Home equity borrowing has traditionally been one of the most cost-effective ways to access extra money. But, in recent years, it’s been one of the only ways to do so. With inflation surging and interest rates soaring in response, borrowing costs rose accordingly, sometimes in an exponential fashion as homebuyers saw with mortgage interest rates. Rates on home equity loans and home equity lines of credit (HELOCs), while not quite immune from this trend, tended to stay in the single digits. And they’re coming down again now that the Federal Reserve issued a rate cut in mid-September.

For those homeowners looking for a relatively modest sum of $25,000, then, it makes sense to start crunching these potential costs. Just note that some lenders will require a larger sum to approve your application. But even if you find a lender who will offer this loan amount, it doesn’t mean that you should act without doing the math first. To that end, below we’ll calculate exactly how much a $25,000 home equity loan will cost monthly now that interest rates have been reduced.

See how low of a home equity loan rate you could secure online now.

Here’s what a $25,000 home equity loan costs monthly now that rates were cut

The average home equity loan interest rate as of October 2 is 8.39%, but it’s a bit higher for two common repayment terms: 10-year and 15-year loans. Here’s what a $25,000 home equity loan would cost with the average rates tied to those repayment terms:

• 10-year fixed home equity loan at 8.50%: $309.96 per month
• 15-year fixed home equity loan at 8.41%: $244.87 per month

While these rates may not be quite as low as borrowers would prefer right now, it’s critical to compare the alternatives. And, unfortunately, they’re not very attractive right now. 

HELOCs, for example, currently come in at almost half a percentage point higher (8.94%). Cash-out refinancing, meanwhile, would have you lose your existing, presumably lower mortgage rate in exchange for the extra money. Personal loan rates could also soon be declining but are still averaging close to 13% now, while credit card interest rates are right around a record 23%. 

So, sure, calculate borrowing $25,000 with those alternatives. But, right now, a home equity loan is likely to be your cheapest option.

Learn more about your current home equity loan options here now. 

The bottom line

A $25,000 home equity loan could cost borrowers between $245 and $310 per month right now, post-rate cut. But remember that home equity loan interest rates are fixed. If they fall after you’ve opened your loan, your rate will remain the same. So it’s important to weigh the potential for rate cuts against what can be locked in right now. And, if you think that rate cuts to come could be significant, it may be worth opening a HELOC instead. Rates on that product will adjust monthly on their own and it won’t require the refinancing (and refinancing costs) a home equity loan will.