Does Your State Affect HELOC Rates?

With more than $30 trillion in home equity—the highest amount of home equity ever held in the United States—many homeowners may consider taking out a HELOC for large expenses. Especially in a high-interest-rate environment where refinancing may not make sense, a HELOC could be the right financing tool for whatever purpose you have in mind. 

As of December 2023, the national average HELOC rate is around 10.04%, but that number may vary depending on your credit qualifications and where your home is located. For the most part, HELOC rates don’t vary much by state, but you should be aware of several state-specific factors. 

Here’s what you need to know if you’re looking for HELOC rates by state. 

In this guide:

• HELOC rates by state
• How are HELOC rates set?
• How does your state affect your HELOC rate?
• How to get the lowest HELOC rate in your state
• How to choose the best HELOC lender
• FAQ

HELOC rates by state

We were surprised to find in our research how little variance exists in HELOC rates across states. But one critical detail is that not all the top HELOC lenders offering the best rates are available in every state. 

Lender	Starting APR
Figure	8.95% fixed
Spring EQ	N/A
Hitch	7.75% variable
Bethpage	6.99% fixed intro, then 8.50% variable

Because the number of lenders might be limited in your state, you might want to jump right to our guides to the best HELOC rates in specific states: 

• Arizona
• California
• Colorado
• Florida
• Georgia
• Massachusetts
• New Jersey
• New York
• Pennsylvania
• Texas
• Utah
• Virginia

How are HELOC rates set?

To better understand how HELOC rates work, you need to know what goes into the pricing of a HELOC. Your interest rate is determined by market conditions, the lender’s margin, your credit profile, and the amount of equity you have in your home. 

Interest rate

The interest rate on a HELOC is often variable. The variable rate on a HELOC consists of the index rate and a margin. 

The index is a benchmark of interest rates based on market conditions. Lenders use it to set their own rates. Lenders often use the U.S. prime rate as their index to set the pricing on their loans. This rate is what goes up or down when the Federal Reserve announces increases to the federal funds rate.

The margin is what the lender charges on top of the index rate. It’s set for the life of the loan. The index plus the margin equals the interest rate you’ll pay. 

Personal credit profile

The most influential factors that determine your HELOC rate make up your personal credit profile. This includes your credit score, income, debt-to-income ratio, and available equity in your home.  

• Credit score and history. Your credit score represents the risk of loaning you money in the lender’s eyes. The higher your score, the lower the risk. With a low credit score, you’ll likely get a higher rate on your HELOC; with a higher credit score, you might qualify for the lowest rates.
• Income. Just like with your first mortgage, you need to make enough income to repay your loan.  
• Employment history. Lenders want to see reliable income every month, and if your employment history is strong, you’ll have a better chance of qualifying for a HELOC. 
• Debt. If you have too much debt, your available credit will be limited. It also could disqualify you from qualifying for a HELOC altogether. 

How does your state affect your HELOC rate?

The state you live in has much less to do with your HELOC rate than your personal credit profile, but here are several factors to take into account when applying for a HELOC. 

Home value

Your home’s value is the key figure in whether you have enough equity to get a HELOC. Equity is the home’s current market value minus how much you owe. Most lenders will loan up to 85% of a home’s value, so you’ll need sufficient equity to qualify for a HELOC.

Here’s an example.

• Home market value: $300,000
• 85% of $300,000 (home value) = $255,000 ← (total amount you can borrow)
• Outstanding mortgage: $200,000

Now, subtract the outstanding mortgage balance:

$255,000 (85% of home value) – $200,000 (outstanding mortgage) = $55,000

So the maximum HELOC you could borrow in this example would be $55,000.

Location of your property 

The location of your home also affects whether you can qualify for a HELOC. Some areas appreciate faster than others, giving owners equity sooner. If your home is in an area that is not insurable, such as a hurricane-prone coastline, you may not be able to get a HELOC. 

State-specific HELOC laws

So if there’s little variance in the rates among states, how does your state affect your HELOC? To answer this question, we asked an expert. 

“State laws can have a significant impact on HELOCs and their rates,” says Attorney Mike Schmidt of Schmidt and Clark LLP. “Each state has its own regulations governing HELOCs, and these laws can vary widely.” 

“Some states impose caps on interest rates lenders can charge on HELOCs, ensuring borrowers are protected from exorbitant rates. These caps often depend on the prime rate and can fluctuate over time. Other states might have restrictions on certain fees or penalties associated with HELOCs, providing consumers with added safeguards,” Schmidt says.

How to get the lowest HELOC rate in your state

In reality, your personal qualifications affect your HELOC rate more than your state does. So if you want the lowest rate in your state, work on your credit and home before applying for a home equity loan. These are the moves you can make to get the lowest HELOC rate.

Prequalify 

Many lenders allow borrowers to prequalify for a HELOC. You can submit an application and see what rate and amount you’ll qualify for without affecting your credit. This can help you get the lowest rate for a HELOC because you can prequalify with several lenders at once. 

Shop around for a lender

There’s significant variance in what interest rate you might get. Take a look at all your financing options, including credit unions, banks, and online lenders. Also keep in mind that shopping around within a 45-day period, even if the lenders perform hard credit pulls, will only count on your credit as a single inquiry. 

Work on your credit score

A better credit score will save you money when you apply for financing of any kind. Automate paying your bills so your payments are reported on time, every time. Keep your credit utilization low, and follow other best practices for improving your credit. 

Maintain your home 

When you apply for a HELOC, your lender will likely order an appraisal, which may involve a basic inspection. According to the Mortgage Bankers Association’s Home Equity Lending Study, 75% of home equity applicants had at least a drive-by inspection, if not a full interior and exterior inspection. Maintaining your home so it looks presentable may help you get a high-value appraisal for a HELOC—and potentially a higher credit line. 

How to choose the best HELOC lender

The best HELOC lender is one that works for you, and ideally, comes at a lower cost of financing. Factors to consider when choosing a HELOC lender to accomplish both of these goals include:

• Interest rate. Many HELOCs have a variable interest rate, and some feature a tempting low introductory rate. Take a look at what your interest rate might be when the introductory rate expires, and choose a HELOC from a lender that’s competitive. 
• Fees. Compare fees when you’re choosing a HELOC lender. Some lenders may offer rate discounts or charge minimal upfront fees for a HELOC. 
• Reputable. Choose a lender with a strong reputation. The Federal Trade Commission advises against working with lenders who misrepresent their loans, encourage you to apply for more than you can handle, or don’t allow for time to review important disclosures. 
• Repayment terms. Make sure the repayment terms work for you, and if they don’t, work with another lender that may be able to meet your needs better. 

FAQ

Are HELOC rates higher or lower than other loan products, such as home equity loans and personal loans?

HELOC rates are generally lower than personal loans because personal loans are unsecured, whereas your home acts as collateral on home equity products. 

Comparing HELOC rates to home equity loans, it depends on the overall interest-rate environment. In a high-rate environment, variable-rate HELOCs tend to be higher than home equity loans (but they might have an introductory rate lower than a home equity loan rate). In a lower-rate environment, variable-rate HELOCs tend to have lower APRs than fixed-rate home equity loans.

How do I know if getting a HELOC is the right move for me?

If you’re interested in getting a HELOC, you’ll want to talk to a financial professional or lender to help you make the right move. They’ll be able to see the full picture and help you make a decision on whether getting a HELOC is right for you.

Can my HELOC rate go down?

If your HELOC is a variable-rate loan, your interest rate can go up and down. However, HELOCs often have a floor rate, which is the lowest interest rate a lender can charge. 

Are HELOC rates negotiable?

You might be able to negotiate HELOC rates. A lender may offer to let you buy down the rate with points, but this isn’t the same as a true discount. Be sure your credit score, income, and debt are at ideal levels to negotiate for the best rate on a HELOC. You might have more success negotiating with a lender you have a relationship with—such as your local bank or credit union.