How Much Does a HELOC Lower My Interest Rate?

It depends. A HELOC will initially have a low interest rate, but that rate will be adjustable, and so can quickly increase beyond your normal mortgage rate, especially if your mortgage rate is fixed. Generally speaking, a HELOC is a useful short-term solution to debt issues, and the more equity you have built up in your home, the lower the HELOC rate will be. Therefore, in order to maximize the lower interest rate you could potentially have when using a HELOC, you should aim to build up equity first. After you take out a HELOC with more equity in your home, you should aim to pay off the HELOC quickly, before your rates have a chance to increase beyond the rates of your mortgage.

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If you are considering a HELOC, try comparing potential HELOC interest rates at various levels of home equity to determine when the best time to open a HELOC will be for you. You should also have a positive cash flow (income greater than expenses) before opening a HELOC.