Key Takeaways
- Shopping around for a HELOC can help you score the best interest rate along with more competitive terms.
- A variety of factors associated with HELOC terms can impact your overall costs, including prepayment penalties, origination fees, maintenance fees and minimum draw amounts.
- Maintaining a good credit score is one of the key ways to obtain a competitively priced HELOC.
If you want to borrow against your home with a home equity line of credit (HELOC), shopping around for one is crucial — for the most competitive interest rate, obviously, but for other favorable terms and conditions, too. HELOCs come with several costs and factors that impact the cost of the loan over its lifetime: prepayment penalties, the length of the draw period, minimum draw amounts, interest-only payments, and annual and “lock-in rate” fees.
Several factors come into play when it comes to getting a good rate. You’ll need a strong credit score, but lenders will also consider your debt-to-income ratio and your overall financial health.
In this post, we cover 10 essential tips for getting the best HELOC rate — plus the outlook for HELOC rates for the rest of 2025.
A HELOC is a way to tap into your home’s equity — the portion of your home you own outright. Like a credit card, a HELOC lets you borrow from a credit line gradually, as the need arises, up to a specified dollar limit; you can then pay the money back in installments. Unlike a credit card, however, HELOCs are broken up into two distinct periods – a draw period and a repayment period. During the draw period, you can borrow funds and repay only the interest. During the repayment period, you can no longer withdraw money and must repay both principal and interest.
10 tips to get the best HELOC rate
1. Maintain good credit
Takeaway: Having a higher credit score will help you get lower rates, so do what you can to raise it before you apply.
Having a good credit score is one of the key ways to obtain a competitive interest rate when applying for HELOC. It’s the main thing the lender will consider when deciding how much to charge you.
A credit score of 700 or above will most likely qualify you for the best interest rates, though homeowners with scores as low as 620 might still get approved.
“It’s all part of the riskiness factor for the lender, if they’re gonna lend to you or not,” says Sacha Rady, Realtor and real estate advisor at Compass in Atlanta. “They want to make sure they get paid back. The lower the credit score, the higher the interest rate you’re going to have.” Your credit score will also determine which loan products you might qualify for.
To help improve your credit score when applying for a HELOC, consider these steps:
- Checking your credit report and disputing any errors
- Keeping your credit card balances low
- Making all credit payments on time
- Holding off on acquiring new debts or credit cards shortly before you apply (your score declines when you open an account)
2. Amass enough equity
Takeaway: You’ll likely find lower HELOC rates if you have substantial equity built up in your home.
The amount of equity (outright ownership stake) you have in your home determines the size of your home equity line of credit, and it influences the HELOC rate you’re able to get. The more equity you have, the better you look to a lender and the less likely that you’re overloaded with debt against your home.
Having a decent amount of equity also means that you’ll have a lower combined loan-to-value ratio, or CLTV. The CLTV is determined by adding up your current loan balance and your desired line of credit and then dividing by the appraised value of your home. For HELOCs, lenders typically prefer CLTVs below 85 percent.
“The lower your loan-to-value, the less risk to the lender, so your pricing is probably going to be slightly better,” says Heather Kyle, a former loan officer at Waterstone Mortgage Corporation in Virginia.
To get an idea of how much home equity you have, find an online estimate for the value of your home and subtract the balance owed on your mortgage. Here’s an example:
- $325,000 (home value) – $215,000 = $110,000 (amount of equity in dollars)
- $110,000 / $325,000 (home value) = 0.338 (33.8 percent equity)
3. Consider different types of lenders
Takeaway: Your own bank or credit union is a great place to start looking for a HELOC, but it’s always best to compare rates from at least a few other lenders to make sure you’re getting the most competitive terms.
While your current lender may offer you a good deal on a HELOC, don’t stop there. Compare estimates from other players, including:
Each type of lender has its own advantages. For instance, online lenders generally have lower operating costs, which can allow them to offer you lower interest rates, while local banks and credit unions may have a better understanding of your local market and offer you more personalized service or fewer fees — especially if you already do business at that institution. To get the best HELOC rate, try to get at least three quotes when considering your options.
“When you’re comparing lenders, compare all of the factors, not just the rate,” says Kyle. “Even with a lender that might have a slightly higher rate, [they] might have lower fees, there might be better repayment terms, or you might qualify differently.”
4. Understand introductory rates
Takeaway: Know how and when your HELOC interest rate might change during the draw and repayment periods.
When you think you’ve found a great HELOC rate, find out how long it will last and how it might change over time. A HELOC typically comes with an adjustable rate during the draw period that fluctuates in sync with the prime rate or other benchmark index. However, some lenders may offer you a fixed rate for an initial, temporary period, sometimes called a teaser rate.
“Some lenders offer very attractive introductory rates for the first six to 12 months only to increase it meaningfully after that period,” says Vikram Gupta, former executive vice president and head of home equity for PNC Bank.
Find out how long your introductory rate will last and what your rate will be after that period ends — especially if you’re planning to withdraw funds over several years. A lower rate during a yearlong introductory period may not be worth it if your rate skyrockets after.
5. Look for rate caps
Takeaway: A low rate cap protects you against a market of rising interest rates.
The interest rates on HELOCs are based on a benchmark rate or index, like the prime rate, plus an additional percentage, or margin, your lender puts on. They are usually variable, fluctuating with their benchmark. However, there is a limit: Most HELOCs offer rate caps as a safeguard against rising interest rates. If you select a HELOC with a low rate cap, you’re protected from paying more than that maximum, even if the prime rate spikes. If there is no cap, you run the risk of your interest rate pushing your monthly payment beyond what you can afford.
“As human beings, we think, ‘Oh well, my payment may go up in the future, but I’ll be making more money by that,’” says Kyle. “We think these things and that might not be the case. You need to pay attention to that rate cap so that you know the maximum amount you could be paying.”
6. Factor in fees
Takeaway: When comparing lenders be sure to consider any relevant fees, as well as the interest rate, in order to get a true picture of the total cost of the loan. Even with fees, some loans may still end up having a lower overall cost.
While obtaining a low interest rate is important, the fees associated with a HELOC also play a big factor in your final cost. “All lenders have different fees associated with a HELOC, and they could be vastly different,” says Kyle. “When [you] talk to a loan officer, [you] should get that out there up front to compare apples to apples.”
Typical fees include:
- Origination fee: An amount that the lender charges for processing and approving your HELOC application.
- Third-party fee: A fee charged by an outside servicer for work done pertaining to your loan, like an appraiser, legal counsel or individuals doing a title search.
- Annual fee: A yearly expense charged by your lender to keep your account open for the duration of the loan.
- Inactivity fee: A fee levied by the lender if you do not draw on the account for a specified (by the lender) period.
- Early closure fee/prepayment penalty: Expense charged if you pay off your HELOC early and close your account–usually within the first few years.
- Lock-in fee: This is a fee to fix the interest rate on all or part of your HELOC balance (more on this in tip number nine) during the draw period.
Get documentation for each quote you receive, including the associated interest and all rate fees so you can compare your options side by side. It’s important to evaluate the total, long-term cost of each loan offer. And don’t be afraid to negotiate. “With home equity lines of credit, there are fees and costs involved, but a lot of lenders offer to pay those for you,” says Raymond Portales, an independent mortgage broker based in Tempe, Arizona.
7. Watch out for balloon payments
Takeaway: A low rate may not be worth it if the trade-off is a huge balloon payment at the end of your term.
Getting a low monthly rate may seem like the most important factor when choosing a HELOC, but sometimes those low rates come at the expense of a balloon payment. A HELOC with a balloon payment requires you to pay off your remaining balance in a lump sum at the end of your term — a potentially huge payment if you’re not prepared for it.
If you are unable to make the balloon payment for some reason, you may be forced to refinance the loan or even sell your property entirely in order to cover the payment.
Assuming you can handle it is “an optimistic viewpoint that is great to have, but at the same time, it can cause you to make unwise decisions,” says Kyle. “Make sure you have reserves in case anything goes wrong. You want to be in a position where a little hiccup is not going to put your home in jeopardy.”
8. Choose shorter draw and repayment periods
Takeaway: Shorter draw periods and repayment periods pose less risk to the lender, so you may be offered lower interest rates if you have the option to choose shorter terms.
Many lenders have only one set of HELOC terms, but some lenders may let you choose the length of your draw period and the repayment period. Opting for a shorter repayment term can decrease the amount of interest you pay.
In addition, you may score a better interest rate if you select a shorter repayment timeline. Check with different lenders to see if changing the length of the draw or repayment periods is a possibility.
9. Look for fixed-rate options
Takeaway: If interest rates are low, fixed-rate options during the draw period could be a selling point. Even if the lock comes with a fee, it may be worth it to avoid future rising rates.
More and more lenders are offering the option to convert some or all of your HELOC balance into a fixed-rate loan for a set period of time, sometimes without a fee. This is a good option if you want to lock in the interest rate without worrying about potential fluctuations in the market.
Doing so may allow you to pay less out-of-pocket during the loan’s lifetime, too. “Fixing the rate protects the consumer from rate increases and payment increases,” says Mark Worthington, manager with online lender Churchill Mortgage.
If you feel interest rates are going to rise before you have the ability to pay off the HELOC, then obtaining a fixed rate can provide some comfort and security, says Worthington.
However, a longer period with a fixed interest rate could mean a higher interest rate. And the strategy could backfire if interest rates start dramatically declining.
10. Take advantage of discounts
Takeaway: Autopay or member discounts are possible ways to lower the APR on your HELOC, so look for ways to save wherever you can.
If you have an existing relationship with a bank or credit union, you may qualify for member discounts on your HELOC rate. Many lenders also offer rate discounts for setting up automatic payments.
“Some lenders offer what I call bundled pricing,” says Jean Chalifoux Kiely, executive vice president and director of consumer banking at Sunrise Banks, based in St. Paul, Minn. “The deeper the relationship, the deeper the discount.”
You might see greater benefits if you are a net-worth client—we’re talking a million dollars or more. For these fortunate souls, lenders “offer some discounts, sometimes a quarter, half, or even a full percentage point off the rate,” says Portales.
You should still talk to multiple lenders, though, as the best deal isn’t always with a bank you already have a relationship with.
HELOC borrowing rates may have peaked, but they could remain high for longer, depending on the future paths of the economy and inflation.
— Mark Hamrick, Bankrate Senior Economic Analyst
What are HELOC rates expected to do in 2025?
After spiking to double digits, HELOC rates began to back down in late 2024 and are predicted to keep trending downward in 2025, perhaps reaching an average of 7.25 percent, a low not seen for three years.
The primary driver for the declines is the Fed’s changing of its monetary policy. As inflation cooled throughout 2024, the Federal Reserve embarked on a series of cuts of the benchmark interest rate. That caused HELOC rates to fall from a high of 10.16 percent at the beginning of 2024 to an average 8.36 percent by year’s end. As of mid-May 2025, the average rate on a HELOC was just under 8 percent in the largest U.S. markets.
Additional rate cuts from the Fed this year could make HELOCs even more affordable. But there’s no guarantee that will happen. “Any decline in HELOC rates will be predicated on the Federal Reserve cutting interest rates, and for that to happen, inflation must come down further,” says Bankrate’s Chief Financial Analyst Greg McBride. “If inflation doesn’t come down, interest rates won’t come down, and that HELOC rate you’re carrying now will be the same rate you carry until that happens.”
Along with inflation and the economy, other factors could influence the Fed’s actions. “The future direction of the Fed’s benchmark interest rate is highly uncertain, in part because of the aspirations of the presidential administration and GOP-controlled Congress,” observes Mark Hamrick, Bankrate’s senior economic analyst. “Interest rate reductions that were previously seen as a given have since come into question. For now, higher for longer remains a relevant mantra.”
Bottom line on getting the best HELOC rate
A HELOC can be a useful way to cover large or unexpected expenses. Even with the continued rate hikes, in many cases, HELOCs will still be a better bet than credit cards, personal loans and even home equity loans (though the interest-rate gap between the two has closed in the last year). But in the current economic environment, it’s more important than ever to do your due diligence before choosing a lender.
As you investigate, remember that there are steps you can take to reduce the amount of interest you pay over the life of the loan including considering different types of lenders, opting for shorter draw periods, locking in rate caps and taking advantage of discounts.
It’s also a good idea to work on improving your credit score in order to qualify for the best offers, ideally several months before you apply. That’s a strategy for all seasons, no matter what the current interest-rate climate is like.
FAQ
Additional reporting by Maya Dollarhide
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