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A borrowing product with a variable interest rate is often considered a risky proposition for borrowers. But in the interest rate climate of recent years, in which rates were consistently rising, this made these sorts of products less desirable. When leveraging your home's equity, as a home equity line of credit (HELOC) does, these products became even more dangerous for homeowners unsure of their ability to make repayments.But what about this November, in the current, cooler interest rate environment? The Federal Reserve has cut interest rates twice this year, the latest coming in October, with another reduction widely expected in December. Against this backdrop, HELOC interest rates have been consistently falling, too, with rates here more than two full percentage points lower than they were around a year ago. In other words, the conventional wisdom of borrowing with a HELOC may not apply now. And that's especially true for homeowners looking for inexpensive ways to borrow large, five-figure amounts like $40,000. After all, a HELOC isn't just one of the cheapest ways to borrow equity now, it's also one of the cheapest ways to borrow money overall.How much does a $40,000 HELOC cost monthly now, however, after the Fed's October interest rate cut? That's what we'll break down below.See how much home equity you'd be eligible to borrow with a HELOC here.How much does a $40,000 HELOC cost monthly after the Fed's October interest rate cut?Today's average HELOC interest rate is just 7.82%. Compare that to the 9.99% it was averaging in September 2024, and it becomes clear that this is now one of the better ways to borrow money. Here's how much a $40,000 HELOC will cost monthly now, calculated against two common repayment periods and the assumption that the rate remains static:10-year HELOC at 7.82%: $481.51 per month15-year HELOC at 7.82%: $378.12 per monthFor reference and to better appreciate the affordability of a HELOC now, here's how much a $40,000 HELOC cost in September, after the Fed cut rates then:10-year HELOC at 7.88%: $482.78 per month15-year HELOC at 7.88%: $379.49 per monthAnd here's what it cost in March, when rates were even higher:10-year HELOC at 8.12%: $487.85 per month15-year HELOC at 8.12%: $385.04 per monthSo while rates and, thus, payments of a line of credit of this size are only slightly lower than they were at earlier points this year, the downward trend is an unmistakable one. And, unlike a home equity loan, in which homeowners would be forced to refinance (and pay refinancing closing costs) to exploit a cooler rate climate, a HELOC adjusts independently for borrowers each month. That makes now one of the best times in recent history to get started with this product.See how low your current HELOC rate offers are here.How much does a $40,000 home equity loan cost monthly now?Home equity loans have higher interest rates than HELOCs do now, negating some of the benefits borrowers can enjoy with these fixed-rate alternatives. For comparison purposes, here's how much a $40,000 home equity loan will cost per month, calculated against the same repayment periods and average home equity loan interest rates;10-year home equity loan at 8.21%: $489.76 per month15-year home equity loan at 8.10%: $384.57 per monthSo, not only are home equity loans more expensive than HELOCs are currently, but borrowers will also miss out on additional savings opportunities that could soon materialize with a cooler interest rate climate. But payments here aren't so much more expensive as totally negate the benefit of that fixed rate, either. Consider both closely, then, to determine not only which makes the most financial sense for you now but which one is the most advantageous in the future.The bottom lineA $40,000 HELOC comes with current monthly payments between $378 and $482, approximately. That makes borrowing with a HELOC cheaper now than it's been since 2023. Take the time, then, to shop around for rates, lenders and terms. It took years for the borrowing climate to cool to this point, so homeowners who want to take advantage should do so strategically now that it's worth doing again.
