This is one of the most common questions that we receive at HELOCEquity. com – and it is quite a loaded question. Rather that displaying charts of regional and national interest rates as they related to HELOCs, we will first discuss the components that will be used in making a determination of how much interest you will pay. First, the quality of your home – through a real estate appraisal will be determined. Second, your credit reports will be pulled as will a calculation of your credit score. Third, the equity in your home will be determined. This will allow the bank or mortgage company to make an appropriate determination as to how much to potentially grant you through a HELOC Equity credit facility.

 

As we discussed earlier, in almost all circumstances, a home equity line of credit is a variable interest rate debt instrument. The interest rate you will pay, once the above issues have been discussed, will be primarily based on the current prime interest rate (as discussed in our previous articles) as well as your credit score. The third consideration that will be made is the demographics and market trends surrounding the area that you live in. If you live in an area that has been especially hit hard by the housing crisis then a bank or finance company may decide to increase the interest rate on your HELOC Equity facility due to the increased risks associated with housing trends in your area. The final consideration that will be made is how much capital you are seeking. The more debt capital you are seeking – the higher the aggregate interest will be.

 

As of April of 2010, the average interest rate paid on a $75,000 line of credit has been hovering around 8. 75%, which is about three to four percentage points above the prime rate. For comparison, a 30 year fixed mortgage currently has a prime interest rate of 4. 4%.