Why you should shop for home equity loans and HELOCs this April, according to experts
Americans continue to fight an uphill battle with economic forces outside their control. Inflation is beyond its target, increasing the cost of goods and total expenses. Interest rates remain steady to help tame said inflation. Now, more price hikes might be in the future due to new tariffs.
These and the other economic factors that are looming can have a direct impact on your wallet. Because of this, consumers need to take advantage of the financial tools and resources available to them.
For homeowners, that can mean utilizing home equity borrowing options. Home equity loans and home equity lines of credit (HELOCs) provide access to capital with more favorable terms than other alternatives. And, right now could be a good time to shop around and review your options with multiple home equity lenders. Here's why.
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Why you should shop for home equity loans and HELOCs now
We spoke to home lending experts about why you should shop for home equity loans and HELOCs this April. Here's what they have to say:
There's no Federal Reserve meeting in April to impact rates
What the Federal Reserve does with the federal funds rates tends to affect the cost of borrowing. While everyone is holding their breath and hoping for rate cuts in the future, the Federal Reserve left rates unchanged after the March meeting.
There isn't a Federal Reserve meeting scheduled for April, which means there's no decision pending by the Fed that could impact rates this month. So, while that means there won't be any cuts, there won't be any increases, either. This can make it a good time to look into home equity loans and HELOCs.
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HELOC rates are on a downward trajectory
Whenever you borrow, the interest rate is a major factor to consider. Now, taking out a home equity line of credit just got more affordable. HELOC interest rates dipped below 8% for the first time since 2023. Before this major milestone, HELOC rates were on a small but steady downward trajectory. HELOC interest rates are typically variable, so if the trend continues, you can still benefit.
"The direction that the market's heading…the expectation is that those numbers are going to decrease and there's going to be some opportunities to potentially take advantage of lower home equity lines of credit [rates]," says Jason Lerner, branch manager at First Home Mortgage.
You can keep your current mortgage interest rate
More than half (54%) of mortgages have rates of 4% or lower, according to Q4 2024 data from Realtor.com. Homeowners who secured such low rates are holding on to a good thing.
"They're locked in and they're sitting on those record low mortgage rates of the two to four range. We don't expect these rates to come again," says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors.
That can make options like a cash-out refinance less appealing, as you replace your existing mortgage and therefore lose your low mortgage rate. Home equity borrowing options like HELOCs or home equity loans can keep your low mortgage rates intact.
"It's a way to leverage and take some of the equity in your home to use for home improvement purposes or debt consolidation without jeopardizing your very low rate," says Mark Worthington, a loan officer and branch manager at Churchill Mortgage.
It's renovation season
Springtime is often considered the prime home-buying season. But it's also a great time for home renovations.
"I will say that April, in general…kicks off the renovation season as well. So, weather is finally, in most parts of the country, warmer and many homeowners start planning big projects," says Evangelou.
The warmer weather and extra hours of daylight provide ideal conditions for renovating. Whether you want to build an outdoor deck or renovate your kitchen or bathroom, now is a good time to do that. Using home equity borrowing options can help you finance those renovation projects.
Home equity borrowing offers flexibility and affordability
When you take out a home equity loan or a home equity line of credit, you retain your current mortgage rate, and the interest rates on these financing tools are often lower than other borrowing options.
Credit card interest rates exceed 22% on average right now, making them a costly choice. If you're in credit card debt, tapping your home equity can be a smart move to consolidate your debt at a lower rate. HELOCs, in particular, offer borrowers a ton of flexibility in how much they can borrow and when.
"With a home equity line of credit, you can re-leverage the money. With a home equity loan, you can't. Once it's leveraged and dispersed to you, even if you pay it off to have that money back again, you need to get a new loan. That makes the flexibility of a home equity line of credit much greater," says Worthington.
The bottom line
If you're looking to consolidate debt or make some home upgrades, home equity borrowing can help. Review your home equity amount and look into both home equity loan requirements and HELOC requirements to see if you qualify. However, it's important to be smart about borrowing.
"Think of your equity as a financial tool that can help you, but it's not like a piggy bank," says Evangelou. Make sure to calculate your repayment costs with each product and shop around with multiple home equity or HELOC lenders.
Lerner suggests a home equity loan for people who need an extended repayment period and who benefit from a fixed rate and repayment schedule. That's a major difference to consider. Home equity loan interest rates are generally fixed, while HELOC interest rates are typically variable. For consumers who want assistance with cash flow in today's economy, Lerner says, "Home equity lines of credit can be a great solution as long as they're managed appropriately with the end goal of ultimately paying them off."
