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Your home may be the place where you live, but it’s increasingly become a smart financing choice thanks to a rising home equity level. According to a report released this March, the average home equity level has risen 6% year-over-year and is now sitting around $313,000. That’s the average, meaning that many homeowners have even more equity to potentially utilize. With options ranging from home equity loans to home equity lines of credit (HELOCs) to cash-out refinances and even reverse mortgages for seniors, there are plenty of ways to access that equity, too.
A HELOC, however, which works as a revolving line of credit the way a credit card does, could be one of your better options. It won’t require you to be of a certain age (like a reverse mortgage would) and it won’t require you to forego your current mortgage interest rate (like a cash-out refinance would). And, right now, HELOC interest rates are materially lower than home equity loans. But those aren’t the only HELOC benefits that may surprise homeowners right now. Below, we’ll break down three others to be aware of.
See how much home equity you’d be eligible to borrow here.
3 surprising HELOC benefits homeowners should know now
Here are three benefits of using a HELOC now that homeowners may not have known:
A declining interest rate
If you’ve been accustomed to higher interest rates on borrowing products in recent years, you may have overlooked the rates tied to HELOCs. Rates on this product tend to be lower than those on credit cards and personal loans, thanks to the home in question functioning as collateral.
That said, HELOC rates have fallen noticeably over the past year or so, dropping from around 10% in January 2024 to just over 8% right now. And because the rate on a HELOC is variable, it could soon decline again, making it one of the cheapest ways to borrow a large sum of money right now.
See what HELOC interest rate you’d qualify for now.
A tax-advantageous way to pay for home projects
If you’re planning to withdraw money from your hard-earned savings account or emergency fund to pay for home repairs and renovation projects, consider pausing first. That’s because interest paid on HELOCs may be tax-deductible if used for qualifying home projects. So, it’s worth investigating what may or may not qualify before taking out cash or swiping a credit card. Just remember that any HELOC funds used for eligible projects won’t qualify for a tax deduction until this calendar year is complete (and you’re ready to file your return for 2025).
Flexible refinancing options
While a variable HELOC interest rate may be beneficial for borrowers right now, it may not always remain so. Fortunately, there are multiple ways to refinance your HELOC, including into a fixed-rate home equity loan. Just be sure to understand the ins and outs of this option by speaking to your lender before formally securing the HELOC, as lender restrictions may vary. Still, if you want to exploit today’s low rates but don’t want to get stuck when they inevitably rise again, it helps to know about your HELOC refinancing options.
The bottom line
The benefits of borrowing products rise and fall but, right now, a HELOC is a surprisingly good choice. With HELOC interest rates steadily falling, tax deduction benefits that most alternatives do not provide and a lender-specific ability to refinance in the future, a HELOC could be the smart way to secure extra financing right now.
