3 smart home equity moves to make this June
The start of a new month is always an opportune time to revisit your financial situation. And with inflation stubborn (but significantly reduced) and interest rates still high, this June is an important time to take stock of what's working and what isn't — and to take steps to improve the latter. With rates significantly elevated for personal loans and credit cards (both of which come with averages in the double digits), many homeowners may elect to use their home equity instead.
Both home equity loans and home equity lines of credit (HELOCs) come with rates under 10% for qualified borrowers right now. However, as with all borrowing options, they will need to be used strategically to obtain the most benefit. And the timing will need to be right to accomplish specific financial goals. To that end, there are certain smart home equity moves owners should make if they're considering tapping into their home equity this June. Below, we'll break down three of them.
Start by seeing what home equity loan interest rate you could secure here today.
3 smart home equity moves to make this June
Home equity loans and HELOCs offer homeowners specific advantages in today's unique economic climate. Here's how they can capitalize on those advantages heading into June:
Start shopping for lenders
When it comes to any lending product, it behooves borrowers to shop around for the lowest rates and best terms. That applies to home equity borrowing, too. But it's particularly important to do in June. With the next inflation report and Fed announcement on rate cuts both scheduled to be released on June 12, the rate climate could change mid-month in either direction.
So it's important to shop for lenders before that happens so you know which one to use should rates adjust in the weeks to come. Consider getting prices from at least three different lenders now so you know which one is offering the best deal — and which just appears to be.
Start shopping for home equity lenders online now.
Lock in a home equity loan rate
With inflation significantly cooled but still more than a full percentage point above the Federal Reserve's target 2% goal, there's a compelling case to be made for locking in a home equity loan rate now. By doing so, borrowers can safeguard against any potential future rate hikes still to come.
"Given the current economic landscape and the potential for interest rates to rise, locking in today's home equity loan rates can be a wise decision," Ralph Adamo, ChFC, CEO and founder of Integrity Wealth Management, recently told CBS News.
And remember that any rate cuts to come are unlikely to come until later in 2024 and they're likely to be negligible, reinforcing the benefit of locking in a home equity loan rate this June instead.
Use it for home repairs and renovations
June and the summer months are often a popular time to complete home repairs and renovations. Some of these summer renovations can significantly raise your home's value — and your equity — as well. And while you can pay for these projects in a multitude of ways, home equity borrowing is one of the better ways to do so.
That's because the interest you pay on a home equity loan or HELOC can be tax-deductible if used for eligible, IRS-approved home projects. Compared to the interest you'll get stuck paying on personal loans and credit cards, then, it becomes clear that home equity borrowing is the best alternative to use for home repairs and renovations both this June and beyond.
Learn more about your home equity options here.
The bottom line
If you've been contemplating tapping into your home equity, this June could be a smart time to do so. To reap the benefits of this unique borrowing type in the month, however, homeowners should be sure to thoroughly shop for lenders, consider locking in a rate sooner rather than later and use it for summer home repairs and renovations, which may allow them to deduct the interest they pay on their taxes next spring. Just make sure to carefully understand the pros and cons of home equity borrowing, as your home serves as collateral in these scenarios, and you could lose it in the process if you don't pay back what you've borrowed.
