How much would a $20,000 home equity loan cost per month now that rates are cut?

Home equity borrowing has traditionally been one of the cheaper ways to access large sums of cash. And this cost-effectiveness has been particularly pronounced in recent years due to interest rates surging on everything from mortgages and personal loans to credit cards, which are now hovering near a record 23%, on average. However, home equity loans and home equity lines of credit (HELOCs) are still in the single digits. Now, with a major interest rate cut already issued earlier in September, and potential other cuts being discussed for November and December, they could become even cheaper.

Currently, home equity loans are less expensive than HELOCs. And they come with the added advantage of a fixed interest rate, so borrowers can easily determine their exact monthly costs. But what would a $20,000 home equity loan cost per month now that interest rates have been cut? That’s what we’ll break down below.

Start by seeing how low a home equity loan rate you could secure here.

How much would a $20,000 home equity loan cost per month now that rates are cut?

Unlike HELOCs, which have variable rates that change monthly, thus making budgeting difficult to predict, a home equity loan rate will remain the same for the full repayment period, unless refinanced. Knowing that, then, here’s what borrowers could expect to pay over two common repayment periods using today’s averages for each:

• 10-year fixed home equity loan rate at 8.50%: $247.97 per month
• 15-year fixed home equity loan rate at 8.41%: $195.89 per month

It’s critical to note that home equity loan rates change frequently. The above rates, for example, were 8.56% for the 10-year option and 8.49% for the 15-year loan just earlier this week. So it pays to monitor the climate closely for opportunities to capitalize. Every basis point reduction helps, particularly when you’re looking for a locked-rate product that will take 10 years or more to repay.

Get started with a home equity loan here now.

What about HELOCs?

In today’s cooling rate climate, some may consider turning to a HELOC over a home equity loan. That’s because HELOC variable rates can and likely will fall each month ahead as rates drop. And HELOCs won’t need to be refinanced for borrowers to secure that lower rate as they’ll simply adjust on their own. 

That said, HELOC rates can rise as easily as they can fall, so borrowers will need to weigh that inherent risk versus the security of a home equity loan. And, right now, HELOCs have an average rate of 8.94%, approximately half a percentage point higher than the average home equity loan rate. So waiting around for the rate to fall may be less beneficial than just locking in a lower home equity loan rate instead.

The bottom line

A $20,000 home equity loan can cost qualified borrowers between $195.89 and $247.97 per month, depending on the repayment term chosen. But interest rates are in decline now and home equity loan rates are not immune as they’ve already dropped multiple times in September. So monitor the market closely, shop around for lenders and get your documentation in order now so that you’re best prepared to lock in a low rate when you find one.

Have more questions? Explore your best home equity loan options online today.