How much does a $200,000 HELOC cost per month now that rates are dropping?

Before borrowing from your home equity it's critical to calculate your potential monthly payments. Getty Images

If you need a six-figure sum of financing right now, there are few cost-effective options available. Both personal loans and credit cards have limits for most borrowers preventing them from getting an above-average credit line. Plus, credit card interest rates are now at a record high of around 23%. Personal loan rates are significantly better but are still around 13% right now. Fortunately, if you're a homeowner, you have one relatively inexpensive way to access a large amount of money right now: your home equity. And with the average homeowner in possession of close to $330,000 worth of equity today, you likely have more than enough funding to utilize. 

Home equity loans, home equity lines of credit (HELOCs) and cash-out refinance loans all allow you to access this money right now. But only HELOCs will allow you to borrow money at a rate that's likely to fall over the repayment period. With a variable rate subject to decline monthly now that interest rates are falling, this could be the smartest way to borrow $200,000 worth of equity in today's climate. Before getting started, however, borrowers should first crunch their potential monthly payments — both at today's rates and what they could be in the weeks to come — to best determine affordability. Below, we'll do the math.

See how low of a HELOC interest rate you could secure here.

How much does a $200,000 HELOC cost per month now that rates are dropping?

The average HELOC interest rate as of October 30 is 8.69%. Here's what a $200,000 HELOC would cost monthly at that rate, tied to two common repayment periods:

• 10-year HELOC at 8.69%: $2,500.08 per month
• 15-year HELOC at 8.69%: $1,991.82 per month

While the federal funds rate won't result in an identical drop in HELOC rates, the trends will closely align. Here is what a $200,000 HELOC will cost monthly if rates drop by 25 basis points, as experts expect the federal funds rates to fall in November:

• 10-year HELOC at 8.44%: $2,473.30 per month
• 15-year HELOC at 8.44%: $1,962.45 per month

And here's what the payments would be if rates fall by half a percentage point from where they currently are, which is possible for later in November or after a possible December Fed rate cut:

• 10-year HELOC at 8.19%: $2,446.68 per month
• 15-year HELOC at 8.19%: $1,933.31 per month

So not only are HELOCs relatively inexpensive now, but they're likely to become more affordable as additional interest rate cuts are issued.

Get started with a HELOC online now.

Should you wait for HELOC rates to drop?

Waiting for HELOC interest rates to fall would be a mistake for most borrowers. That's because rates on this particular product are variable and subject to change independently each month. Unlike a home equity loan which has a fixed rate that will need to be refinanced, HELOCs adjust on their own each month, with no action (or closing costs) required on behalf of the borrower. 

This is a major advantage for homeowners right now, likely resulting in additional savings to come. It's important to remember, however, that rates can move up as easily as they could fall. So it's critical to only borrow as much as you can comfortably afford to repay, calculated on a variety of rate scenarios, in case rates move in the wrong direction.

The bottom line

Right now, a $200,000 HELOC comes with monthly payments between $1,992 and $2,500, approximately. And those payments are poised to drop in the weeks and months to come as long as inflation continues to cool and the Federal Reserve continues to issue interest rate reductions. So, if you know you need a large sum of money and want to pay as little as possible to get it, a HELOC could be your best option right now.