4 things home equity borrowers should remember in 2025
If you're a homeowner, you enjoy many economic benefits. From owning an appreciating asset to mortgage interest tax deductions and more, homeownership offers multiple ways for owners to improve their financial circumstances. It also provides a cost-effective way to borrow money that's not available to non-owners. By borrowing with a home equity loan or home equity line of credit (HELOC), owners can gain access to a large, potentially six-figure sum of money with an interest rate much lower than what's available with popular alternatives.
Because these products are so closely tied to your most important financial asset, however, and because they're reflective of the larger economy and interest rate climate, existing borrowers need to remember a few critical points now, in 2025. Below, we'll break down four things worth remembering this new year.
Start by seeing what home equity loan rate you'd currently qualify for here.
4 things home equity borrowers should remember in 2025
Already have a home equity loan or HELOC? Keep these four things in mind now:
You don't need to use your current mortgage lender
If you needed access to a large amount of money and didn't want to pay a lot to secure it in recent years, you could be forgiven for automatically turning to your current mortgage lender to get your home equity loan quickly. But that may have been a mistake. You don't need to use your mortgage lender to borrow from your home equity and, in many cases, you may benefit from using a different bank instead. So if you see rates with competitors that are materially lower than what you're paying with your existing mortgage lender, it may be worth making the shift – and saving the money.
Explore rates and lenders online here.
A refinance may be worthwhile now
Both home equity loan and HELOC interest rates steadily declined in 2024 with the latter hitting an 18-month low to start 2025. If you opened either of these in 2023 or earlier, then, a refinance may be worth exploring. Today's home equity loan rates are averaging just 8.43% now while HELOCs are 8.27%. And, yes, in some circumstances and with some lenders existing home equity loans may qualify to be refinanced into a HELOC.
Rate cuts appear less likely
As noted, it may be tempting to refinance a home equity loan, with its fixed interest rate, into a HELOC with a variable one, especially considering that HELOC rates are lower right now. This will allow borrowers to exploit additional interest rate cuts to come in 2025. But it's important to note that interest rate cuts appear unlikely to maintain the same pace as they did in the final months of 2024 when the Federal Reserve issued three reductions in its final three meetings of the year. So borrowers will need to weigh the likelihood of additional cuts to come versus the security of today's fixed, home equity loan rates to determine which is more beneficial for their circumstances.
Home values may adjust this year
When you initially took out your home equity loan or HELOC, your home's value may have been higher or lower than it is now. And if it's lower, you'll need to be careful with how you use the remaining amount of your loan or line of credit. This is how many borrowers wind up becoming "underwater," when their home is worth less than what they owe. And with home prices constantly in a state of flux, it's always worth keeping an eye on your home's evolving value, especially if you've borrowed money from it recently.
The bottom line
Both home equity loans and HELOCs can be effective and valuable borrowing tools, particularly in today's still-high rate climate. However, because the money comes from critical assets, borrowers should be diligent in their approach. By remembering these four items, and using them to readjust their home equity borrowing approach (if needed), homeowners can more easily accomplish their financial goals both this year and in the years ahead.
Have more home equity loan questions? Learn more about your current options here.