Why owners should use home equity before the next Fed meeting
After the benchmark interest rate was raised to a 22-year high over the summer, the Federal Reserve elected to keep rates untouched in their September meeting, giving borrowers some much-needed breathing room. But rates are unlikely to stay where they are permanently and they could change again when the Fed meets at the end of October.
To prepare for this, borrowers should take a series of actions now. For many homeowners that could mean tapping into their home equity before the next Fed meeting. Start by exploring your home equity loan options here to see how much you could borrow.
Why owners should use home equity before the next Fed meeting
Here are three reasons why homeowners should strongly consider using their home equity now.
Rates are still relatively low
Rates on home equity loans and home equity lines of credit (HELOCs) are still relatively low, with both still in the single digits for qualified borrowers. Compared to the double-digit interest rates many will get with a personal loan — and the 20%-plus available with credit cards — home equity loans are one of the better credit options currently. But it may not remain that way after the next Fed meeting, particularly if they raise the benchmark rate yet again. So, if you know you want to use your home equity for major expenses now, it makes sense to apply before then.
You may have a lot to borrow
Rising home prices mean more available equity to borrow for millions of homeowners. In fact, the average homeowner currently has around $200,000 worth of equity they can utilize. That said, home prices may not stay high for long. Although no one knows for sure when the real estate market will adjust, everyone is predicting that it will adjust at some point. When that happens, and it could be soon, you may not have as much equity to utilize as you do today.
You may be eligible for tax benefits
With less than three months remaining in 2023, your options for using credit that you can then deduct from your taxes are limited. But with a home equity loan or HELOC, you may be able to deduct the interest you paid on the loan from your taxes in the spring. If you use the funds for qualifying home repairs, improvements and renovations, you may be eligible to deduct that interest. This is a nice perk when compared to other popular credit alternatives like credit cards and personal loans, in which you'll get stuck paying the interest back in full.
The bottom line
Home equity loans and HELOCs are like any other financial products or services in that the timing is key. And right now the timing for using your home equity this way is critical. If you wait much longer, rates on these products can rise, making them a less beneficial alternative for many owners. Plus, right now you likely have more to utilize than you would in a different, less favorable real estate market. And if you use your home equity for qualifying home repairs in October, November and December, you could deduct it from your taxes when you file your return next April.
Learn more about your home equity borrowing options here today.
