Why you shouldn't wait to use your home equity

As a homeowner, the equity you build up in your home can be a valuable resource when you need it. Whether you're looking to start a home renovation or you need to consolidate existing high-interest debt, home equity loans and lines of credit offer lower-rate options for accessing the money you need.

But as interest rates rise and economic uncertainty grows, borrowing any money will only get more expensive. Now could be an opportune time to tap into the equity you've built in your home, especially if your home value has increased over the past few years thanks to the booming housing market. With higher-interest personal loans or credit cards as the alternative, home equity loans and home equity lines of credit (HELOCs) offer competitive rates in today's market.

Compare top home equity rates you can qualify for here now and learn more.

Why you shouldn't wait to use your home equity

If you're considering using your home equity, it can pay to start exploring your options, or you could end up waiting a long time for rates to come down.

Interest rates are rising

There are a number of individual factors that go into the home equity rate you qualify for — your credit score, current debts, the lender you choose and more — but the overall economic environment plays a role, too.

Just this week, the Federal Reserve increased interest rates for the tenth time since last March, putting its target federal funds rate range at 5.00 - 5.25%. Home equity rates are tied to this federal rate, which is why they tend to move alongside Fed changes. And another Fed rate hike means banks won't be far behind charging higher interest rates on the loans and lines of credit they offer, including on home equity. 

If you've already locked in a home equity loan, you probably have a fixed rate that isn't likely to change. But if you're still thinking about opening one, locking in a fixed interest rate today could help you avoid higher rates to come. 

Learn more about your home equity loan rate options today.

Rates could remain high

Not only are rates rising, but there's little indication that they're going to drop anytime soon. 

In a press conference following the Fed's rate announcement, Fed Chairman Jerome Powell said the Fed will consider ongoing rate moves in the months to come and didn't rule out the possibility of more rate hikes or holding rates where they are. "We will make that determination meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation," Powell said. "And we are prepared to do more if greater monetary policy restraint is warranted."

As a result, the cost of borrowing isn't likely to come down anytime soon. If you're considering using your home equity to borrow for a home project or other purpose, it can pay to start comparing options you may qualify for sooner rather than later.

Home equity loan vs. HELOC

If you are considering tapping into your home equity, one thing to consider is whether a home equity loan or a home equity line of credit (HELOC) better suits your goals.

If you choose a home equity loan, you can lock in a fixed rate today and receive a lump sum for the amount you qualify for, which you'll pay back in monthly installments. If you want to use your loan for a specific purpose and know how much money you'll need, this could be a good option to lock in a rate now. Plus, when rates do eventually fall, you can choose to refinance at a lower rate.

On the other hand, HELOCs have variable interest rates, which can change over time. In the short term, this means that your interest rate could move higher. But over the long term, an adjustable interest rate could lower your payments when rates eventually go back down. If you want the ability to access a line of credit but only pay back the actual amount you borrow from it, this could be a better option. 

The bottom line

Home equity loans and HELOCs both offer great alternatives to higher-interest lending products like credit cards, even as rates rise. If you're considering using your home's equity to improve the value of your home with a renovation or remodel, or even for debt consolidation, it's still a great time to do so.

Start exploring today's top home equity rates to see what you can qualify for now.