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Homeowners now have valuable assets: their home equity. With home values ​​rising steadily over the past few years, homeowners today a lot from equity to touch to – about $327,000 on average. The amount of equity you can access – which is the total you can borrow while maintaining a 20% equity cushion – is now $214,000. The high number of equities, coupled with recent interest rate cuts by the Federal Reserve, has made it an opportune time to consider. home equity loan.
Home equity loans are generally one of the most common cost-effective borrowing optionsbecause these loans are secured by the equity in your home, that means the rates are usually lower than options like credit cards and personal loans. And a new 50 basis point reduction in the Fed’s benchmark rate is being pushed home equity rates down further, making him even more attractive. So, if you’ve been planning to borrow money from your home equity, this could be a good time to go.
Before you take out a home equity loanHowever, it is important to understand the monthly costs associated with this type of loan. So, how much does a $150,000 home loan cost today? Below, we will discuss these payments based on current rates.
Home equity loan rates can change quickly. Compare the highest rates and lock in one today.
How much would a $150,000 monthly home loan cost now if rates were to drop?
Unlike home equity lines of credit (HELOCs)which offers variable rates that can change with a wider rate environment, most home equity loans are fixed rate, so the rate you start your loan at is the rate you’ll end it at (unless you refinance your home equity loan at some point). That keeps your payments consistent every month.
With a home equity loan, the cost of the monthly payment is highly dependent loan terms and the interest rate offered. There are two common home terms to choose from: 10-year and 15-year loan terms, with the 10-year loan term currently offering an average rate of 8.50% and the 15-year loan term offering an average rate of 8.41%. Here’s how the monthly payments would be in each option using today’s average rates:
- 10-year home equity loan at 8.50%: With this rate and term, the monthly payment would be $1,859.79 per month
- 15-year home equity loan at 8.41%: With this rate and term, the monthly payment would be $1,469.21 per month
As illustrated above, choosing a shorter 10-year home equity loan will result in faster loan repayments, but you will have higher monthly payments. On the other hand, if you choose a 15-year term, the monthly payments will be more manageable, but you will pay more in interest over time.
But that’s just the monthly cost at the current rate. There is an expectation that the Fed can reduce rates even more over the next few months. Here’s your monthly payment if the Fed cuts rates by another 25 basis points and a collective 50 basis points and home equity loan rates drop by the same amount:
If home equity loan rates drop by 25 basis points:
- 10-year home equity loan at 8.25%: With this rate and term, the monthly payment will be $1,839.79 per month
- 15-year home equity loan at 8.16%: With this rate and term, the monthly payment would be $1,447.37 per month
If home equity loan rates drop by 50 basis points:
- 10 year home equity loan at 8.00%: With this rate and term, the monthly payment will be $1,819.91 per month
- 15-year home equity loan at 7.91%: With this rate and term, the monthly payment would be $1,425.70 per month
Because of the savings potential, it can be tempting to try and wait for rates to drop before borrowing. However, it can be difficult to time the market, as interest rates are affected by more than just the Fed – and there is always the risk that rates could rise in the future. So, if you need to borrow money fast, it might be worth getting a good rate today.
Find out how much the right home equity loan is worth today.
Bottom line
If you decide to take out a $150,000 home equity loan at today’s average rate, your monthly payment will vary from $1,469.21 to $1,859.79 depending on the loan term you choose. And, the Fed is expected to cut rates longer, which could help lower home loan costs. But if you’re going to wait, you might want to think twice about that strategy. While you can potentially save on interest costs by waiting for rates to drop, it’s a risky bet. For many borrowers, it may be more important the lock is at a good level now – and if rates fall in the future, there will always be an option to refinance and capitalize on savings.
