Home equity borrowing has been one of the cheapest ways to borrow large sums of money in recent years. Whether with a home equity loan or home equity line of credit (HELOC), borrowers were able to secure interest rates significantly lower than those offered with credit cards and personal loans. And, now, with one interest rate cut issued in September and additional ones looming for when the Federal Reserve meets again in November and December, home equity borrowing is poised to become even cheaper soon.

This is especially true for those who pursue a HELOC. These come with variable interest rates subject to change each month. That may have been a disadvantage when interest rates were climbing but it’s a major benefit now with interest rates on the decline. With the average homeowner having approximately $330,000 worth of equity to utilize now, a $25,000 HELOC can help borrowers cover some major expenses while still maintaining a large amount of equity to potentially use in the future. Before getting started, however, borrowers should calculate their potential monthly payments. So, what will a $25,000 HELOC cost monthly now that rates have been cut?

See how low of a HELOC interest rate you could qualify for here.

How much does a $25,000 HELOC cost monthly now that rates were cut?

When calculating your potential HELOC monthly payments it’s critical to remember that rates on this product are variable. In other words: the payment you calculate today is unlikely to be the same one in a few months or over the full repayment period of 10 or 15 years. That noted, here’s what qualified borrowers can expect to pay monthly for a $25,000 HELOC at today’s interest rate:

• 10-year HELOC at 8.73%: $313.05 per month
• 15-year HELOC at 8.73%: $249.57 per month

While HELOC rates are unlikely to fall (or increase) in direct proportion to the federal funds rate, it helps to know what they could look like if they drop by 25 basis points from today’s average:

• 10-year HELOC at 8.48%: $309.70 per month
• 15-year HELOC at 8.48%: $245.89 per month

And here’s what they’d be if they fall by half a percentage point from today’s 8.73%:

• 10-year HELOC at 8.23%: $306.37 per month 
• 15-year HELOC at 8.23%: $242.24 per month

As demonstrated, a $25,000 HELOC comes with affordable monthly payments now and those payments are likely to become even cheaper in the months ahead. And, unlike home equity loans, borrowers won’t need to refinance to secure a lower rate as the HELOC will simply adjust each month on its own.

Get started with a HELOC here.

What about home equity loans?

If you’re looking for the lowest rate on a home equity product, home equity loans are the better choice. They come with an average of 8.36% now, more than 25 basis points lower than HELOCs. But, unlike HELOCs, that rate will be fixed and borrowers won’t be able to exploit any future rate drops without refinancing to secure that lower rate. And that refinance will come at a cost (typically 1% to 5% of the total loan amount). So weigh the lower home equity loan rate currently available versus what can soon be accessible with a HELOC to better determine which one works best for you now.

The bottom line

A $25,000 HELOC comes with monthly payments between $250 and $313, approximately, right now. And those payments are likely to drop in the months to come as the larger rate climate cools. But don’t let those lower payments tempt you to overborrow, either. Your home serves as collateral in these borrowing circumstances so it’s critical to withdraw only an amount that you can comfortably afford to pay back or you’ll risk your homeownership in the process.