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Homeowners in need of inexpensive financing don’t have to look too far, as they can easily find it now with a home equity line of credit (HELOC). That’s often the case in most economic climates, but especially so now, as was made clear once again this week when HELOC interest rates again tumbled downward, falling below 8% for the first time since 2023, according to Bankrate data. Now at an average rate of just 7.90% for qualified borrowers, HELOC rates are down more than two full percentage points since September 2024. They’ve hit 18-month and two-year lows already in 2025, with a clear end to the decline unknown, making now a great time to borrow via this unique product.
That all said, HELOCs don’t work the way some other borrowing options do, and to get the most out of the line of credit, homeowners will want to take a nuanced and strategic approach. This is particularly important now, as rates on HELOCs seemingly decline on a weekly basis, even while rates on home equity loans stagnate and while rates on personal loans and credit cards stay in the double-digit range. Against this backdrop, then, and with the potential for HELOC rates to fall even further soon, interested homeowners should consider making select moves right now. Below, we’ll break down three of them.
Start by seeing how low of a HELOC rate you could secure here.
What homeowners should do as HELOC rates continue to fall
Here are three things homeowners considering a HELOC should do now as rates continue to fall:
Determine your exact financing needs
Don’t let a consistently declining HELOC rate cloud your financial judgment. Remember that HELOCs use your home as collateral, which is one of the reasons why lenders tend to offer lower rates here than you’d get with other unsecured debt types.
So, you must determine your exact financing needs before securing the line of credit. You don’t want to use too much of a HELOC just because it’s relatively inexpensive to do so. If you overborrow and can’t make your payments, you could risk having your home foreclosed on by the lender. To avoid this scenario, then, first determine exactly how much you’ll need to borrow. Then apply for a HELOC only in that amount.
Get started with a HELOC online today.
Consider using it for select purposes only
HELOCs, like their home equity loan counterparts, should be used for select purposes only, even with a rate that’s continuously declining so far this year. So, a kitchen remodel or bathroom renovation would make sense, as would new landscaping. These sorts of projects can qualify for a HELOC tax deduction, essentially resulting in a lower tax bill.
The interest paid on the line of credit, even if minimal thanks to today’s lower average rates, would be even less of a concern if used for these projects, as they can be deductible for the year in which the line of credit was used. Other expenses, however, like college tuition, a wedding or something similar, are generally not a smart use for a HELOC, even if it’s less expensive to borrow this way now.
Shop around for rates and lenders
Sure, the average HELOC rate is now 7.90%, but the keyword there is “average,” meaning that you may get offers higher or lower than that rate. But the only way to secure one lower is by shopping around for rates and lenders. You don’t need to use your existing mortgage lender to obtain a HELOC, so it makes sense to shop around to see what rates and terms you may qualify for.
And, if you have a good credit score, you may even be able to get a rate below that 7.90% average. However, you won’t be able to determine what’s available until you start looking around, so consider starting the process now, as lenders compete for your business in today’s rapidly cooling home equity rate market.
The bottom line
An interest rate environment that’s consistently cooling can be exciting for borrowers. But it needs to be exploited carefully and strategically if the money you’re borrowing comes out of your own home. Prospective HELOC borrowers should use this time to determine their exact financing needs and to have a plan to use it for select purposes only. Finally, by shopping around and comparing rates and lenders, homeowners can potentially find a below-average rate and attractive terms that they may have otherwise missed out on by simply applying for a HELOC with their current mortgage lender.
Have more questions about borrowing with a HELOC? Learn more here now.
