Compare HELOC Rates

1 What can I use a HELOC for?

A HELOC can be used for nearly anything that you would typically use a credit card for. Essentially, it is a revolving credit line that uses your home’s equity as collateral.

However, common reasons to use a HELOC include debt consolidation, home repairs, major medical bills, education and other major expenses. Day-to-day expenses are not usually paid for through a HELOC.

Depending on the lender, you may be able to access your home equity credit line through checks, online banking, telephone banking and/or a card linked to the HELOC.

2 When do HELOC rates change?

Most HELOC rates vary in the same way that credit card APRs vary. HELOC rates are usually determined by the prime rate, plus a fixed rate that changes depending on your creditworthiness.

The prime rate is a benchmark rate used by the financial industry and it fluctuates based on the federal fund rate, which is set by the Federal Reserve. When interest rates are on the rise, you can also expect rates on all credit lines, including HELOCs, to rise as well.

3 Are there tax advantages to having a HELOC?

A major benefit of a HELOC is the ability deduct interest paid on borrowed funds, much like a mortgage. However, there are limits to how much interest you can deduct during tax time, depending on how you used your HELOC funds.

Interest is tax deductible on up to $1 million if funds are used to purchase or improve your home. For non-home-related expenses, interest is deductible on up to $100,000. Additionally, you cannot deduct more than the home’s fair market value.

The tax advantages of using a HELOC may seem attractive, to the point where it would seem unwise to not use it for all expenses. However, remember that a HELOC is secured by your home -- failure to repay your HELOC may put you in danger of losing your home.

4 Are there tax advantages to having a HELOC?

Deciding to agree to a HELOC is a major financial decision. And you should weigh your options carefully first. There are benefits to HELOC over other financing options, which you should consider including: current low prime rates vs. other loan types, possible tax deductions for HELOC repayments, and access to major financial demands (i.e. home improvements, university fees, weddings, etc.)