When is the best time to borrow home equity? The answer may surprise you.

Interest rates are high and homeowners are stuck. with Bail rate Now in the 6% to 7% range, options for prospective homeowners to purchase a new home or options for current owners to refinance their existing mortgage are limited. In this environment, many homeowners may consider renovating or fixing up their living spaces.

In addition to making your home more comfortable and attractive, a significant home improvement can increase your overall home value. Homeowners should strongly consider using their existing home equity to finance these repairs. Actually, arguably Best time to borrow your home equity When you need to fix your house.

You can explore your home equity options here to learn more.

When is the best time to borrow home equity?

It may seem counterintuitive to use your home equity while doing home repairs but, generally, the best time to borrow against your home is when you plan to refinance it with a major home improvement, renovation, or repair. Why? Unlike other options (like credit cards and personal loans) you’ll usually be able to deduct the interest you pay Home equity loan or a Home Equity Line of Credit (HELOC) You file your taxes for the year the loan was used.

“Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS Says “the loan must be secured by the taxpayer’s principal home or second home (qualifying residence) and meet other requirements.

“Generally, you can deduct home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 8a,” the IRS says. “However, any interest shown in Box 1 of Form 1098 from a home equity loan, or a line of credit or credit card loan secured by property, is not deductible if the proceeds are not used to purchase, construct, or substantially improve. Qualifying home .”

While there are many great times to borrow against your home equity, it’s arguably best when you know you’ll be using it to fix up your home. Considering the tax deductions — and home equity loan interest rates are lower than credit cards and personal loans — it may be the best way to pay for your next kitchen remodel or a new roof.

Check out your home equity loan options here to see how much you can borrow.

How to Use Home Equity

There are several ways that homeowners can use their equity to work on their home Here are three popular options:

A home equity loan

A Home equity loan Allows the homeowner to borrow a lump sum from their accumulated equity. Rates for home equity loans Fixed, allowing the homeowner to budget more effectively each month. Most lenders will allow borrowers to withdraw money 80% to 85% of their existing equity.

Learn more here.

A HELOC

A HELOC A home equity loan works like a loan but instead of paying the borrower a lump sum up front, it will act as a revolving line of credit (like a credit card would). This can be beneficial because borrowers only pay interest on the amount they use — not the amount they apply for, as they would with a home equity loan. said, HELOC rates Usually variable so the lower rate you get once you’re approved may not be lower in the long run.

Learn more here.

Cash-out refinancing

Cash-out refinancing It involves taking out a new mortgage loan for an amount larger than what you currently owe your lender. You then use the new loan to pay off the old loan and take the difference for yourself as cash. Depending on how much you currently owe on your mortgage – and how much you’re applying for a new loan – you can secure a substantial amount. Be sure to check the rates first to make sure it’s the best option for you.

Learn more here.

Bottom line

There are several though Great time to take out a HELOC or Home equity loan, arguably the best when you need it for home repairs and renovations. If you use the money for these projects, you’ll be able to deduct the interest you pay for the tax year you use it, making it a desirable option in an otherwise discouraging rate environment.