Index + margin
Most HELOCs are variable-rate loans. Your rate equals an index — commonly the Wall Street Journal Prime Rate — plus a margin that's set when you open the line and usually doesn't change. When the Prime Rate moves, your HELOC rate moves by the same amount, typically on your next billing cycle.
Rate = Prime Rate + your margin. If Prime is 7.00% and your margin is 1.00%, your rate is 8.00%. If Prime falls to 6.50%, your rate falls to 7.50%.
Numbers are for illustration only and are not a quote or current rate.
What affects your margin
- Credit score. Higher scores generally earn lower margins.
- Combined loan-to-value (CLTV). Borrowing less relative to your home's value usually means better pricing.
- Line amount. Pricing can vary by line size.
- Occupancy. Primary residences typically price better than second homes or investment properties.
- Debt-to-income ratio. Lower DTI signals less risk.
Introductory rates and caps
Some HELOCs offer a low introductory rate for the first several months before the rate resets to index plus margin. Compare the fully indexed rate, not just the teaser. Also check for a lifetime rate cap (the highest your rate can go) and any floor (the lowest it can go).
Look at the total cost, not just the rate
Compare origination fees, valuation costs, annual fees, and early-closure fees alongside the rate. A slightly higher rate with no fees can cost less than a lower rate with high upfront costs — especially if you plan to repay quickly.
How to get a lower HELOC rate
- Raise your score before you applyPay card balances down and correct report errors.
- Request only what you needA lower CLTV can mean a lower margin.
- Ask about fixed-rate optionsLocking part of your balance protects against rising rates.
- Start with a soft pullSee your options without affecting your credit score.
Pricing changes with the market. Start with a soft-pull eligibility check, and Matthew can walk you through current pricing for your situation.