How much would a $40,000 HELOC cost per month?

There are countless reasons why you might need access to money. Whether you have home repairs what to do, high interest debt that need to be paid or a wide range of other expenses to cover, your home can provide all the liquidity you need.

This liquidity can come by way of home heritage, which is the difference between the value of your home and the money you owe on it. For example, let's say your home is worth about $400,000 and you only owe $100,000 on it. In this example, you would have $300,000 in equity.

So what if you wanted to access $40,000 of your equity? A Home Equity Line of Credit (HELOC) it's a way to do it. But, it is important that you make sure that you can cover the monthly cost of the loan with your capital. Failure to do so could put your home at risk.

So, how much would the monthly payment be with a $40,000 HELOC?

The monthly cost of a HELOC depends on multiple factors. And, it's important to keep this in mind HELOC interest rates and payments are variable. Therefore, they may change over time. Below, we calculated the monthly cost of a $40,000 HELOC if you pursued this option now.

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How much would a $40,000 per month HELOC cost?

The size of your monthly HELOC payments depends on your HELOC balance, your interest rate, and the length of your repayment period (generally ranges between 10 and 20 years). The The average HELOC interest rate is currently 9.89%. And remember that HELOC interest rates are variable, and these payments can change over the term of your line of credit:

• Amortization period of 10 years: Your monthly payment on a $40,000 HELOC with a 10-year repayment period at today's average interest rate would be $526.17. If your interest rate has remained the same throughout the 10 years amortization periodyou will pay a total of $23,140.33 in interest.
• Amortization term of 15 years: You'll pay $427.15 per month for a $40,000 HELOC at today's average interest rate with a 15-year repayment period. Assuming your rate stays the same throughout the repayment period, you'll pay $36,887.77 in interest.
• Payback period of 20 years: Your monthly payment would be $383.10 on a $40,000 HELOC at today's average interest rate with a 20-year repayment period. If your interest rate stayed the same over the 20 years, you would pay $51,943.52 in interest while paying off this HELOC.

It's important to note that while shorter repayment periods come with higher monthly payments, they offer substantial interest savings over the long term. So you should weigh the pros and cons of different HELOCs payback periods before deciding which one to take advantage of.

Find out how affordable your HELOC can be today.

Consider taking out a home equity loan

A home loan can give you even lower cost access to the capital you need (with interest rates below 9% currently available). In addition, these loans usually have fixed interest rates. Your monthly payments on a $40,000 home equity loan would range from $400.96 to $502.38, depending on whether you opted for a Term of 10 or 15 years. And, since home equity loans have fixed interest rates, those payments won't change over time, as can be the case if you use an adjustable-rate HELOC to access the financing you need.

Why you should leverage your home equity now

Regardless of whether you decide to use a HELOC loan or a home equity loan to access the equity you need, it's wise to do so now. Here's why:

• Inflation is high: Persistent inflation continues, and rising prices are taking a toll on budgets across the country. So if you need to make home repairs, pay off debt, or cover any other major expenses, you may not have the money you need for those expenses in your budget. But to HELOC or home equity loan could give you the liquidity you need.
• Your financial need will not wait: If you need financing, your need may not be one that can wait. For example, if you need funds to repair your roof, waiting could cause more damage. And there are countless other examples of potential financial needs that simply need to be addressed quickly.
• Interest rates are low compared to other options: Home equity loan products are usually included better interest rates than personal loans and credit cards. This means you can lower your overall financing cost by opting for a home equity loan product with a competitive interest rate.

Leverage your home equity to get the financing you need now.

The bottom line

A $40,000 HELOC could include monthly payments ranging from $383.10 to $526.17 based on the current average HELOC interest rate. But because HELOCs come with variable rates, your monthly payment could change over time. If you need a predictable payment, you may be better served with a home equity loan.

Regardless of how you access your capital, now may be a good time to do so. As persistent inflation continues to squeeze budgets, a HELOC or home equity loan could provide you with the financing you need at competitive rates.