How much would a $40,000 per month home equity loan cost?

If you’re a homeowner, chances are you have significant borrowing power. And this borrowing power could be coupled with competitive interest rates. The average homeowner potentially has hundreds of thousands of dollars exploit at the moment.

But what if you needed to get your hands on $40,000 and decided to use a home equity loan to do it? Of course, home equity is not free money; you will have to pay it back at some point. If you do not make your payments as agreed you could lose your house. So it’s important to make sure you can afford to repay what you borrow. As such, you must calculate the expense before applying for a loan.

But, how much would your monthly payments be? on a $40,000 home equity loan? This is what we will detail below.

Find out how affordable a home equity loan could be now.

How much would a $40,000 per month home equity loan cost?

Your monthly home equity loan payment will be based on your starting loan balance, your interest rate and the duration of the loan you choose. Here’s how much you’ll pay monthly if you take out a $40,000 home equity loan for 10 or 15 years, at today’s average interest rates.

• A 10-year home equity loan: The average interest rate on a 10-year home equity loan is currently 8.80%. At this interest rate, a 10-year, $40,000 home equity loan would cost $502.38 per month. You would pay a total of $20,286.04 in interest over the life of the loan, for a total repayment cost of $60,286.04.
• A 15-year home equity loan: The average interest rate on a 15-year home equity loan is also 8.80% right now. So your monthly payments on a $40,000 home equity loan over 15 years would be $400.96. The loan would have a total interest cost of $32,173.06 and a total repayment cost of $72,173.06.

Based on these numbers, the 15-year home equity loan would cost about $100 less per month than the 10-year option. But there is a trade-off to consider. The total cost of the 10-year home equity loan is $11,887.02 less than the total cost of the 15-year option. You will therefore need to decide whether monthly savings or long-term savings are more important to you when making your choice.

Compare your home equity loan options from leading lenders today.

What if you took the HELOC route?

You may decide to use a Home Equity Line of Credit (HELOC) to access the financing you need. But these line of credit products come with variable interest rates that will change from time to time.

That said, the average HELOC interest rate is currently 9.88%. Assuming your HELOC had the average interest rate and that rate remained the same over a 10-year repayment period, your monthly payments on a $40,000 HELOC would be $525.95. Over this 10-year repayment period, you would pay $23,113.82 in interest for a total repayment cost of $63,113.82.

Again, it’s important to note that your HELOC interest rate may change from time to time – and this could impact your monthly payment. In addition, these loans are generally accompanied by a drawing period this gives you access to more financing for the first five to ten years. If you take advantage of this access to financing (by borrowing more money against your equity), you can enter your repayment period with a higher HELOC balance, which will result in higher payments.

Smart Ways to Use $40,000 of Home Equity

If you decide to tap into your home equity, it’s important to make wise decisions about how you’ll use it. Some of the smartest uses of your home equity include:

Use your home equity to your advantage now.

The essential

A $40,000 home equity loan at today’s average interest rate would have a monthly payment ranging from $400.96 to $502.38. If you choose the HELOC route, your payment could be around $525.95, but this payment may change due to the variable rate that these lines of credit typically come with. However, if you do access your equity, make sure you use it wisely. Consider using your home equity to make repairs, pay off debt, or start a business now.