Significant decreases since last year

Interest rates on home equity lines of credit (HELOCs) and home equity loans have decreased significantly over the last year. The average HELOC rate was over 8% last January, and it has since dropped by 81 basis points. The annual home equity loan rate is down 40 basis points. It could be a good time to lock in a rate on a second mortgage.

According to real estate analytics firm Curinos, the average HELOC rate is 7.25%, down 19 basis points from last month. The national average rate on a home equity loan is 7.56%, three basis points lower than one month ago. Both rates are based on applicants with a minimum credit score of 780 and a maximum combined loan-to-value ratio (CLTV) of less than 70%.

With primary home mortgage rates refusing to budge, homeowners with home equity and a favorable primary mortgage rate may feel the frustration of not being able to access that growing value in their home.

For those who are unwilling to give up their low home loan rate, a home equity line of credit or home equity loan can be an excellent solution.

The Federal Reserve estimates that homeowners have $36 trillion dollars of equity locked within the walls of their homes. A second mortgage HELOC, or HEL allows U.S. homeowners to tap into the record-setting equity they have accumulated.

Home equity interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which has just fallen to 6.75%. If a lender added 0.75% as a margin, the HELOC would have a rate of 7.50%.

Lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan, so it pays to shop around. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home.

And average national HELOC rates can include “introductory” rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate.

HELs don’t usually have introductory rates, so that’s one less variable to deal with. The fixed rate you earn on a home equity loan won’t change over the life of the agreement.

You don’t have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit.

The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat.

Meanwhile, you’re paying down your low-interest-rate primary mortgage.

Today, LendingTree is offering a HELOC APR as low as 6.36% on a credit line of $150,000. However, remember that HELOCs typically come with variable interest rates, meaning your rate will fluctuate periodically. Make sure you can afford monthly payments if your rate rises.

The best home equity loan lenders may be easier to find, because the fixed rate you earn will last the length of the repayment period. That means just one rate to focus on. And you’re getting a lump sum, so no draw minimums to consider.

And as always, compare fees and the fine print of repayment terms.

The national average for a HELOC is 7..25% and for a home equity loan is currently 7.56%. However, rates vary from one lender to the next. You may see rates from just below 6% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are.

For homeowners with low primary mortgage rates and a chunk of equity in their house, it’s probably one of the best times to get a HELOC or a home equity loan. You don’t give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades.

If you withdraw the full $50,000 from a line of credit on your home and pay a 7.50% interest rate, your monthly payment during the 10-year draw period would be about $313. That sounds good, but remember that the rate is usually variable, so it changes periodically, and your payments will increase during the 20-year repayment period. A HELOC essentially becomes a 30-year loan. HELOCs are best if you borrow and repay the balance within a much shorter period.