3 ways a HELOC can help homeowners right now
In today's hard-to-predict economic climate, in which inflation is declining but interest rates are still frozen and stock market performance is uncertain, many Americans may find themselves looking for ways to grow and protect their savings. While this may be difficult to do for many, homeowners have a valuable tool at their fingertips via their accumulated home equity. With the average home equity amount around $313,000 right now, there's a substantial amount of funding to potentially utilize for a wide range of needs and expenses.
Barring the funding of major costs, such as weddings, college tuition, and more, a HELOC can help homeowners in more fundamental ways right now. And with rates on the line of credit steadily declining over the last year (they're down around two points from September 2024), the costs of having a HELOC are reasonable now, too. So, how can a HELOC exactly help homeowners in today's unique economic climate? Below, we'll break down three ways to know now.
See how much you could borrow with a HELOC online today.
3 ways a HELOC can help homeowners right now
Here are three timely ways a HELOC can assist homeowners right now:
It can expedite credit card debt payoff
The average credit card interest rate is 21.37% now, only slightly down from the recent record 23% rate it was in recent months. The average HELOC interest rate, at the same time, is just 8% now, making it almost three times cheaper than credit cards. So if you use the latter to pay down the former, you can expedite your credit card debt payoff timeline significantly. This is critical in any economic climate, but particularly now when credit card debt relief looks unlikely thanks to higher rates frozen for longer.
Even if the Federal Reserve were to resume its interest-rate cut campaign later this year, it's likely to have a muted impact on credit card rates because credit cards are more tied to the prime rate versus the federal funds rate that the bank adjusts. So, waiting for relief that's unlikely to materialize doesn't make sense right now, particularly when a HELOC offers a cheaper and quicker way to regain your financial freedom.
See what HELOC rate you'd be eligible for here.
It can serve as an emergency fund source
Recent major drops in the stock market and retirement savings may have led many Americans to reconsider their emergency funding sources. While items like certificates of deposit (CDs) and high-yield savings accounts could be viable options, those require savers to use their existing funds. But a HELOC can tap into the equity you've already built up in your home, leaving your money in the bank untouched.
And unlike a home equity loan, it won't require immediate repayments as you'll only need to make payments on the line of credit if you start using it. If you don't use it, you can just keep it on the sidelines for emergencies. Just be aware that HELOC interest rates are variable and subject to change monthly, so the rate you secure now may not be the same one you get when you ultimately start using the HELOC.
It can form your next tax deduction
Sure, the tax filing season just passed. But if your refund was smaller than you would have liked or, worse, if you got stuck paying back taxes, you may already be thinking about ways to improve your tax situation next year. That could mean securing new, substantive tax deductions that you didn't have for the 2024 tax year.
Fortunately, a HELOC can help here, too. If used for qualifying home repairs and projects (like a kitchen remodel, bathroom renovation or more), homeowners could theoretically deduct the interest paid on the HELOC when they file their tax return for the year in which the HELOC was used. And with the need for funding for spring home projects and renovations likely high right now, it makes sense to start shopping for a low-rate HELOC quickly.
The bottom line
Leveraging your home equity, even in today's economy and even via a low-rate HELOC, should always be done strategically. Failure to repay all that's been borrowed could result in you losing your home to the lender. That said, if you can comfortably manage repayments, a HELOC could be a big boost for your financial situation in today's economy. Whether used to expedite credit card debt payoffs, as an emergency fund, to form your next tax deduction or as a combination of all three, a HELOC can potentially help you both now and in the weeks and months ahead.
