HELOCs are equity-based loans that operate more like credit cards than they do a one-time lump sum dispersal, and they represent a viable alternative to a traditional home equity loan or cash-out refinancing option. On Long Island, current rates can start as low as 6.99 percent, depending on which HELOC lender you bank with. That’s where Island Federal Credit Union can help. With flexible repayment and debt consolidation options, competitive variable interest rates and top-notch customer service, we’re well-equipped to help you get the best HELOC rates Long Island as you get set up with a HELOC.
What are HELOC Rates and How Do They Differ from Traditional Loans?
HELOC stands for “home equity line of credit,” and they share some key similarities and key differences with traditional loans.
Similar to traditional loans, HELOC loans allow homeowners to borrow against their home’s equity value for any upgrade or improvement. Hence, homeowners often take out HELOC loans for improvements that are often too costly to pay for out of pocket. This may include the likes of a new roof, kitchen remodel, home addition, a new backyard deck, and more. You can also take out a HELOC loan to consolidate debt.
Like any type of loan, HELOC loans charge an interest rate on repayment – but unlike standard home equity loans, most HELOC loan interest rates are variable. While some lenders may offer a fixed interest rate for a certain period of the loan period, variable interest rates mean that the interest rate – and thereby the monthly payment that you’ll owe – may fluctuate from month to month based on market interest rates. This means you may have a prime rate one month, but a less desirable rate the following depending on market trends. That being said, the purpose of your loan is to improve your home, which makes your HELOC interest tax deductible.
Think of a HELOC loan kind of like a revolving credit line. As you repay the balance of the loan, the amount of “credit” that’s available is also freed up. If necessary, you can continue to borrow against this line of credit throughout the “draw period” that was initially established. And like any type of loan, you can pay more than just the minimum payment to pay down the principal amount faster.
Another key difference is how much of a loan you can take out against your home (loan to value ratio). Many lenders allow homeowners to borrow up to 85 percent of the value of your home – minus the amount that you owe – for the duration of the agreement. At Island Federal, we offer HELOC loan limits of up to 100 percent of the value of your home, minus any outstanding debts.
Other HELOC alternatives are personal loans and cash-out refinancing.
Factors Influencing HELOC Rates in Long Island
There are many personal financial variables that can impact HELOC rates in Long Island. Similar to any type of loan, personal financial history, credit score, employment history, monthly income and more all help dictate interest rates. The more favorable of a borrower you are, the better the rate you’re likely to earn. You can learn more about HELOC loan limits and interest rates here.
Current Market Trends in Long Island for HELOC Rates
There are also various external factors that can cause interest rates to fluctuate. Arguably the biggest decision-maker is the Federal Reserve. The Federal Reserve, or the Fed, works to adjust interest rates that banks can charge by increasing or decreasing the federal funds rate. When it increases the federal funds rate, interest rates are pushed higher – and vice versa. The Fed has regularly made news in this post-pandemic economy as it routinely raised interest rates in an attempt to curb inflation. However, these latest rate hikes make it more expensive for businesses and individuals to borrow.
However, this may also be one of the advantages of choosing a HELOC loan over a traditional fixed-interest rate loan. As inflation slows and the Fed decreases the federal funds rate over time, variable interest rates are also likely to decrease, meaning it will cost less to borrow.
Other key factors that influence current HELOC rates include lender competitiveness and overall borrower demand.
How to Secure the Best HELOC Rates in Long Island
To secure the best HELOC rates in Long Island, it’s important to work on your personal financial situation. There’s only so much externally that you can control, but you can take control of your financial journey. Some tips for improving your credit score and securing the best possible interest rate include:
- Ensuring you’re paying all of your bills on time.
- Reducing your debt-to-credit ratio to under 30 percent.
- Checking your credit report annually to ensure accuracy (and disputing any inaccuracies).
- Strategically applying for new lines of credit. Too many “hard credit inquiries” will hamper your credit score.
Additionally, if you’re interested in any type of loan – let alone a HELOC loan – don’t be afraid to shop lenders for the best rates. Also be sure to be aware of other intangibles, like fees and terms, that could influence rates.
Expert Advice on Managing HELOC Rates and Payments
What’s the best way to manage a HELOC payment? Manage your HELOC payments the same way you do any other loans. Some tips include:
- Budgeting accordingly for interest-only payments.
- When possible, make principal payments to more quickly pay down the balance.
- If interest rates are low, consider refinancing your HELOC to secure a better interest rate.
Island Federal HELOC Rates
Low introductory rates, no closing costs and flexible draw periods are just a few of the reasons why Island Federal is among the best to work with in home equity lending on Long Island. When you combine these aforementioned benefits with competitive rates, personalized service and an easy, streamlined application process, working with Island Federal becomes that much more convenient. Contact Island Federal today for more information on current rates and to get started.
Final Thoughts
Home equity lines of credit differ from standard home equity and personal loans, so it’s important to understand what you’re getting into before you agree to any terms. It’s also important to fully understand your own financial situation and any external market factors to determine if a HELOC is best for you.
For more information on a HELOC and to apply for one, contact Island Federal today. We’ll work with you and help you determine if a HELOC is the best option for you and your situation. If it is, we have the experience, professionalism and support to help you get started and to help you fully understand your commitments. Contact Island Federal today for more information.
HELOC rates may vary from month to month - and for a variety of reasons. Currently, Island Federal offers an introductory fixed rate of 6.99 percent on home equity lines. In general, variable interest rates may range anywhere from 1 percent to 18.99 percent, depending on external factors.
Variable HELOC loan rates fluctuate over the life of the loan. Depending on your personal financial journey and external circumstances, the fluctuation in rates may be dramatic. While you can't control external factors, it's important to follow credit best practices to keep your score high and remain eligible for the best possible rate.
Typically, HELOC lines come with variable interest rates. However, some lenders may offer fixed introductory rates for a certain period to provide more cost certainty.
Make sure to speak with your lender for a better understanding of any incentives or programs that may apply.
If the Fed raises interest rates, your HELOC's variable interest rate is likely to increase - and vice versa.
Yes, but only if the conditions are right. For example, it might make sense to convert a HELOC to a fixed-rate loan if interest rates are low.