How much will a $40,000 HELOC cost per month after the Fed interest rate cut?

Homeowners should carefully weigh the costs of borrowing equity before getting started with a HELOC. Getty Images/iStockphoto

Borrowing money can be stressful. But doing so via a product that has a variable interest rate adds another layer of concern.

And, in the interest rate climate of recent years, this has been particularly problematic. With inflation high, the Federal Reserve moved to issue a series of interest rate hikes, at one point bringing the federal funds rate to its highest level in 22 years. Those increases made borrowing with a variable rate product, like a home equity line of credit (HELOC), cost-prohibitive, as rates and payments were positioned to move upward each month. So borrowing a large amount of money, like $40,000, in this way was a bit risky.

What about now, though? Inflation is significantly lower than it was just a few years ago, and the central bank has issued a series of rate reductions over the past year, the latest of which was issued earlier in September. Against this new backdrop, a $40,000 HELOC could again be valuable for homeowners in need of extra financing. To truly determine the worth and affordability, however, they should start by calculating their potential monthly costs. So, how much will a $40,000 HELOC cost per month after the Fed interest rate cut? That's what we'll break down below.

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

How much will a $40,000 HELOC cost per month after the Fed interest rate cut?

Calculating the exact monthly repayment costs of a HELOC can be difficult thanks to the variable rate, but homeowners can still get an approximate idea of their expenses. Here, then, is what a $40,000 HELOC will cost now, tied to average rates and common repayment periods:

• 10-year HELOC at 7.88%: $482.78 per month
• 15-year HELOC at 7.88%: $379.49 per month

For reference, here's what a HELOC of that same amount would have cost earlier in 2025:

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

And here's what a $40,000 HELOC would have cost last fall, after the Fed cut rates:

• 10-year HELOC at 8.94%: $505.41 per month
• 15-year HELOC at 8.94%: $404.28 per month

Not only is a HELOC of this amount cheaper than it was just a few months ago, but it's also materially less expensive than it was last fall, too. And with rates poised to decline further (rate cuts are currently widely expected for when the Fed meets again in October and December), a HELOC could be even cheaper before the end of the year. Homeowners won't need to refinance to realize those savings, either, as rates change independently each month.

See how low your current HELOC rate offers are here.

What are HELOC interest-only payments?

While the above payment calculations currently reflect what qualified borrowers can expect to pay monthly, they don't tell the full story. That's because the above figures are calculated on the assumption that borrowers will immediately use and repay their line of credit. 

But with a HELOC, that's not necessary, as many lenders allow for interest-only payments to be made during the draw period, which can be up to 10 years. In other words, while the above payments may be relatively cheap, many borrowers could pay even less if they just focus on paying the interest each month. And with interest declining alongside rate cuts, even payments structured like that should be relatively manageable now.

The bottom line

A $40,000 HELOC comes with monthly payments between about $379 and $483 now, after the Federal Reserve cut interest rates again. But that's on the assumption that borrowers will want to make full payments immediately. If they elect to make just the required interest-only payments during this period, it'll be even cheaper. And if additional rate cuts are issued in the upcoming months again, the monthly payments could become even less expensive. So, if you know you need the financing and want to take advantage of the new, cooler rate climate, a HELOC could be one of the better ways to do so now.