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Finding affordable ways to borrow money has become increasingly challenging. Popular avenues such as credit cards and personal loans carry steep interest rates right now, straining household budgets in today’s high-rate environment. However, home equity loans and home equity lines of credit (HELOCs) stand out as cost-effective alternatives for consolidating debt, funding renovations or covering major expenses. Since they use your home as collateral, they can give access to funds at lower interest rates.
With the average American homeowner sitting on around $313,000 in equity, these products unlock a valuable financial resource when used strategically. Below, lending experts share their top advice for homeowners thinking about borrowing equity right now.
Find out how affordable home equity borrowing could be now.
Home equity borrowing advice that owners should know now
Here’s the home equity borrowing advice lenders say can help you save money now:
Lock in promotional rates for short-term needs
Some lenders are currently offering HELOC rates as low as 5.99% for the first six months, lenders say. Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, says these deals work especially well if you’re considering home upgrades that add immediate value to your property.
He recommends matching your timeline to the promotional period. If you’re planning a kitchen upgrade or bathroom renovation that you can complete within half a year, these starter HELOC rates can provide substantial savings.
But don’t let a flashy rate fool you, Joe Perveiler, senior vice president and home lending executive at PNC Bank, emphasizes.
“Compare multiple lenders and review the full offer, not just the rate and terms,” Perveiler says. “Sometimes, a low rate can end up costing more if it has higher closing costs and other fees.” Strive to find the best overall deal rather than the lowest introductory rate.
Learn more about the home equity options available to you today.
Shop for low or no-fee deals
Competition among lenders is creating wins for borrowers who take the time to shop around. Banks are waiving HELOC closing costs and offering rate discounts for autopayments as they fight to capture market share. Glick says comparing at least three lenders can help you shave 0.5% to 1% off your rate.
As you shop, note that the differences between lenders go beyond basic rates and fees. Debbie Calixto, sales manager at mortgage lender loanDepot, points out that some lenders charge early termination fees while others don’t. These hidden costs can impact your total borrowing expense, especially if your plans change.
Prioritize high-ROI home improvements
HomeAbroad’s Glick suggests focusing on projects that offer a significant return on investment (ROI), add resale value or reduce utility bills rather than discretionary upgrades. For example, energy-efficient windows or a new HVAC system can increase your home’s value by 5% to 10% while potentially qualifying for tax-deductible interest. With home values up but inventory tight, improvements that boost your property’s appeal become even more valuable.
Consider getting a HELOC
If you’re in a stable financial position, Calixto says now could be a great time to set up a HELOC, even if you don’t need the funds right away. A HELOC gives you access to funds when needed without holding a balance upfront.
“[You] only [pay] interest on the amount borrowed,” Calixto explains. That makes this type of borrowing a flexible financial safety net for future expenses.
Timing may work in your favor with HELOCs. Since these products have variable rates, expected Federal Reserve rate cuts mean your rate could drop over time. Perveiler notes that today’s rates are already lower than earlier this year, and they could fall further if the market shifts.
Weigh the advantages and drawbacks of HELOCs and home equity loans
Perveiler explains that HELOCs let you borrow only what you need. This helps you keep monthly payments manageable while taking advantage of lower starting rates and higher loan limits than credit cards. But their variable rates mean your payments can increase if market rates rise.
Home equity loans work differently. They have fixed rates, which means predictable payments throughout the loan term. You get a lump sum upfront that you can spend or invest as you see fit, with no ongoing account fees. The downside is the risk of borrowing too much and paying unnecessary interest, or borrowing too little and needing another loan later. Origination fees and closing costs can also make them more expensive than HELOCs in some cases.
The bottom line
“Using your home equity can be valuable [for] consolidating debt, [funding high-return] investments or [improving] your monthly cash flow,” says Calixto. “When used responsibly, [it] can be a powerful [way to] build wealth and increase financial flexibility.”
Before committing to either home equity borrowing option, speak with at least three lenders to compare rates, fees and terms. A trusted mortgage professional can help you achieve the right balance between immediate savings and long-term financial security.
