How much is a $125,000/month HELOC worth now that rates have dropped?

With the recent fall in interest rates, the home equity lending landscape is changing, with more borrowers turning to… Home Equity Lines of Credit (HELOC) as a way to access cash for large projects or other financial needs. HELOCs, which are lines of credit with variable interest ratesThe last couple of years have generally been viewed as a gamble due to the Fed’s aggressive stance on persistent inflation. That’s because when the Fed raised rates, homeowners with HELOCs saw their rates go up and their monthly payments go up.

But now, with inflationary cooling and rates are starting to drop, now may be a good time to take out a HELOC. While the variable nature of HELOC rates may have been a concern in a rising rate environment, this may now be the case. work in your best interests. After all, the Fed is expected to cut its benchmark rate twice more during the rest of 2024 and into 2025, and if the benchmark rate continues to decline, homeowners with HELOCs will likely see their rates fall in tandem. This, in turn, will make their monthly payments more affordable.

What can borrowers expect to pay each month on a $125,000 HELOC loan now that rates fellAlthough? And how much money can they expect if rates continue to fall? Here’s what your monthly payments on a $125,000 HELOC could look like at today’s rates, and what they could look like if the Fed cuts rates even further over time.

Find out what your best HELOC deals are today.

How much is a $125,000/month HELOC worth now that rates have dropped?

Right now, average HELOC interest rate averages 8.69% (as of October 22, 2024). Based on this rate, let’s calculate how much a $125,000 HELOC would cost with regular repayment periods.

• 10-year HELOCs at 8.69%: The monthly payment for a $125,000 HELOC at this rate would be $1,562.55.
• 15-year HELOCs at 8.69%: The monthly payment for a $125,000 HELOC at this rate would be $1,244.89.

These payments reflect the current interest rate environment, but with future rate cuts expected from the Federal Reserve, these numbers could drop further in the coming months. If rates were to decrease by 0.25%, here’s what monthly payments would look like:

• 10-year HELOCs at 8.44%: The monthly payment for a $125,000 HELOC at this rate would be $1,545.81 per month.
• 15-year HELOCs at 8.44%: The monthly payment for a $125,000 HELOC at this rate would be $1,226.53 per month.

A reduction of half a point will reduce costs even further:

• 10-year HELOCs at 8.19%: The monthly payment for a $125,000 HELOC at this rate would be $1,529.17 per month.
• 15-year HELOCs at 8.19%: The monthly payment for a $125,000 HELOC at this rate would be $1,208.32 per month.

These numbers show that the $125,000 HELOC is becoming more affordable, especially if there are additional rate cuts in November and December, as many analysts expect. The savings can be significant over time as rates continue to fall.

Compare today’s best HELOC rates online now.

Does a HELOC make sense in today’s rate environment?

Given the current economic outlook, choosing a HELOC may be a smart financial move for homeowners. Although HELOC rates currently hover around 9%, these lines of credit are still among the most popular. the most affordable loan options available right now. For example, credit card rates averaging around 23%, so borrowers will save a significant amount of interest by simply choosing a HELOC over a credit card in today’s borrowing environment.

The Federal Reserve also said further rate cuts are possible in the near future. This gives homeowners a unique opportunity to take advantage of falling rates. Unlike fixed rate loansMost HELOCs have adjustable rates, meaning borrowers can benefit from lower interest costs as rates drop. So, if you take out a HELOC now, your payments could become cheaper over time, making this attractive option for those looking for flexible financing.

However, it is important to keep in mind that variable nature of HELOC rates can be a double-edged sword. While lower rates are a benefit, it is important to exercise caution as rates could rise again in the future, increasing the cost of your monthly HELOC payments. Therefore, it is important to evaluate your financial situation and make sure you are comfortable with changing your monthly payments.

Bottom line

For many homeowners, especially those with significant equity, a HELOC is worth considering in today’s market. If you need to borrow $125,000, a HELOC is currently one of the most cost-effective borrowing solutions, with monthly payments ranging from approximately $1,245 to $1,563 based on today’s rates. As rates continue to fall, these payments could drop even further, making a HELOC a flexible and affordable option. However, while rate cuts are promising, it is important to remember the variable nature of these loans and plan accordingly. Always make sure you borrow an amount that fits your budget and be prepared for possible changes in future payments.