How much will a $40,000 HELOC cost per month following the Fed's December rate cut?

Borrowing a five-figure amount of money with a product that has a variable rate can be risky for obvious reasons. But what if interest rates were consistently declining again? And what if it were with a product that, right now, has one of the lowest average interest rates on the market? Then it can be worth considering.

This is the position homeowners in need of extra financing find themselves in right now as they look to their home equity line of credit (HELOC) options. Average HELOC interest rates are down by more than two full percentage points from where they resided in September 2024, for example. And thanks to the product's variable rate, borrowers wouldn't have had to take any action to exploit these declines, as the HELOC rate changes independently each month.

So, if you need an amount such as $40,000 now, a HELOC could be a viable way to secure it. Plus, HELOC rates are already lower than what can be secured via home equity loans, personal loans and credit cards. That's largely due to an extended interest rate cut campaign on behalf of the Federal Reserve, the latest of which was issued on December 10.

Still, with your home serving as collateral here, it's critical that you know what you're getting involved with before submitting your application. But how much will a $40,000 HELOC cost per month now, following the Fed's December rate cut? That's what we'll detail below.

See how much home equity you'd be eligible to borrow here now.

How much will a $40,000 HELOC cost per month following the Fed's December rate cut?

Calculating the repayment costs on a HELOC requires a bit of speculation, thanks to the product's variable rate that can and will change, especially over an extended repayment period. Here's how much a $40,000 HELOC will cost per month now, after the December 10 Fed rate cut, calculated against today's average rate, two repayment periods and the assumption that rates will remain constant:

• 10-year HELOC at 7.81%: $481.30 per month
• 15-year HELOC at 7.81%: $377.89 per month

For reference, here's what a HELOC of this size would've cost monthly after the central bank's prior rate cut on October 29:

• 10-year HELOC at 7.82%: $481.51 per month
• 15-year HELOC at 7.82%: $378.12 per month

And here's how much it would've cost in March 2025, prior to any Fed rate cuts being issued in the year:

• 10-year HELOC at 8.12%: $487.85 per month
• 15-year HELOC at 8.12%: $385.04 per month

So payments here are both lower than they were in November and even lower than they were at the start of the year, too. And these are calculated on the assumption that the full line of credit is immediately utilized and that full repayments are then made. But HELOCs don't have to work that way, as many will use the line of credit intermittently, versus all at once. Additionally, since many lenders will mandate interest-only payments during the initial draw period, these payments can potentially even be lower, should owners elect to repay their HELOC that way.

See how low your current HELOC rate offers are here.

What about a $40,000 home equity loan?

Home equity loans have comparable rates to the best HELOCs, but they come with something HELOCs don't: a fixed interest rate that will remain the same until refinanced. So this can be a viable alternative worth exploring, too. Here's how much a $40,000 home equity loan will cost per month now, using today's average rates and the same repayment periods:

• 10-year home equity loan at 8.18%: $489.12 per month
• 15-year home equity loan at 8.13%: $385.27 per month

Home equity loan payments, then, are slightly higher than HELOCs for this amount of money, but they also won't change in the future the way a HELOC is likely to do. Compare both closely, then, before making a final call.

The bottom line

A $40,000 HELOC comes with monthly payments ranging from $378 to $481 for qualified homeowners now, after the December Fed rate cut. That makes now one of the least expensive times to borrow this much money with a HELOC in recent history. But with home equity loans a viable alternative, with average interest rates that won't change based on market conditions, those are also worth exploring further now. Take the time to consider both and make sure that you can afford the payments with either before formally applying. With your home functioning as collateral in these borrowing exchanges, it's critical that the numbers work in your favor both immediately and long term.