Here’s a guide to today’s market for home-equity lines of credit:
Credit Availability
Tight. Lenders are much tougher about approving HELOCs than mortgages or refinancings.
What It Takes to Get Approved
- A decent amount of equity: You’ll need well over 20 percent.
- A good credit score: It should be at least 680 (on the FICO scale of 300 to 850)
- Steady income: You’ll need to prove it. If you’re an employee, you’ll have to present two years’ worth of tax returns and a current month’s pay stubs. If you’re self-employed, you may need documentation of a reliable income, such as a letter from your accountant.
What You’ll Pay
The average rate on a $30,000 to $50,000 HELOC is about 5.9 percent. That markup over the prime rate (now 3.25 percentage points) is much higher than normal. In recent years, creditworthy borrowers could get a HELOC at the prime rate or at prime plus a bit less than a percentage point.
Advice
If your credit score is under 680, work to raise it by paying off your credit cards and keeping those charges below 30 percent of the cards’ limits.
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