$50,000 HELOC vs. $50,000 home equity loan: Which is cheaper this June?

Before borrowing money from their home this June, homeowners should first calculate their potential repayment costs. Getty Images

Borrowing $50,000 can't always be done easily or inexpensively. With the average credit card interest rate over 21% now, just shy of a record high, securing a $50,000 credit limit may not only be difficult, it'll be costly. Personal loans, meantime, come with interest rates much lower than credit cards, but at an average rate of 12.65%, they also may not be the most cost-efficient way to borrow a five-figure sum of money right now.

If you're a homeowner, however, you may have an affordable way to access $50,000 or more at your fingertips. With a home equity line of credit (HELOC) or a home equity loan, homeowners can borrow from their accumulated equity with relative ease. And, right now, with home equity levels rising and the average amount comfortably over $300,000, this may be your optimal way to borrow. But these products don't operate in identical ways and, as such, don't have identical interest rates. So it's important to start your home equity borrowing journey by calculating the potential repayment costs associated with both products. 

Between a $50,000 HELOC and a $50,000 home equity loan, then, which will be cheaper if opened this June? We'll do the math below.

See how much home equity you could borrow here now.

$50,000 HELOC vs. $50,000 home equity loan: Which is cheaper this June?

To determine the costs of each, borrowers will need three primary figures: the amount of money being borrowed, the interest rate associated with each and the length of the repayment period. Fortunately for homeowners, interest rates on both have declined significantly over the past year or so and could continue to fall in the months ahead if interest rate cuts are issued as many expect. 

That noted, HELOC interest rates are variable and can change monthly based on market conditions, while home equity loan rates are fixed and will remain the same unless refinanced by the homeowner. In other words, while rates on both products are similar now (8.22% for HELOCs and 8.25% for home equity loans), they're unlikely to remain as closely aligned over time. Here, then, is what each costs if secured now, for borrowers with good credit:

10-year home equity loan at 8.25%: $613.26 per month15-year home equity loan at 8.25%: $485.07 per month10-year HELOC at 8.22%: $612.47 per month15-year HELOC at 8.22%: $484.20 per month

So, by borrowing $50,000 with either option this June, your payments will essentially be the same. 

But the difference in the rate structures and repayments is critical to understand. HELOCs may or may not remain as inexpensive as they are right now, thanks to that changing rate. While HELOC rates are still down from where they were last September, for example, they've since jumped a bit in recent weeks. And, with a HELOC, borrowers will be required to make interest-only payments for the initial draw period, giving them more flexibility before full payments are required in the repayment period. 

Home equity loans, on the other hand, come with predictability thanks to the fixed rate, which could be welcome in today's unique economic climate. But payments here will be required immediately since the home equity loan funds will be disbursed in a single lump sum versus the HELOC's borrow-as-you-go structure. So, there's a lot to consider before getting started. To better determine which product makes the most sense for your financial circumstances, it can be beneficial to speak with a home equity lending expert who can answer your questions and guide you toward the more appropriate option.

Speak with a home equity loan specialist today.

The bottom line

This June, a $50,000 home equity loan comes with similar monthly repayment costs as a $50,000 HELOC. That means borrowers will need to dig a bit deeper to determine the true, long-term affordability by evaluating the potential for HELOC rates to change over time and by measuring the interest-only payments that the product comes with versus the full repayment costs the loan does. By measuring these items closely and by calculating their costs against a variety of potential rates, they can better determine long-term affordability and, importantly, get started with the home equity borrowing process now while home values are high and rates are relatively stable.

Matt Richardson

Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.