A borrowing product with a variable interest rate can be risky in an environment in which interest rates are volatile or on an upward trend. And that’s been the case for much of the last two years as a spike in inflation led to a series of hikes to the federal funds rate. This caused rates on mortgages, personal loans, home equity loans and home equity lines of credit (HELOCs) to surge. It became particularly difficult for those who had opened HELOCs, since the rate on this line of credit adjusts monthly.

But the interest rate climate is changing again. The Federal Reserve issued its first rate reduction in more than four years when it met in September. Other rate cuts are now likely for when it meets in November and December, too. This has made HELOCs a smart alternative for many homeowners right now, thanks to the variable rates they come with. And with the average homeowner in possession of approximately $330,000 worth of equity currently, a line of credit for $70,000 can help cover a variety of large expenses while still leaving the majority of equity to potentially use in the future. 

Before getting started, however, borrowers should calculate their potential monthly payments. Below, we’ll do the math.

See how low of a HELOC rate you could secure here.

How much does a $70,000 HELOC cost per month now that rates have dropped?

The average HELOC interest rate is 8.69% right now. Here’s what a $70,000 HELOC would cost monthly, then, tied to two common repayment periods:

• 10-year HELOC at 8.69%: $875.03 per month
• 15-year HELOC at 8.69%: $697.14 per month

While HELOC rates are unlikely to fall by the precise amount the federal funds rate will, it’s helpful for borrowers to know what to expect if they do. Here, then, is what a $70,000 HELOC can cost monthly if rates drop by 25 basis points, as expected in November:

• 10-year HELOC at 8.44%: $865.66 per month
• 15-year HELOC at 8.44%: $686.86 per month

And here’s what they’d be if HELOC rates drop half a percentage point from today’s average:

• 10-year HELOC at 8.19%: $856.34 per month
• 15-year HELOC at 8.19%: $676.66 per month

So your HELOC monthly payments could be relatively inexpensive now, ranging from $698 to $875 for qualified borrowers. But they’re likely to become cheaper as additional interest rate cuts are issued. 

Get started with a HELOC online now.

What about reverse mortgages?

A reverse mortgage is a home equity borrowing alternative that many homeowners may want to consider now. With this option, owners receive monthly payments from their lender. Those payments reduce the available amount of equity in the home and will need to be repaid if the owner moves from the property or dies. But it can be a valuable way for owners to access their equity now. 

That said, with few exceptions, a reverse mortgage is typically reserved for owners 62 and older. So, if you’re younger and need access to this type of financing, a HELOC may be preferential.

Learn more about your reverse mortgage options here.

The bottom line

A $70,000 HELOC comes with affordable payments now and the inherent potential for them to become even cheaper in the months ahead. That noted, it’s important to remember that HELOC rates can fall as easily as they can rise, so only borrow an amount that you’re comfortable paying, calculated at a variety of potential interest rates. And remember that your home is collateral in this scenario so you’ll want to avoid overborrowing as you could risk your homeownership if you fail to repay all that you’ve withdrawn.