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How much does a $250,000 HELOC cost now that rates are dropping?
If you’re seeking a substantial amount of funding, traditional borrowing options like personal loans and credit cards often fall short, as their high interest rates and limited borrowing capacities can make them more hassle — and more expensive — than they’re worth. Part of the issue is that credit card rates recently climbed to unprecedented levels above 23%, while rates on personal loans, though more reasonable, still hover around 13%.
However, homeowners have a potentially more attractive option: tapping into their home equity. Today’s homeowners are in a particularly advantageous position, with the average household holding approximately $330,000 in home equity — about $214,000 of which is tappable, meaning that it can be borrowed against while retaining a healthy amount of equity in your home. This substantial cushion opens up several borrowing possibilities, including home equity lines of credit (HELOCs), home equity loans and cash-out refinancing.
Among these options, though, HELOCs stand out right now due to their variable rates, which can benefit borrowers as interest rates continue to decline. But while a HELOC could be a good option, understanding the cost implications of a HELOC is crucial for making an informed borrowing decision. To help you make a decision, let’s take a look at how much a $250,000 HELOC could cost each month now that rates are dropping.
Find out what home equity rates you could qualify for here.
How much does a $250,000 HELOC cost now that rates are dropping?
HELOC rates can and will adjust automatically with the wider rate environment. So, the rate you start with will likely not be the rate you end with, as your HELOC rate will change over time. That said, the average HELOC rate is currently 8.68% (as of October 31, 2024). Using that average rate, we can estimate the cost of a $250,000 HELOC based on two popular repayment timelines: 10 and 15 years.
Here’s what those payments would look like at today’s rate:
- 10-year HELOC at 8.68%: The monthly cost would amount to $3,123.76 with this rate and term.
- 15-year HELOC at 8.68%: The monthly cost would amount to $2,488.30 with this rate and term.
If there are more rate cuts by the Fed in the coming months, as the Fed has indicated could happen and as most analysts forecast, HELOC costs could decline even further. For example, if Fed rates drop by 0.25%, as anticipated, and HELOC rates drop by the same amount, your monthly costs could look like this:
- 10-year HELOC at 8.43%: The monthly cost would amount to $3,090.29 with this rate and term.
- 15-year HELOC at 8.43%: The monthly cost would amount to $2,451.60 with this rate and term.
A more substantial decrease of 0.50% over time would make monthly payments even more affordable. Here’s what your monthly payments would look like when factoring in a potential 50-basis-point drop:
- 10-year HELOC at 8.18%: The monthly cost would amount to $3,057.02 with this rate and term.
- 15-year HELOC at 8.18%: The monthly cost would amount to $2,415.18 with this rate and term.
As you can see, the potential for reduced monthly costs as rates decline makes HELOCs an appealing option for homeowners. Still, it’s essential to carefully consider your borrowing capacity as you make a decision. Interest rates are expected to continue to drop over time, but they could fluctuate unexpectedly, so it’s wise to budget for a range of possible payment scenarios to ensure affordability.
Compare today’s best home equity borrowing rates now.
Does a home equity loan make more sense right now?
While home equity loans offer the security of fixed rates, they’re generally not the optimal choice in the current rate environment. Here’s why: The Federal Reserve is expected to implement more rate cuts in the coming months, which would directly benefit HELOC borrowers through lower monthly payments. With a home equity loan, you’d be locked into today’s higher rates unless you refinance – a process that incurs additional closing costs and fees.
On the other hand, HELOCs automatically adjust to rate decreases without requiring refinancing or additional expenses. This flexibility makes them particularly attractive when rates are expected to fall. HELOCs also allow you to draw funds as needed (up to your borrowing limit) rather than borrowing a lump sum, which can potentially reduce your interest costs if you don’t need the full amount.
The bottom line
Today’s $250,000 HELOCs have payments ranging from roughly $2,415 to $3,124 per month depending on the term and current rate. Given the Federal Reserve’s anticipated rate reductions, these payments could decrease further, making HELOCs an attractive option for accessing substantial funds affordably. So, if you need to borrow a large sum of money with minimal cost, a HELOC could be your best choice in today’s shifting financial landscape.
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Starbucks looks to hit reset button. Here’s how its new CEO plans to renew the aging brand.
Starbucks is looking to turn its business around by being less of a fast-food chain and more of a neighborhood coffee house.
Brian Niccol, the struggling company’s new CEO, on Thursday shared his vision of Starbucks becoming “a welcoming coffee house where people gather and where we serve the finest coffee.”
Talking to analysts for the first time since taking the job on September 9, Niccol laid out his plan to reverse a trend illustrated in the company’s fiscal fourth-quarter results, which had same-store sales down 7%, the third straight such drop. For the full year, Starbucks said its revenue rose less than 1% to $36 billion.
The Seattle-based coffee giant released the bad financial news last week and said that it would suspend financial guidance for its 2025 fiscal year to give Niccol time to assess the business.
“It is clear we need to fundamentally change our strategy to win back customers and return to growth,” said Niccol, who labeled the earnings report as “very disappointing.”
Looking to placate customers turned off by higher prices and longer wait times, Niccol said Starbucks would not hike its prices during its current fiscal year, which began at the end of September, and is taking steps to deliver orders in less than five minutes.
“We probably have about 50% of our stores or 50% of our transactions already happening less than 4 minutes. So we know it’s very doable,” Niccol said. “We just need to do it in all our stores in every transaction.”
Starbucks is also working out kinks in its staffing levels as its baristas contend with in-store, drive-thru and online orders, not to mention ceaseless customization choices, the CEO said.
The coffee giant plans to cut back on its overly complex menu and focus on fewer but tastier offerings, while taking steps to “better separate mobile order pickup from the cafe experience,” Niccol said.
Starbucks will discontinue its Oleato olive-oil infused beverages from most locations starting early next month, axing what longtime Starbucks leader Howard Schultz called a “transformational idea” when he introduced it in Italy early last year.
Starbucks will stop charging extra for nondairy milk
As of next Thursday, November 7, Starbucks will stop charging more for nondairy milks at its corporate owned and operated cafes across North America. The option to pick oat, soy or coconut milk is the company’s most popular customization after an extra shot of expresso, Niccol said. Once in place, nearly half of those that pay for a modifier could see a price reduction of 10% or more when they choose a nondairy milk, according to the executive.
At a Starbucks in Michigan, for instance, it cost 70 cents to switch to almond milk in a medium Pumpkin Spice Latte.
The switch comes after a lawsuit earlier this year by three California residents who claimed the extra charge for nondairy substitutes marked a form of discrimination against people who are lactose intolerant or have other dietary restrictions.
Starbucks also plans to bring back self-serve condiment coffee bars in all of its cafes by early 2025. The company had moved its milk, sugar and simple drip coffee behind the bar during the early days of COVID-19, but the switch back should give its baristas more time to craft the lattes, macchiatos and other less straight-forward drinks.
Further, Starbucks plans to offer ceramic mugs to those looking to drink their hot beverages at Starbucks, and provide more comfortable seating to make its locations appealing to people who want to sit, work and meet. It also plans to bring back Sharpie pens so baristas can write a message on a customer’s order.
“While we are confident in the strategy, we anticipate that the turnaround will take time, as Starbucks faces persistent challenges across key markets, including China, alongside rising competition, high prices, long wait times, and staffing shortages/turnover,” Arun Sundaram, equity analyst at CFRA Research, wrote in a note.
While early in its turnaround, much of what Niccol laid out seems sensible, according to Neil Saunders, managing director, retail, at GlobalData.
“One of the big issues a lot of customers have with Starbucks is the wait time for drinks and the queue lengths in some stores,” Saunders said. “Generally, most people want a quick coffee fix when they’re on the go – that makes timeliness and efficiency paramount. Starbucks has faltered on delivering this over the past couple of years,” according to the analyst. “This is a critical fix if Starbucks wants to rebuild sales.”
At the same time, Starbucks also needs to consider customers who want to linger, as it is “increasingly competing with independent coffee shops which often have a great vibe,” Saunders said.
Niccol stepped into his new role weeks after the caffeine purveyor ousted Laxman Narasimhan, whose 18-month stint at the helm was marked by sluggish sales, and amid a waning fondness for the brand, particularly among Americans.
A restaurant executive for 20 years, Niccol is credited with reviving Taco Bell’s image and for turning things around at Chipotle after a series of food-safety issues.
There are nearly 40,000 Starbucks stores worldwide, and roughly 17,000 locations in the U.S.
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