How are HELOC rates set?
Prime plus a margin, what sets the margin, rate caps and intro rates, and what a 1-point rise costs.
Private by design. Your numbers stay on this device.
Educational estimates only. Not financial, tax, or lending advice.
What decides my HELOC rate?
Most HELOC rates are variable: an index, usually the prime rate, plus a margin set from your credit score, loan-to-value and debt-to-income. The margin stays fixed for the life of the line while prime moves, so your payment changes when prime does. Federal rules require lenders to disclose the index, any rate caps and the maximum rate.
What is a HELOC rate made of?
Two parts: an index that moves with the market, and a margin that the lender sets once.
A home equity line of credit almost always has a variable rate. The lender picks an index and adds a fixed margin to it, and the sum is your rate. Most lenders use the prime rate. The Federal Reserve publishes it as the “bank prime loan” rate in its H.15 release, defined as the rate posted by a majority of the 25 largest U.S. banks. Banks usually change prime when the Fed changes its federal funds target, so a Fed move shows up in your HELOC rate at its next adjustment.
Regulation Z, the federal Truth in Lending rule for home equity plans, says the index has to be one the lender does not control and that the public can look up. Under section 1026.40, a lender cannot tie the rate to its own cost of funds or keep a right to change it at will. Once the line is open, the lender generally cannot change its terms, the margin included.
What decides your HELOC margin?
Your credit, how much of the home you have borrowed against, and your other debts.
The margin is where your own profile shows up. A higher credit score usually earns a smaller margin. So does more equity: lenders look at the combined loan-to-value of your first mortgage plus the full credit line, and the margin rises as that total gets closer to the home’s value. Your debt-to-income ratio counts as well, and some lenders price large and small lines differently.
Every lender that uses prime starts from the same number, so the margin is the part to compare. Ask each lender for the margin, the index and the current rate in writing. Regulation Z tells lenders to prompt you to ask for the index value, the margin and the APR.
What does a 1-point rate rise do to a HELOC payment?
On this $60,000 line, each point adds $50 a month during the draw period.
| Rate | Draw-period payment | Repayment payment | Interest over 30 years |
|---|---|---|---|
| 7.5% | $375.00 | $483.36 | $101,004.04 |
| 8.5% | $425.00 | $520.69 | $115,967.66 |
| 9.5% | $475.00 | $559.28 | $131,226.22 |
The rates are illustrative, not quotes, and each is held for the whole term. A real HELOC rate moves with prime. The balance is drawn in full on day one.
During the draw period you pay only interest, so the payment moves in step with the rate: $375.00 at 7.5%, $475.00 at 9.5%. When repayment starts, the same balance has to be paid off over 20 years, and the payment at 8.5% climbs from $425.00 to $520.69. Two points of prime movement over the life of the line add $30,222.18 in interest.
The HELOC calculator runs this on your own balance and terms, and its rate stress field adds points at the start of repayment. Before you take a line, it is worth checking whether the payment still fits two or four points higher.
How do HELOC rate caps and intro rates work?
Caps limit how high the rate can go. An intro rate is a discount that ends.
Regulation Z requires the lender to tell you, before you open the line, whether there is a limit on how much the rate can change each year and the maximum rate it can ever reach. Some lines have no annual limit at all, and the disclosure has to say so. The maximum rate is the number to test your budget against.
Many lines start with an introductory rate below index plus margin. The lender has to disclose that the starting rate is not based on the index and margin, and how long it lasts. When it ends, the rate resets to prime plus your margin, which is why the margin matters more than the starting rate over the life of the line.
Are HELOC rates higher than mortgage rates?
They are priced differently: a HELOC is a variable-rate second lien, and a first mortgage is usually fixed.
A HELOC sits behind your first mortgage, so in a foreclosure the first lender is paid before the HELOC lender is. Lenders price that extra risk into the margin. A home equity loan is also a second lien, but it has a fixed rate and a fixed payment from the start, which the HELOC vs home equity loan comparison sets side by side.
For first mortgages, the Freddie Mac Primary Mortgage Market Survey® put the 30-year fixed average at 7.24% for the week of Oct 29, 2026. That survey covers conventional purchase loans, so it tells you nothing directly about HELOC pricing. More weeks are on our mortgage rates page.
If your first mortgage carries a low rate, a HELOC lets you borrow without re-pricing it, and the cash-out refinance rates guide shows how much that re-pricing can cost. The cash-out refinance vs HELOC comparison weighs both over the years you expect to keep the money, using the net-cost method in our methodology.