years. A Skyrocket with a rate may not be worth it if the rate is low during the one-year deployment period.
5. Find the rate cap
Takeout: Low interest rate caps protect you from rising interest rate markets.
HELOC interest rates are based on additional percentages or margins added by lenders, in addition to benchmark rates or indexes, such as prime rates. Usually it varies with benchmarks. However, there are restrictions. Most HELOCs offer rate caps as a protection against rising interest rates. Choosing HELOC with a low interest rate cap protects you from paying more than that maximum, even if your prime rate rises sharply. If there is no cap, you risk interest rates pushing you up your monthly payments to spare.
“As a human being, ‘Well, my payments may go up in the future, but I’ll make more money from it,” Kyle says. “We’re thinking these things, so maybe not. You need to pay attention to that rate cap, so you know the maximum amount you can pay.”
6. Fees factors
Takeout: When comparing lenders, make sure to consider the associated fees and interest rates to get a true picture of the total cost of your loan. Even with fees, some loans can have lower overall costs.
While it is important to acquire low interest rates, fees related to HELOCs also play a major role in final costs. “All lenders have different fees associated with HELOCs, and they can vary widely,” says Kyle. “When you talk to a lender, (you) need to get it in advance to compare the apple to the apple.”
Typical prices are as follows:
- Origination fee: The amount that the lender will charge for processing and approval of the HELOC application.
- Third Party Fees: A fee charged by an external servicer for work related to a loan, such as an appraiser, lawyer, or individual doing a title search.
- Annual fee: Annual costs charged by the lender to keep your account open for the duration of the loan.
- Inactive fee: A fee collected by the lender if you do not draw an account for a specified (by the lender) period.
- Early closure fee/prepayment penalty: If you pay off Helock early and close your account, you will usually be charged within the first few years.
- Lock-in fee: This is the fee for revising interest rates for all or part of the HELOC balance during the draw period (more on this)
Get documentation of each quote you receive, including related interest and all charges, so you can compare options side-by-side. It is important to assess the total long-term cost of each loan offer. And don’t be afraid to negotiate. “The home equity credit line costs money and costs, but many lenders offer to pay them for you,” says Raymond Portales, an independent mortgage broker based in Tempe, Arizona.
7. Be careful when paying for balloons
Takeout: If the trade-off is paying big balloons at the end of your semester, a low fee may not be worth it.
Getting a low monthly rate may seem like the most important factor when choosing a HELOC, but sometimes those low fees can come at the expense of balloon payments. HELOC with balloon payments requires you to repay the remaining balance in one lump sum at the end of the period. This is a potentially large payment if you’re not ready.
If for any reason you are unable to make balloon payments, you may be forced to refinance your loan or sell the property entirely to cover your payments.
Assuming you can handle it, it’s “a great optimistic perspective to have, but at the same time, it can make wise decisions,” says Kyle. “Make sure you have a bress in case something goes wrong. I want to be in a position where a little hiccup can’t put the house at risk.”
8. Choose a short draw and repayment period
Takeout: Due to shorter draws and less risky repayment periods, lower interest rates may be offered if you have the option to choose shorter terms.
While many lenders only have one set of HELOC terms, some lenders may have the option of choosing the length of the draw and the repayment period. Choosing a shorter repayment period can reduce the amount you pay.
Plus, choosing a shorter repayment timeline will help you earn better interest rates. Check with various lenders to see if it is possible to change the length of the draw or repayment period.
9. Find fixed fee options
Take-out: If interest rates are low, a fixed-rate option during the draw may become a selling point. Even if the lock costs money, it may be worth avoiding future rates of increase.
More and more lenders offer the option to convert some or all of your HELOC balances into fixed-rate loans for a period of time, sometimes without a fee. This is a good option if you want to lock interest rates without worrying about potential market fluctuations.
This will help you reduce your own self-pay for the lifetime of your loan. “Changing the rates will protect consumers from rising rates and higher payments,” says Mark Worthington, manager of online lender Churchill Mortgage.
If you feel that interest rates will rise before you have the ability to pay off your HELOC, getting a fixed rate can provide you with some comfort and security, says Worthington.
However, a longer period of fixed interest rates can mean higher interest rates. And when interest rates begin to drop dramatically, your strategy can backfire.
10. Take advantage of discounts
Takeout: Autopay or Member Discount is a possible way to lower your APR with HELOC. Find ways to save as much as you can.
If you have an existing relationship with a bank or credit union, you may qualify for a member discount for the HELOC rate. Many lenders also offer discounts for setting up automatic payments.
“Some lenders offer what I call bundled pricing,” says Janchalifokily, executive vice president and director of the Consumer Bank at Sunrise Banks, based in St. Paul, Minnesota.
If you are a netwomen client, you may see a greater advantage – we’re talking over $1 million. For these lucky souls, lenders “offer discounts, sometimes a quarter, half, or even full,” says Portales.
However, the best transactions are not always related to banks, so you should consult with multiple lenders.
What are the expected HELOC rates to do in 2025?
After spikes into double digit numbers, the HELOC rate is expected to start to recede in late 2024 and keep the trend down in 2025, reaching an average of 7.25%, not seen for three years.
The main factor behind the decline is the change in monetary policy of the Fed. With inflation cooled throughout 2024, the Federal Reserve has set out to cut a series of benchmark interest rates. This reduced the HELOC rate from a high of 10.16% in early 2024 to an average of 8.36% by the end of the year. As of mid-May 2025, the average HELOC rate was just under 8% in the largest US market.
With additional fee cuts from the Fed this year, Helocs could be even more affordable. However, there is no guarantee that this will happen. “The decline in HELOC fees is based on the Federal Reserve cut rates, which means that inflation needs to be further reduced,” says Greg McBride, Bankrate’s chief financial analyst. “If inflation doesn’t drop, interest rates won’t fall, and the HELOC fee you’re carrying now will be the same interest rate as you until it happens.”
In addition to inflation and the economy, other factors could affect the Fed’s behavior. “The future direction for the Fed’s benchmark rate is extremely uncertain due to the aspirations of the presidential administration and the GOP-controlled Congress,” said Mark Hamrick, senior economic analyst at the Bankrate. “The interest rate cuts, which were previously seen as being given, have been questioned ever since. For now, there has been a much longer associated mantra.”
Conclusions for getting the best HELOC rate
HELOC is a convenient way to cover large or unexpected costs. In many cases, even with continuous rate hikes, HELOCs are a better bet than credit cards, personal loans, or even home equity loans (though the interest rate gap between the two closed last year). However, in the current economic environment, it is more important than ever to do due diligence before choosing a lender.
When researching, don’t forget that there are steps to reduce the amount you pay over the life of your loan, such as considering different types of lenders, choosing to shorten the draw period, locking rate caps, and taking advantage of discounts.
We also recommend working on improving your credit score. This is ideally a few months before you apply to qualify for the best offer. It’s a strategy for all seasons, no matter what the current interest climate is.
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Additional Reports by Maya Dollarhide
