Why you should get a home equity loan before the next Fed rate hike

After halting interest rate hikes in June, the Federal Reserve appears ready Implement another rate hike At its next meeting in late July. A minimum 25-basis point hike could bring interest rates to a target range of 5.25 to 5.50 percentage points.

Loans and lines of credit only become more expensive for borrowers when the Fed raises rates. Even relatively more affordable borrowing options charge interest Home equity loan And Home Equity Lines of Credit (HELOCs) May be up soon.

Nevertheless, now is a great time for many homeowners to take advantage of home equity. House prices have increased Over the past few years, growth Equity amount You may currently be in your home. And with running lack of room In the market, investing that equity back into your home can be a good way to preserve and improve your living space without transferring its value.

But given the potential interest rate changes, it may pay to act now.

Get started by exploring some of the best home equity loans available right here.

Why you should get a home equity loan before the next Fed rate hike

If the Fed increases its target federal funds rate range, it May have a ripple effect For any number of borrowers — including consideration Tap into home equity.

So if you’re considering a home equity loan, it might be worth locking in your rate sooner rather than later. Home equity loan, unlike HELOCs, carry fixed interest rates. The rate you lock in today is what you’ll pay for the entire (potentially decades-long) life of the loan.

There are advantages to choosing a fixed interest rate over the long term. You will have predictable monthly payments that you can budget for. And there’s no need to worry about increased rates that make you pay higher at the end of the month.

“If someone likes the peace of mind of knowing their rate won’t go up, they can choose a fixed rate,” Julia Colantuono, CFP, APMA, financial planner and founder of One Financial Design, said recently. CBS News. “And if interest rates drop significantly, they can refinance.”

Home equity loans, in general, can also be ideal for homeowners Specific plans for their finances, as you will get the loan amount instantly after approval. Find out how much you qualify to borrow and the rate you may qualify for today!

Why you might want to consider a HELOC

Locking in a fixed home equity loan rate before another Fed rate hike Save your money Over the life of your loan. But depending on how you plan to use the borrowed money, you may also want to look into whether a HELOCs fit your needs better.

A HELOC is a line of credit that carries a variable interest rate. Despite the promise of higher interest rates in the near-term as the Fed continues to raise rates, HELOCs can mean paying less over the life of your loan. This is not only because of possible lower rates in the future but also the ability to do so Draw only the amount you need from your line of credit.

“I would prefer a HELOC in today’s environment because of the flexibility,” says Colin Gizzy, CFP, founder of Gizzy Investments. “You only pay interest on an equity line of credit on the amount you actually draw, whereas with a home equity loan you pay interest on the entire amount of the loan.”

By comparison, GG says, “a home equity loan would have been more attractive in the low interest rate environment we’ve seen over the last 10-15 years.”

Explore the home equity loan options available to you now

Bottom line

Borrowing from home equity A big advantage for homeowners in today’s high interest rate environment. Because home equity loans and HELOCs are secured by the value of your home, you can usually score good rate Compared to alternative lending options (such as personal loans or credit cards).

However, homeowners considering home equity as an option should be aware of an upcoming Fed rate hike. It may be worth locking in a fixed home equity loan rate sooner rather than later, as your rate will remain the same throughout the loan term. Alternatively, a HELOC may be another option with some added flexibility over time.

Compare home equity rates you can qualify for today here.