Is Home Equity Borrowing Smart in Today’s Economy? Weigh in on the experts

If you own a home, House prices have increased Along with across the country Rising interest ratesYou can consider the benefits of borrowing against your home equity

Home equity loan And Home Equity Lines of Credit (HELOCs) Allow homeowners to borrow against the value built on their homes. that equity The difference between your current estimated home value and how much you paid on your mortgage. Because home equity loans or lines of credit Protected by your homeThey often come with lower interest rates than alternatives, such as credit cards and some personal loans.

Even now, you probably are Pay more in interest When rates are low compared to yours, and given today’s overall economic uncertainty, you may be wondering if taking out a loan is a good idea. Below, we’ll outline three things that can help you decide

Thinking about using home equity today? Find the best rate you can qualify for now.

Should You Borrow From Home Equity In Today’s Economy?

Here are a few factors that may influence your choice to use a Home equity loan or HELOC Today.

interest rate

Home equity loans and HELOCs are one of the biggest advantages today Competitive interest rates You can score compared to other borrowing options. Top home equity rates can be as low as 7%-8% APR. In comparison, some personal loan rates for the most creditworthy borrowers can start in that range but go up to double digits, while credit cards routinely charge 20% APR on balances.

“Compared to other types of loans, borrowing against the value of your home will always be advantageous,” says Sean Ballinger, CFP, founder of Columbus Street Financial Planning.

Are you looking to score the best rates you can today? “Keeping a loan-to-value ratio below 80% will ensure you get the most competitive rate,” Ballinger also recommends. “And stick with major or regional established banks when looking for a home equity loan or line of credit product.”

The online sections of these banks can be a great place to start your search. Make sure you practice good habits Improve your score Before you apply, and always shop around before deciding on a lender. You may be approved for different rates and terms, so it’s always beneficial to compare what you may qualify for.

Start exploring the home equity rates you may qualify for today here.

Home value

An advantage for homeowners today is that rate Home values ​​have increased Over the past few years. That may increase showing signs of slowing downBut many are sitting on large amounts of equity — especially compared to when they initially bought their home.

Even if those increased values ​​are a short-lived benefit in today’s economy, you may want to take advantage of them Increase the value of your home For the long term.

If you are considering using home equity for a Home renovation Or remodel, you get another advantage over other borrowing options, since the interest on your loan duty free When used for this qualified purpose. Plus, if you choose a project designed to improve your home for future buyers, you can preserve its value and make more money in the long run when you’re ready to sell.

Preparing for the future

There is a lot of uncertainty about what the economy might look like next year. The Fed has indicated it may be ready Stop increasing its rates, even if rates remain high. And Fed officials as well as economists have a prediction Recession next month.

While taking on more debt can be a risk in general, you can benefit by securing a relatively low rate today – especially when the future is uncertain.

“It’s a good idea to have multiple levers for borrowing options, especially now that credit is tighter,” says Mike Bigica, CFP, founder of Pixel Financial Planning. “If your roof needs sudden repairs, and you’ve recently been laid off, you’ll be glad you applied for that HELOC earlier in the year to avoid credit card debt.”

Another factor to consider is whether to get a fixed-rate home equity loan or a variable-rate HELOC best suited to your vision. Some borrowers may prefer fixed rates, as rates may still rise in the future. For others, however, variable rates may be better — the longer repayment timeline may mean you’ll pay less in the long run when rates eventually drop.

Now find out at what rate you can qualify to avail various home equity options here.

Bottom line

Borrowing can be a difficult decision when interest rates are high and a potential economic downturn looms. While this may not be the right time for every homeowner, some may benefit greatly Borrowing from their home equity Today. Not only do home equity loans and HELOCs offer the opportunity to score potentially lower interest rates, but they can help you preserve the value of your home when used for renovations and can be a good way to avoid high-interest loans in the future.

Before you decide, consider how an additional payment might fit into your overall financial plan and budget, and whether a fixed or variable interest rate makes more sense for you. And don’t forget to compare different lenders to qualify for the best rate possible.