3 home equity moves to make before the July Fed meeting
Home equity loans and home equity lines of credit (HELOCs) have been two of the most cost-effective borrowing options to explore in recent years. Thanks to the home in question serving as collateral, lenders have offered borrowers significantly lower interest rates than they otherwise would have been secured with alternative options like credit cards and personal loans.
The timing surrounding a home equity loan application, however, is critical to get right. And with a consistently cooling inflation rate (the latest report showed it dropping again in June) and the next Federal Reserve meeting to discuss interest rates set to begin on July 30, now could be a smart time to pursue this unique credit option.
However, borrowers will need to take a strategic approach to reduce costs and secure a low rate. Below, we'll break down three smart home equity moves homeowners should make before the July Fed meeting begins.
Start by seeing what home equity loan rate you could secure online now.
3 home equity moves to make before the July Fed meeting
The average homeowner has around $300,000 worth of home equity right now. Here are three smart ways they can go about accessing with the next Federal Reserve meeting looming:
Shop for lenders
While rates may formally be cut in September, an official reduction in the federal funds rate doesn't need to take place for lenders to start offering lower interest rates. They can do so now and may start to if it looks like the July Fed meeting will be the final one before rates are cut. So it makes sense to start shopping for lenders now, before July 30. Most lenders will offer rates similar to one another but they won't necessarily be identical and every percentage point and quarter of a percentage point can result in significant savings. So start shopping for lenders now and remember that you don't need to use the same bank you have your current mortgage loan with.
Shop for top home equity lenders here today.
Be prepared to act
A loan application isn't something you should submit freely. You'll want to have shopped around for lenders first, have a clear understanding of your financial needs and goals and have boosted your credit score as much as possible. But with select upcoming dates likely to affect what rates and terms you're offered, it makes sense to complete all of the above actions now so you're prepared to act quickly. A delay could result in less attractive offers.
Open a HELOC instead of a home equity loan
A home equity loan, thanks to its fixed-rate feature, is the smart option in a climate in which rates are increasing. But now, following three consecutive reports showing inflation cooling and with the rate barely above the Federal Reserve's target 2% goal, rates are likely to be cut soon. While that may not happen in July, the CME FedWatch tool has it pegged at a more than 90% likelihood for September.
Home equity borrowers, then, should open a HELOC instead of a home equity loan heading into the July Fed meeting. The former has a variable rate subject to fall as rates do. Home equity loans, meanwhile, have fixed rates that will need to be refinanced (and paid for via closing costs) in order to fall. So, right now, it's typically smarter to pursue a HELOC to better position yourself for savings in the second half of the year and into 2025.
Explore your HELOC options online now.
The bottom line
With the likelihood of a lower rate climate growing each day, homeowners looking to borrow from their accumulated home equity should take some strategic approaches now, before the Federal Reserve meets again at the end of the month. So start shopping for lenders now, get ready to act so that you can secure a low-rate option when discovered, and consider a HELOC over the fixed-rate nature of a home equity loan. By making these moves now, borrowers will position themselves for financial success both now and over the lifespan of their loan or line of credit.
