There are countless reasons you may need access to money. Whether you have home repairs that need to be made, high interest debt that needs to be paid off or a wide range of other expenses to cover, your home may provide all the liquidity you need. 

That liquidity can come by the way of home equity, which is the difference between your home’s value and the money you owe on it. For example, say your home is valued at around $400,000 and you only owe $100,000 on it. In this example, you would have $300,000 in equity. 

So, what if you wanted to access $40,000 of your equity? A home equity line of credit (HELOC) is one way to do so. But, it’s important that you make sure you can cover the monthly cost of borrowing against your equity. If you fail to do so you could put your home in jeopardy. 

So, how much would the monthly payment be on a $40,000 HELOC? 

The monthly cost of a HELOC depends on multiple factors. And, it’s important to note that HELOC interest rates and payments are variable. So, they may change over time. Below, we calculated the monthly cost of a $40,000 HELOC if you pursued this option now.

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How much would a $40,000 HELOC cost per month?

The size of your monthly HELOC payments depends on your HELOC balance, your interest rate, and your repayment period term (typically ranging from 10 to 20 years). The average HELOC interest rate is currently 9.89%. And remember that HELOC interest rates are variable and these payments may change over the term of your credit line: 

• 10-year repayment period: Your monthly payment on a $40,000 HELOC with a 10-year repayment period at today’s average interest rate would be $526.17. If your interest rate stayed the same through the entire 10-year repayment period, you would pay a total of $23,140.33 in interest.  
• 15-year repayment period: You would pay $427.15 per month on a $40,000 HELOC at today’s average interest rate with a 15-year repayment period. Assuming that your rate stayed the same through the entire repayment period, you would pay $36,887.77 in interest. 
• 20-year repayment period: Your monthly payment would be $383.10 on a $40,000 HELOC at today’s average interest rate with a 20-year repayment period. If your interest rate stayed the same for the entire 20 years, you would pay $51,943.52 in interest while paying this HELOC off. 

It’s important to note that while shorter repayment periods come with higher monthly payments, they offer substantial long-term interest savings. So, you should weigh the pros and cons of different HELOC repayment periods before you decide which you’ll take advantage of. 

Find out how affordable your HELOC could be today. 

Consider taking out a home equity loan instead

A home equity loan may give you even lower cost access to the equity you need (with sub-9% interest rates currently available). And, these loans typically come with fixed interest rates. Your monthly payments on a $40,000 home equity loan would range from $400.96 to $502.38, depending on whether you opted for a 10-year or 15-year term. And, since home equity loans come with fixed interest rates, these payments won’t change over time as may be the case if you use a variable-rate HELOC to access the funding you need.

Why you should tap into your home equity now

Regardless of whether you decide to use a HELOC or a home equity loan to access the equity you need, it’s wise to do so now. Here’s why: 

• Inflation is high: Persistent inflation continues, and rising prices are straining budgets across the country. So, if you need to make home repairs, pay off debt or cover any other large expense, you may not have the money you need for those expenses in your budget. But a HELOC or home equity loan could give you the liquidity you need.  
• Your financial need won’t wait: If you’re in need of funding, your need may not be one that can wait. For example, if you need funds to repair your roof, waiting could lead to more damage. And, there are countless other examples of potential financial needs that simply need to be addressed promptly.
• Interest rates are low compared to other options: Home equity lending products typically come with better interest rates than personal loans and credit cards. That means you can reduce your overall financing cost by opting for a home equity lending product with a competitive interest rate. 

Tap into your home equity to get the funding you need now. 

The bottom line

A $40,000 HELOC could come with monthly payments ranging from $383.10 to $526.17 based on today’s average HELOC interest rate. But since HELOCs come with variable rates, your monthly payment could change over time. If you need a predictable payment, you may be better served with a home equity loan. 

Regardless of how you access your equity, now may be a good time to do so. As persistent inflation continues to squeeze budgets, a HELOC or home equity loan could give you the funding you need at competitive rates. 

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he’s not working, he enjoys time with his wife, two kids, two dogs and two ducks.