Last updated: June 09, 2025

Market Insights

How to get the best HELOC rates

Family celebrating after getting a great HELOC rates with a toast.

Key takeaways

HELOC interest rates can vary depending on factors such as your credit score.
HELOCs typically have a variable interest rate composed of an index and a margin.
Comparing lenders, improving your credit score, and lowering your debt-to-income ratio may help you get a better HELOC rate.

Please note: Discover® Home Loans does not offer HELOCs but does offer home equity loans for amounts between $35,000 and $300,000 (2nd Lien) up to a 90% combined loan-to-value (CLTV) ratio.

If you're thinking about a home equity line of credit (HELOC), it's important to understand how interest rates are calculated and how much you'll pay over the life of your loan.

How is a HELOC interest rate calculated?

HELOCs typically come with a variable interest rate composed of two key components — an index and a margin.

Index: An index is a benchmark interest rate that may change with market conditions, the economy, and other factors. The U.S. prime rate is an example of an index used for HELOCs. The interest rate on a HELOC may go up or down depending on changes in an index.
Margin: The margin is a percentage determined by the lender that is added to an index. It may be based on a borrower's financial profile, lender's policies, and other factors. The margin is usually fixed for the life of the HELOC.

The interest rate for a variable-rate HELOC is simply the sum of the index and margin. For example, if the prime rate is 7.5% and your lender adds a margin of 2%, your interest rate would be 9.5%.

Your annual percentage rate (APR) may be higher than this amount as it typically includes closing costs and other fees.

Factors that may impact HELOC interest

The amount of interest you pay on your HELOC may depend on various factors, including:

Credit score: Generally, a low credit score means you're more likely to pay higher interest rates. Lenders typically set a minimum credit score requirement to qualify for a HELOC. This may vary between lenders, so make sure to do research and compare your options before you apply.
Length of HELOC draw and repayment periods: A HELOC usually includes a draw period, which is a predetermined amount of time to withdraw funds from the line of credit. During this time, you may have the option to only make interest payments on borrowed funds. After the draw period, you normally enter a repayment period where you pay both the principal and interest. Draw and repayment period lengths may affect how much interest you pay over the life of your HELOC. For example, a longer draw and/or repayment period may result in more interest paid over time if a loan balance remains outstanding for longer.
HELOC withdrawal amount: The amount you withdraw from your line of credit, as well as other factors, determines the interest you owe.

Looking for a fixed rate alternative to a HELOC? Discover Home Loans offers low, fixed rates on home equity loans with $0 application fees, $0 origination fees, $0 appraisal fees, and $0 costs due at closing.

Getting the best HELOC rates

Compare lenders: Look at a variety of lenders to determine what interest rates, repayment terms, and other factors are best for your situation. Checking online reviews is one way to research lenders, while referrals from friends or neighbors who have taken out a HELOC can offer a first-hand perspective.
Improve your credit score: Your credit score often influences the interest rate you will get. There are some things you may be able to do to improve your credit score, including making sure your credit report doesn't have errors and not getting too close to your credit limit.
Lower your DTI: Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward your monthly debt payments. The lower your DTI, the better your interest rate and terms may be. One way to lower your DTI is to pay off debts.
Get a HELOC with a shorter draw and/or repayment period: Usually, loans with shorter terms have a lower interest rate.
When reviewing HELOC products on the market, consider other options that let you tap into your home equity, such as a home equity loan or cash out refinance

Questions to ask lenders to get the best HELOC interest rates

If you want to get a HELOC, it's a good idea to shop around. Interest rates and loan features can vary, so review multiple lenders and ask specific questions about their products before you apply.

Here are some questions you may want to ask lenders:

How long does the introductory interest rate last, and what happens next?

Some HELOC lenders offer an introductory interest rate, which is a promotional rate that lasts for a limited amount of time after opening your account. Make sure you understand how long an introductory interest rate will last and what your interest rate may look like from then on.

What is the index and margin?

Find out what the index and margin may be for a HELOC product before applying. Lenders may include information about the index and margin in the fine print on their website and other materials. If not, ask them directly.

A lender may present a margin as a range. For example, "prime rate plus a margin of 1-4%." This means the margin may vary depending on factors such as your credit score.

What are the interest rate caps?

Lenders may have interest rate caps that control how much the interest rate on a variable-rate HELOC can increase or decrease. You'll want to find out how high or low an interest rate may go.

How long is your draw period?

Ask how long you can withdraw funds from your line of credit. For example, a lender may offer a draw period of 10 years.

Does the HELOC have a balloon payment?

Some HELOCs have a balloon payment, which is a lump sum payment typically due at the end of the draw or repayment period.

Are there any additional fees?

Lenders may charge fees like early withdrawal fees, inactivity fees, annual account fees, prepayment penalties, and more. Make sure you have a clear understanding of the fees associated with a HELOC before applying.

HELOC interest rates vs. home equity loan interest rates

Unlike HELOCs, which typically have variable interest rates, home equity loans often come with fixed interest rates.

With variable interest rates, your rate may fluctuate during the loan term. In contrast, fixed interest rates stay consistent during the loan term.

How to refinance a variable rate HELOC into a fixed-rate home equity loan

Borrowers may be able to refinance a variable-rate HELOC into a fixed-rate home equity loan. These loans provide a way to access home equity while offering a fixed interest rate.

Here are a couple of things borrowers should consider before refinancing a variable-rate HELOC into a fixed-rate home equity loan:

Extra fees: Obtaining a fixed-rate home equity loan may involve paying closing costs and other fees, such as loan origination fees and attorney fees.
Minimum amount: A lender may require a minimum amount to be borrowed from a HELOC to qualify for a fixed-rate home equity loan.

Decide whether a HELOC is right for you

A HELOC may suit your financial needs. For example, you could use this line of credit to fund home repairs or remodels over several years.

HELOCs typically have variable interest rates that can go up and down, which may make payments fluctuate each month. If you prefer to have consistent monthly payments, a fixed-rate home equity loan may be a better solution.

Where to go next

Take a deep dive into HELOCs and consider if this is the best option for your needs — HELOC: Home equity line of credit handbook.
Compare HELOCs with other home equity financing products — HELOC options & alternatives.
Tap into your equity with a fixed-rate borrowing option — check current home equity loan interest rates.

Main: The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Capital One, N.A. or its affiliates.

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We do not lend in IA or MD. You are not guaranteed approval. Once you apply and submit your credit and property information, we will confirm your eligibility. We don’t lend on cooperatives, condotels, investment properties, log homes, manufactured homes, mobile homes, or secondary homes. We will only originate one 1st lien mortgage per property per 12-month period. The maximum loan amount you qualify for will depend on additional factors, including type of loan, lien position, loan-to-value and your credit history. We may change rates, program terms, and conditions without notice. Discover Card accounts and other Capital One accounts (with the exception of Discover home and personal loans) may not be paid off with this home loan. All loan programs are offered by Capital One, N.A., 2500 Lake Cook Road, Riverwoods, IL 60015. NMLS ID 453156.