Should you use your home’s equity before 2025? Experts weigh in

Property owners have a unique opportunity to obtain a loan secured by their home at affordable rates. Do you take out home loan or use Home Equity Line of Credit (HELOC)interest rates typically lower than you would pay using alternatives such as credit cards or personal loans, since the debt is secured.

Home equity loan and HELOC interest rates have risen in recent years as the Federal Reserve has raised its benchmark rate. While these options remained more affordable than the alternatives, many homeowners put off borrowing because rates were much higher than we had become accustomed to since the end of the 2008 recession.

Those hoping to put their capital to use finally got some encouraging news from the Federal Reserve. lower rates in both September and November 2024, giving new hope that more Available loans secured by your own home. However, with inflation ticks again, there are fears that this optimism will be short-lived.

Amid economic uncertainty, many homeowners are unsure whether it makes sense to take out a loan this year or whether deferment is the best choice. Luckily, expert advice can help you make the best choice.

Start by looking at what home equity loan interest rate you can qualify for here.

Should you use your net worth before 2025?

Here’s what the experts we spoke with had to say about using home equity now, heading into the new year:

Using your own capital makes sense to meet immediate needs.

For some borrowers, taking out a loan before 2025 makes sense—regardless of economic conditions—simply because it’s the right choice for their financial situation.

“If you’ve built up significant equity in your home and will soon need cash for a major expense, now is a good time to consider a line of credit or home equity loan,” advises Fred Bolstad, head of retail home lending at U.S. Bank. “If you can afford the monthly payments, you don’t have to wait.”

Bolstad said there has been renewed interest in home equity loans over the past six months as rates began to fall and suggested talking to lenders to see what’s on offer. And there’s a good reason to take this advice thanks to the benefits of borrowing against your home equity.

“If you need money, it’s a great idea to take it from the equity in your home,” says Rick Miller, a financial planner and investment advisor at Miller Investment Management. “The repayment terms required are likely to be the most favorable of all alternatives. If you use a home equity line of credit, the interest rate will be much lower than any credit card fees, and the minimum repayment amount will be small and lower than yours.” control.”

Opening a line of credit secured by your own capital Now can also save you from more serious financial problems in the future.

“In these tough economic times, it makes sense to have a home equity line of credit as a backup plan,” advised Jerry L. Smith, CEP, founder and CEO of JLS Sales Academy. “You don’t pay interest on money you haven’t borrowed yet. Of course, you may be charged some fees to set up a line of credit, but it’s a small price to pay for giving yourself a backup plan in case of future financial adversity.”

Start exploring HELOC options online to learn more.

Waiting may not make sense without the guarantee of future rate cuts.

Waiting for a loan is not an option if you urgently need to meet. However, even in situations where you have more time before you need to access funds, delaying the process of tapping your capital may not always pay off.

“Given the election results and the potential for further federal funds rate cuts coming before the end of the year, there are several reasons to wait until 2025 to see if home equity lending rates decline. However, for many homeowners, it may make more sense to act now, says Aaron Craig, vice president of mortgages and indirect sales at Georgia’s Own Credit Union.

Craig believes that acting quickly is the best choice for several reasons. “Rates are still lower than alternatives, and there is no guarantee that home equity loan interest rates will fall further in 2025,” he said. “Additionally, by tapping into your home equity now, you can complete your home project before the busier spring season and qualify for a potential tax deduction.”

Smith also warns that delay can backfire. “If the economy worsens, it may be more difficult to obtain a home equity line of credit,” he said. “Another issue is the timing of opening a credit line. This is not something you can walk into a bank and deal with in a day. If financial difficulties arise, you may need a solution on the same day rather than weeks or months later.”

Deferring may pay off in the form of more affordable loans.

While there are many reasons to act sooner rather than later, there are also arguments for delaying borrowing.

“People should only use their home equity loans now if they need the funds,” said Melissa Kohn, regional vice president at William Raveis Mortgage. “There is no reason other than the need to borrow that this will be profitable if adopted in 2024. The HELOC rate fluctuates with the prime rate, and the Fed will likely continue to cut rates again next year.”

Ultimately, you’ll need to decide whether you want to risk delaying in hopes of future low rates or whether you want to act now, especially if you have immediate financial needs.

Those who decide to move on should remember that rates are still significantly lower than other types of loans. And What refinancing it’s an option for the future—so while it may be disappointing that the ultra-low rates of the COVID era are over, it’s still possible to get good loans if you shop around and take the time to find the best deals.

Start shopping for home equity loans online today.