3 surprising things to know about home equity borrowing now
With so many ways to borrow money, homeowners may have overlooked a simple and cost-effective one close to home – their home equity. With a home equity loan or home equity line of credit (HELOC), homeowners can leverage their accumulated home equity to pay for a series of expenses, large or small. And, depending on the use of the equity, may even qualify for tax deductions.
In today's unique economic climate, however, in which inflation is sticky and interest rate cuts are on hold, home equity borrowing should be approached strategically and with precision. Since the home is collateral, you could risk losing it to the lender if you fail to make your repayments. So it's important to understand the ins and outs of home equity loans and HELOCs before applying.
Against this backdrop, not only should interested homeowners familiarize themselves with how both products work, but they should also work toward dispelling some common misconceptions of the home equity borrowing landscape. That extends to knowing some surprising things about home equity borrowing right now. Below, we'll break down three to consider.
Start by seeing how much home equity you could borrow here.
3 surprising things to know about home equity borrowing now
Here are three things homeowners may be surprised to know about the home equity borrowing climate right now:
Home equity levels are up year-over-year
While down slightly from the approximate $320,000 home equity average in November 2024, home equity levels overall are up 6% year-over-year to $313,000 approximately. And that's an average, meaning that if you live in an area of the country where home prices are elevated, you may have even more equity to borrow from.
Since most lenders will want you to keep a healthy 20% buffer of equity in your home, that still leaves a six-figure sum to borrow from right now. Plus, it will be relatively easy to access compared to the eligibility criteria needed to qualify for unsecured debt like credit cards or personal loans.
Get started with a home equity loan online today.
Rates on home equity loans and HELOCs have been consistently dropping
If you're looking for a way to borrow money inexpensively now, you'd be hard-pressed to find cheaper options than home equity loans and HELOCs. Both products saw their rates drop consistently in 2024 and both saw that downward trend continue into the opening months of 2025.
HELOC rates just fell to a two-year low and have since dipped slightly from that point in March, making them an especially attractive way to borrow money right now. And that's come despite the Federal Reserve pausing its interest rate cut campaign. Since the Fed's policies are a big driver behind home equity loan rates, rates on both could fall even further should the Fed resume its rate cut actions later this year, as some anticipate.
HELOC rates are lower than home equity loans
In January 2024, home equity loan interest rates averaged 8.91% while the median HELOC rate was significantly higher at 9.41%. But that dynamic has been reversed recently and now HELOC rates are lower than home equity loans. The average HELOC interest rate as of March 18, 2025, is just 8.04% while home equity loans are at 8.37%.
Still, the latter is a fixed rate while the former is variable, so the lower HELOC rate will need to be weighed carefully against the inherent risk of rate changes to come. However, the change in rates underlines the evolving dynamics of home equity borrowing in today's unique economy.
The bottom line
If you need to borrow money now and haven't yet considered your home equity, you may be surprised at how advantageous it is to use this unique funding source today. With home equity levels up, rates on both home equity loans and HELOCs down and the potential for rates to fall even further in the weeks and months ahead, borrowing from your home equity could be an alternative worth exploring now. Just be sure to do so with a clear repayment plan to avoid risking your home during the borrowing and repayment process.
Learn more about your HELOC and home equity loan options here.
