If you’re among homeowners looking to tap home equity, you may be closely watching home equity line of credit (HELOC) rates (and mortgage refinancing rates). Today’s HELOC rates for a $100,000 credit line held steady, depending on the borrower’s loan-to-value (LTV) ratio.

• 60% LTV: 9.13%
• 80% LTV: 9.31%
• 90% LTV: 10.18%

Today’s HELOC rates

The most creditworthy borrowers have the best odds at snagging the best HELOC rate, which should beat out today’s overall average rate of 9.31% (for 80% LTVs and $100,000 credit lines). It’s wise for consumers to compare HELOC rate quotes with APRs they might be able to secure via cash-out refinancing.

Here are HELOC rates today, based on varying LTVs and credit lines:

HELOC rate trends

Lenders base interest rates off the prime rate, which is impacted by the Federal Reserve’s handling of the federal funds rate. In recent years, as the Fed has fought economic inflation, the prime rate has climbed and so have HELOC rates.

Understanding HELOC rates

Since a HELOC is secured against your home’s value, the interest rate is typically lower than that of unsecured debt, such as a personal loan or credit card.

HELOCs typically carry variable-rate APRs, so your monthly payment can fluctuate based on the prime rate. Typically, lenders add a margin (or markup) to the prime rate based on your borrower profile to determine your interest rate. The average margin added to the prime rate is about 0.75 percentage points, although margins may range from -1% to 5%. A strong HELOC offer is one with a low margin. To calculate the lender’s margin, subtract the current prime rate from your HELOC rate offer.

Aside from the prime rate, factors determining your HELOC rate include your:

• Credit scores
• Percentage of home equity you aim to borrow
• Debt-to-income ratio

HELOCs come with a “draw period” (usually spanning 10 years) during which you can borrow money against your home equity. With a conventional HELOC, your monthly payments cover a combination of interest-and-principal payments, but you can opt for an “interest-only” HELOC, in which you pay only the interest you accrue until the draw period ends.

On a $50,000 loan with a 10-year draw period at an 8% interest rate, your monthly payments would be about $607. Try free, online HELOC payment calculators to estimate affordability for your situation.

How to choose the best HELOC lender

You can borrow a HELOC from a bank, credit union or online lender. Here’s how to find the best HELOC lender:

Shop around

Aim to get at least three quotes as you compare financing options.

“Shopping around is the most critical component” to finding the best HELOC lender and rate, said David Kimball, CEO of Prosper Marketplace, which offers online peer-to-peer lending.

Consider starting with your local bank or credit union, which might offer an attractive interest rate (or loyalty reward) to keep your business. Also, check online mortgage companies, which tend to offer competitive rates since they have low overhead. And don’t forget to survey websites that aggregate rates from various lenders, Kimball said.

Negotiate rates, terms

Be upfront with lenders that you’re comparing offers, and ask if they can lower rates or fees to match competitors, or if they have discounts available.

Some lenders may offer rate caps, which protect you against rising interest rates for a set period or for the life of the loan. Others may allow you to pay mortgage-like points to get a lower interest rate or offer a discount rate for setting up automatic payments.

Lock in a legitimate lender

Recognize the red flags that signal a dishonest lender. Avoid those that want you to borrow a larger amount than you need or push monthly payments that are larger than you can afford. And be extremely wary of a lender that offers one deal when you apply but rolls out different terms for you to sign.

Tips for getting the best HELOC rate

A low margin is key, but “not all HELOCs are created equal,” said Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage.

“Some of the better options will offer an introductory rate for the first year, so the interest rate is fixed rather than floating, and they may even cover some closing costs in return for a minimum draw amount or period of keeping the line open,” Alvarez added.

You can pull a few levers to improve your rate offers:

Raise your credit scores

You’ll likely need a score of at least 680 to qualify for a HELOC, but borrowers with scores above 720 are more likely to qualify for a better rate.

If you can delay borrowing to improve your credit, dispute errors on your credit reports (note: some errors can affect your scores but some, like the wrong address, likely won’t have any effect on your scores once fixed) and consider making extra payments on your existing debt or lowering your credit utilization ratio.

A shorter-term fix would be inviting a creditworthy co-applicant to join the HELOC agreement: ideally a co-borrower who’s also listed on your mortgage or a cosigner who’s willing to assume legal responsibility for repayment if you need help.

Lower your debt-to-income (DTI) ratio

Lenders will review your DTI ratio to gauge your ability to manage monthly payments. To calculate your DTI ratio, sum your monthly debt payments and divide by your gross monthly income.

For example, if you owe $500 on your student loans and $1,000 on your credit card each month — and you earn $4,000 in gross monthly income, you would divide $1,500 by $4,000 for a DTI of 37.5%.

Most lenders prefer a DTI ratio under 43%. To lower yours, pay more each month toward your existing debt, postpone large purchases and avoid increasing your debt.

Increase your home equity

Although most lenders will let you borrow up to 85% of your home equity, borrowing less can help you qualify for a better rate. This keeps your combined loan-to-value (CLTV) ratio “for all mortgages on the property lower, so you will also get better rate and program options,” Alvarez said.

Pros and cons of HELOCs

No financial product is perfect for all consumers, so carefully consider these tradeoffs.

Alternatives to a HELOC

HELOCs aren’t the only way to tap equity or borrow, so consider the alternatives before rushing to apply.

Frequently asked questions (FAQs)

Editorial Disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.

This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.

Note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed or may no longer be available.