Home equity borrowing has been one of the cheapest ways to access large sums of money in recent years – and it’s about to become even cheaper. Thanks to the home in question serving as collateral, lenders have often provided borrowers with lower rates to access their home equity than they would otherwise. But now that inflation appears to be on a downward trend, the Federal Reserve is openly discussing cuts to the federal funds rate. And if that happens in September, rates for all borrowing products, including home equity loans and home equity lines of credit (HELOCs) will drop, too.

But a lower rate isn’t the only advantage to using home equity now. With the average amount of equity hovering around $300,000 today, homeowners have a lot of financing to work with. An amount of $60,000, then, can be relatively inexpensive to borrow while still allowing the homeowner to maintain hundreds of thousands of dollars worth of equity. Understanding this, it’s important to know how much this home equity option would cost each month. Below, we’ll calculate how much a $60,000 HELOC costs right now – and why it may be better than a home equity loan in the same amount.

Start by seeing what HELOC interest rate you can qualify for here today.

How much would a $60,000 HELOC cost per month?

The average HELOC interest rate is currently 9.18%, significantly lower than credit cards (which easily surpasses 20% now) and personal loans (around 12%). So if you need $60,000 and have it available in your home, this is one of the cheapest ways to access it. Here’s how much it would cost, timed to both a 10-year and 15-year repayment period:

• 10-year HELOC at 9.18%: $765.91 monthly for a total of $31,909.43 in interest paid.
• 15-year HELOC at 9.18%: $615.00 monthly for a total of $50,700.25 in interest paid.

While a $60,000 HELOC could cost between $615 and $765.91 if withdrawn now, the timeliness is critical. That’s because HELOC interest rates are variable and will inherently change until paid back in full (usually every month). So while today’s costs are manageable, they could become even more so for those who take out a HELOC now. 

With interest rate cuts looking more realistic for September, the 9.18% rate could soon be 8.93%. For context, here’s how those monthly payments would look then:

• 10-year HELOC at 8.93%: $757.58 monthly for a total of $30,934.02 in interest paid. 
  
• 15-year HELOC at 8.93%: $606.06 monthly for a total of $49,091.52 in interest paid

But the above only accounts for a reduction in rates of 25 basis points. If rates drop further than that, as they increasingly look likely to do, the monthly payments and the overall interest paid on this home equity option will continue to drop as well.

See how low of a HELOC rate you could obtain here now.

What about home equity loans?

Home equity loans, on the other hand, seemingly appear to be a better option. They come with a lower, average rate of 8.59% right now and that rate will also fall if the Fed takes action. The key difference here, however – and the reason why a HELOC may be the better current option – is the way that interest rate is structured. Home equity loans are fixed and will need to be refinanced into the prevailing lower rate while HELOCs will adjust automatically. 

And that refinance won’t be free, since homeowners will need to pay closing costs to secure that lower rate, potentially multiple times as rates adjust continuously. So while a home equity loan does come with a slightly lower rate, the intangibles will need to be carefully parsed and calculated for homeowners to determine if it’s truly better than a HELOC right now.

The bottom line

If you’re looking for an inexpensive way to access $60,000 today, a HELOC could be the way to go. Not only will your payments be manageable, but they’re likely to become even cheaper in the future. And that inherent ability to adjust downward arguably makes HELOCs more cost-effective than home equity loans now, even if the latter currently comes with a lower rate. Just remember that the best rates and terms will be reserved for those with the best credit scores. So if you have subpar credit, you’ll likely pay more unless you boost your score before applying.