{"id":2824,"date":"2025-09-15T19:55:14","date_gmt":"2025-09-15T19:55:14","guid":{"rendered":"https:\/\/ft365.org\/index.php\/2025\/09\/15\/are-home-equity-loans-or-helocs-a-good-idea-now-bankrate\/"},"modified":"2025-09-15T19:55:14","modified_gmt":"2025-09-15T19:55:14","slug":"are-home-equity-loans-or-helocs-a-good-idea-now-bankrate","status":"publish","type":"post","link":"http:\/\/ft365.org\/index.php\/2025\/09\/15\/are-home-equity-loans-or-helocs-a-good-idea-now-bankrate\/","title":{"rendered":"Are Home Equity Loans Or HELOCs A Good Idea Now? | Bankrate"},"content":{"rendered":"
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Key takeaways<\/span> <\/span> <\/h2>\n
    \n
  • With home values at historic highs, tapping home equity is tempting if you need cash. <\/li>\n
  • However, while home equity loan and HELOC rates are lower now than they have been over the past year, they\u2019re still higher than historical norms. <\/li>\n
  • HELOCs might be a better deal than home equity loans right now, as their rates have dropped more substantially. But loans might be easier to obtain. <\/li>\n<\/ul><\/div>\n

    If you\u2019re a homeowner, odds are you\u2019re sitting on a sizable source of cash right now.<\/p>\n

    As housing prices continue to soar, so has the worth of home equity (basically, your home\u2019s value, minus the mortgage outstanding). As of Q2 2025, tappable equity was at record highs, according to property data analyst ICE Mortgage Technology. The average mortgage-holding homeowner had a stake worth $213,000.<\/p>\n

    And homeowners are tapping that stake, swapping their home\u2019s value for ready money. Originations of home equity loans and HELOCs (home equity lines of credit) are up 12 percent \u2014 their strongest growth in three years, according to TransUnion. And if the Federal Reserve does cut interest rates at its upcoming meeting, as it\u2019s expected to do, equity-tapping could become cheaper. <\/p>\n

    But, even so, is borrowing against your home a good idea for you these days? Depends on who you ask and what it\u2019s for. Let\u2019s crunch some numbers.<\/p>\n

    \n

    Home Equity Icon<\/title> <\/svg> <\/p>\n
    \n

    $11.5 trillion in homeownership stakes <\/p>\n

    Nearly every corner of the country has experienced a surge in home equity since 2020, according to a recent Bankrate study. On average, it has increased 142% nationwide since then. Collectively, tappable equity among mortgage-holders is $11.5 trillion, the highest in five years.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n

    What\u2019s happening with HELOC and home equity loan rates?<\/h2>\n

    First, what\u2019s going on with in home equity interest rates? At the beginning of 2024, the average rate on a HELOC was 10.16 percent, a record high, according to Bankrate\u2019s survey of the nation\u2019s largest lenders. From there, it began declining, dropping as low as 7.9 percent this past April \u2014 a two-year low. Home equity loan rates have also fallen \u2014 averaging 8.23 percent, they\u2019re lower than they\u2019ve been in about a year.<\/p>\n

    As of mid-September, here\u2019s where the average home equity loan and HELOC rates stand:<\/p>\n

    \n
    \n\n\n\n\n\n
    HELOC<\/th>\n10-year home equity loan<\/th>\n15-year home equity loan<\/th>\n<\/tr>\n<\/thead>\n
    8.10%<\/td>\n8.38%<\/td>\n8.26%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/figure>\n

    A lot of the drop is due to the Federal Reserve: The central bank lowered benchmark interest rates a total of one percentage point near the end of 2024, as inflation became more manageable. According to Bankrate\u2019s\u00a0home equity forecast<\/u>, both HELOCs and home equity loan rates will decline further in 2025, assuming the Fed resumes cutting.\u00a0\u201cA declining interest rate environment will provide some relief for borrowers,\u201d says Bankrate Financial Analyst Stephen Kates, CFP. \u201cLower rates can ease the burden on many indebted households by opening opportunities to refinance or consolidate.\u201d<\/p>\n

    How interest rates impact home equity borrowers<\/h2>\n

    People have been turning to home equity products despite the fact that rates, while lower, are not exactly low. Currently, home equity loan and HELOC rates range from 6.63 percent to 12.50 percent, depending on the terms, the lender and the borrower\u2019s creditworthiness, according to Bankrate\u2019s survey of the nation\u2019s largest lenders. Just three years ago, during the pandemic, these averages were closer to 5.50\u20136 percent.<\/p>\n

    The difference in rates affects your monthly payment and the total interest you pay. Let\u2019s compare two $50,000 10-year fixed-rate home equity loans, with one at 6 percent and another at 10 percent:<\/p>\n

    \n
    \n\n\n\n\n\n\n
    $50,000 10-year home equity loan<\/th>\n6% interest<\/th>\n10% interest<\/th>\n<\/tr>\n<\/thead>\n
    Monthly payment<\/td>\n$555<\/td>\n$661<\/td>\n<\/tr>\n
    Total interest paid<\/td>\n$16,612<\/td>\n$26,290<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/figure>\n

    If you had a 10 percent interest rate, your monthly payment would be $106\u00a0more than with a 6 percent rate. And the total interest you would pay over the loan\u2019s lifetime is $26,290 \u2014 almost $10,000 more.<\/p>\n

    Why are home equity loans popular now?<\/h2>\n

    With home values at historic highs, it\u2019s no wonder that tapping your home\u2019s value is tempting. If you have a major unplanned expense or home remodeling project, home equity is often the route taken to finance it. But why via home equity loans or HELOCs? Largely because the only other way, a\u00a0cash-out refinance<\/u>, doesn\u2019t make much financial sense these days. Many homeowners have primary mortgages locked in at 3 or 4 percent rates \u2014 about half of the current cost \u2013 which they don\u2019t want to lose. So, rather than replacing their main home loan, they\u2019re taking out a second one instead.<\/p>\n

    Also, because home prices are so high and housing so scarce, many homeowners are staying put, opting to\u00a0renovate their residences<\/u> instead of moving. There are benefits to using a home equity loan to do so. Interest on the loan can be tax-deductible if the funds are used to repair or improve a home (and you itemize deductions on your tax return). Also, home equity products offer longer repayment terms and \u2014 even at their elevated rates \u2014 lower APRs than personal loans and credit cards.<\/p>\n

    \n

    40.5% <\/h3>\n

    Denial rate for HELOC applications as of Q1 2025, meaning that nearly half of applicants are not approved. While high, it\u2019s more favorable than in 2021, when the majority of applicants (61%) were turned down. <\/p>\n

    Source: Home Mortgage Disclosure Act <\/p>\n<\/p><\/div>\n

    HELOC vs. home equity loan: Which is a better deal today?<\/h2>\n

    If you have to choose between a HELOC and a home equity loan, there are a few aspects that can make a HELOC more attractive in today\u2019s market:<\/p>\n

      \n
    • Variable rates:<\/strong> HELOCs have variable interest rates throughout their terms. That means borrowers will likely benefit as rates decline, whereas with a fixed-rate home equity loan, your rate stays the same.<\/li>\n
    • Speed of funding:<\/strong> It can take 45 to 60 days or more for a home equity loan to close. In contrast, HELOC funding can take between two and six weeks: The underwriting is a little less onerous, so it moves faster.<\/li>\n
    • Flexibility: <\/strong>HELOCs offer a more adaptable approach, giving you the ability to draw against available funds and pay them back like a credit card. You\u2019re charged interest only on the withdrawn funds (not the entire credit line) and you typically have the option to make just minimum payments of interest during the draw period.\u00a0 With a home equity loan, you\u2019re getting a lump sum and start paying back the principal, along with the interest, immediately.<\/li>\n<\/ul>\n
      Savings Icon<\/title> <\/svg> <\/p>\n

      Money tip: <\/strong> While their upfront closing costs may be less, HELOCs also often carry ongoing annual fees, transactional fees and prepayment penalties. <\/p>\n<\/p><\/div>\n

      That said, home equity loans have their points:<\/p>\n

        \n
      • Efficiency:<\/strong> If you need a specific sum for a one-time cost, like paying off\u00a0outstanding credit card balances, the loan could be the more efficient way to go. <\/li>\n
      • Easier to obtain: <\/strong>Because their\u00a0rates can rise, HELOCs often carry more stringent credit score and other requirements.\u00a0Home equity loans might be easier to come by. For example, in 2024, the average FICO score for HELOC borrowers was 771, but 749 for HE Loans, according to the Mortgage Bankers Association.<\/li>\n
      • Predictable payments:<\/strong> The fixed rate on a home equity loan means you\u2019ll pay back the same amount each month \u2014 good for set-it-and-forget-it types or long-term budget planners. And if you feel interest rates are bottoming out, you might prefer to lock in a low rate now.<\/li>\n<\/ul>\n

        Drawbacks of home equity borrowing<\/h2>\n

        Of course, home equity products come with caveats too. For starters, they use your house as collateral. \u201cHome equity loans and HELOCs are tied to your home, so if you can\u2019t make payments, you\u2019re at risk of losing your house,\u201d says Certified Financial Planner Chloe Moore, founder of Financial Staples, a virtual, fee-only firm. This can also put you in a bind if home prices drop significantly: In between your first and second mortgages, you could owe more money than what your home is worth.<\/p>\n

        \u201cConsider why you\u2019re wanting to use your home equity,\u201d Moore adds. \u201cIf it\u2019s for a home renovation project, could it wait? If you\u2019re consolidating debt, do you have a solid plan to repay the loan and ensure you don\u2019t incur more debt over time? Are you at risk for being laid off, and if so, do you have an emergency fund to cover a loss of income?\u201d All of these things need to be carefully considered before depleting an equity stake.<\/p>\n

        \n

        A declining interest rate environment will provide some relief for borrowers.<\/q> \u2014 Stephen Kates, CFP, financial analyst for Bankrate <\/cite> <\/p><\/blockquote><\/div>\n

        Alternatives to HELOCs and home equity loans<\/h2>\n

        If you\u2019ve decided a HELOC or home equity loan isn\u2019t the right borrowing solution for you, alternatives exist.\u00a0<\/p>\n

        Personal loans<\/h3>\n

        Instead of tapping into your home equity, you could consider getting an unsecured personal loan. They aren\u2019t tied to your home, so you don\u2019t risk losing it if you can\u2019t repay. They\u2019re also convenient and quick, with funding coming in as soon as one day. <\/p>\n

        But: \u201cthat typically comes at a higher cost,\u201d says Adam Boyd, the head of consumer lending at Citizens Bank. \u201cThe average rate you get on a personal loan is generally going to be higher than what you can get on a home-secured product.\u201d For instance, as of mid-May, the average rate on an unsecured personal loan is 12.43 percent \u2014 a good four percentage points higher than home equity products.<\/p>\n

        Also, aside from special-purpose home improvement loans, unsecured personal loans don\u2019t generally allow you to borrow as much. \u201cUnless they\u2019re in a very good financial situation \u2026most people aren\u2019t going to get $50,000 or $100,000,\u201d says Ron Haynie, senior vice-president of housing finance policy for the Independent Community Bankers of America.<\/p>\n

        \n

        Home Equity Icon<\/title> <\/svg> <\/p>\n
        \n

        For those with exceptional credit and high income, some lenders do offer unsecured personal loans for $100,000 or more. <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

        Cash-out refinance<\/h3>\n

        A cash-out refinance could be another option. Refinance rates remain lower than home equity loan rates and may not be that bad a deal, depending on how old your primary mortgage is, and how sizable your ownership stake.<\/p>\n

        For instance, say you are halfway through your 30-year loan term, owe $50,000 on a home valued at $400,000 and your current mortgage rate is 6 percent (the average 30-year-fixed mortgage rate back in 2008). You can get a 30-year fixed cash-out refinance for around 6.7 percent \u2014 not that much higher than your mortgage) and pull out $80,000 in equity. So, it may make more sense for you to refinance than to take out a home equity loan or HELOC.<\/p>\n

        \n

        Dollar Icon<\/title> <\/svg> <\/p>\n
        \n

        Bankrate insights <\/p>\n

        Bankrate\u2019s Home Equity Insights Survey\u00a0found that home improvements or repairs, debt consolidation, tuition\/education expenses and routine household bills are the top four things homeowners cite as good reasons to tap into their home equity.\u00a0 <\/p>\n<\/p><\/div>\n<\/p><\/div>\n

        Bottom line on home equity loans today<\/h2>\n

        Elevated home values and declining interest rates can make home equity products tempting nowadays. But the emphasis should be on your need, not market conditions: If your home is demanding significant repairs or remodel work sooner rather than later. Or you\u2019d really like to clear those credit card balances once and for all.<\/p>\n

        If you\u2019re trying to tap your home equity, compare a variety of lenders and products. These rates change frequently and can vary significantly depending on the lender and your financial profile.<\/p>\n

        Also, \u201cas you do research, don\u2019t just focus on the advertised rate,\u201d Boyd advises. \u201cTalk with the lender and understand what the other stipulations are attached to that rate just to make sure you\u2019re considering all costs associated with the loan.\u201d This way, you can better choose the right home equity product for you \u2014 whether it\u2019s now or in the future.<\/p>\n

        Additional reporting by Ashlee Valentine<\/em><\/p>\n

        \n
        \n

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        Key takeaways With home values at historic highs, tapping home equity is tempting if you need cash. However, while home equity loan and HELOC rates are lower now than they have been over the past year, they\u2019re still higher than historical norms. HELOCs might be a better deal than home equity loans right now, as<\/p>\n","protected":false},"author":2,"featured_media":2044,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-2824","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-news"],"featured_image_urls":{"full":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea.jpg",1280,720,false],"thumbnail":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-150x150.jpg",150,150,true],"medium":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-300x169.jpg",300,169,true],"medium_large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-768x432.jpg",640,360,true],"large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-1024x576.jpg",640,360,true],"1536x1536":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea.jpg",1280,720,false],"2048x2048":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea.jpg",1280,720,false],"morenews-featured":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-1024x576.jpg",1024,576,true],"morenews-large":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-825x575.jpg",825,575,true],"morenews-medium":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-590x410.jpg",590,410,true],"crawlomatic_preview_image":["http:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/localimages\/Homes-Your-homes-worth-more-than-ever-But-is-borrowing-against-it-a-good-idea-260x146.jpg",260,146,true]},"author_info":{"display_name":"henry","author_link":"http:\/\/ft365.org\/index.php\/author\/henry\/"},"category_info":"Latest News<\/a>","tag_info":"Latest News","comment_count":"0","_links":{"self":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/2824","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/comments?post=2824"}],"version-history":[{"count":0,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/2824\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media\/2044"}],"wp:attachment":[{"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media?parent=2824"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/categories?post=2824"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/tags?post=2824"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}