The federal funds rate is on the decline again. And that’s good news for borrowers of all types, particularly those who are considering accessing their existing home equity. While the Federal Reserve’s actions (or lack thereof) influence borrowing products in different ways, there’s a greater influence on home equity loan interest rates than, for example, mortgage rates. 

That means home equity loan rates, while not falling in direct relation to the federal funds rate, are generally on a decline right now. With the average homeowner also in possession of around $330,000 worth of equity,  this combination of low rate and high equity makes it an attractive way to borrow money in today’s unique economic climate. 

Still, the home serves as collateral in these borrowing circumstances. To avoid losing it, then, borrowers must calculate their potential costs in advance so they know what they can afford, even if they’re deducting a minimal amount like $10,000. But, how much would a $10,000 home equity loan cost monthly now that rates are cut? That’s what we’ll calculate below.

See how low of a home equity loan rate you’d be eligible for here.

How much would a $10,000 home equity loan cost monthly now that rates are cut?

Finding a home equity loan for just $10,000 may be difficult as some lenders won’t offer loans in that low of an amount. But others may, with $10,000 being the typical minimum, according to Experian. Here, then, is what a $10,000 home equity loan would cost now that rates have been reduced, tied to two common repayment periods and the rates those periods come with:

• 10-year home equity loan at 8.50%: $123.99 per month
• 15-year home equity loan at 8.42%: $98.01 per month

So while the 15-year option comes with payments that are more than $25 cheaper each month, it will require another five years’ worth of payments. And the difference in total interest paid between the two loan amounts is stark – $7,641.00 for the 15-year home equity loan versus $4,878.28 for the shorter one (a difference of $2,762.72). Weigh the payments carefully against each other, then, to determine which is most cost-effective for your financial situation.

Get started with a low-rate home equity loan online today.

How much cheaper are home equity loans now?

Not sure if now is the right time to open a home equity loan? Comparing the costs of acting now versus what was available earlier this year can help answer the question. 

Home equity loan rates in May 2024, for example, were averaging 8.79%. While that higher rate resulted in just a slightly higher monthly payment compared to what’s available now, the interest over the life of the loan was a bit more substantive: $5,065.05 over the 10 years versus $4,878.28 now (a difference of around $187) and $8,032.62 over the 15 years versus $7,641.00 now (a difference of around $392). 

So you’ll need to weigh these cost savings versus what may (or may not) be available shortly. For some borrowers, it could be worth waiting while others may want to apply for a loan now (and use the interest tax deduction they may be eligible for when they file their 2024 return in the spring).

The bottom line

A $10,000 home equity loan comes with monthly payments between $98 and $124 now – lower than what they were earlier this year but perhaps not quite as low as they could be if borrowers delay action. So weigh the pros and cons of acting now to determine which path is best for you and remember that today’s low rates will only apply to those borrowers with excellent credit, so if you don’t have a great score, it may behoove you to start working on that first.