HELOC rates have dipped. Here’s what to know before you take one out

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The latest HELOC rates

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Home equity line of credit (HELOC) rates for loans with a 10-year repayment schedule are back where they were two weeks ago at 5.49%, after a brief increase to 5.51% last week, according to Bankrate data from the week ending July 18 . Rates on 20-year HELOCs hit 7.43%, down from 7.46% the week prior, and 30-year HELOCs sank to 6.17% from 6.43% the week prior. ,See the lowest rates you can get here.,

HELOCs are popular as they are one of the most affordable loan types for homeowners with significant equity in their homes; typically rates are significantly lower than with personal loans or credit cards. And experts say HELOCs can be a good option for those looking to consolidate high-interest debt or fund home improvement projects. But it’s important to remember that if you don’t repay a HELOC, you could lose your home.

Key things to know about a HELOC

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HELOCs are based on the amount of equity someone has in their home, so the amount of money a borrower qualifies for will vary. And their structure differs from many other loans: Indeed, they are composed of a two-part structure: typically a 10-year draw period and a 20-year repayment period that together equal a 30-year term. During the draw period, a borrower can withdraw as much or as little as they like, in small increments or a lump sum. Once the repayment period begins however, money can no longer be withdrawn and the borrower must pay back the principal in addition to interest.

Getting the best rate on a HELOC

To get the best rate on a HELOC, you will want to have substantial equity in your home, a higher credit score (760 and above is a good goal), and a lower debt-to-income (DTI) ratio. To calculate your DTI, add up your monthly bills including your house payment, credit card, child support, insurance, other debts, etc. and divide the total by your gross monthly income. The number that lenders are looking for is generally 36% or lower to ensure you not only get approved, but to help you get the best rates and terms on a HELOC. You will also want to shop around for a HELOC as rates and terms vary.

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Credit: www.marketwatch.com /

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