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CBS News
02-06-2025
- Business
- CBS News
Home equity borrowing advice that owners should know now, according to lenders
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before you tap into your home equity, make sure you know what experts say about navigating this type of borrowing now. Getty Images Finding affordable ways to borrow money has become increasingly challenging. Popular avenues such as credit cards and personal loans carry steep interest rates right now, straining household budgets in today's high-rate environment. However, home equity loans and home equity lines of credit (HELOCs) stand out as cost-effective alternatives for consolidating debt, funding renovations or covering major expenses. Since they use your home as collateral, they can give access to funds at lower interest rates. With the average American homeowner sitting on around $313,000 in equity, these products unlock a valuable financial resource when used strategically. Below, lending experts share their top advice for homeowners thinking about borrowing equity right now. Find out how affordable home equity borrowing could be now. Home equity borrowing advice that owners should know now Here's the home equity borrowing advice lenders say can help you save money now: Lock in promotional rates for short-term needs Some lenders are currently offering HELOC rates as low as 5.99% for the first six months, lenders say. Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, says these deals work especially well if you're considering home upgrades that add immediate value to your property. He recommends matching your timeline to the promotional period. If you're planning a kitchen upgrade or bathroom renovation that you can complete within half a year, these starter HELOC rates can provide substantial savings. But don't let a flashy rate fool you, Joe Perveiler, senior vice president and home lending executive at PNC Bank, emphasizes. "Compare multiple lenders and review the full offer, not just the rate and terms," Perveiler says. "Sometimes, a low rate can end up costing more if it has higher closing costs and other fees." Strive to find the best overall deal rather than the lowest introductory rate. Learn more about the home equity options available to you today. Shop for low or no-fee deals Competition among lenders is creating wins for borrowers who take the time to shop around. Banks are waiving HELOC closing costs and offering rate discounts for autopayments as they fight to capture market share. Glick says comparing at least three lenders can help you shave 0.5% to 1% off your rate. As you shop, note that the differences between lenders go beyond basic rates and fees. Debbie Calixto, sales manager at mortgage lender loanDepot, points out that some lenders charge early termination fees while others don't. These hidden costs can impact your total borrowing expense, especially if your plans change. Prioritize high-ROI home improvements HomeAbroad's Glick suggests focusing on projects that offer a significant return on investment (ROI), add resale value or reduce utility bills rather than discretionary upgrades. For example, energy-efficient windows or a new HVAC system can increase your home's value by 5% to 10% while potentially qualifying for tax-deductible interest. With home values up but inventory tight, improvements that boost your property's appeal become even more valuable. Consider getting a HELOC If you're in a stable financial position, Calixto says now could be a great time to set up a HELOC, even if you don't need the funds right away. A HELOC gives you access to funds when needed without holding a balance upfront. "[You] only [pay] interest on the amount borrowed," Calixto explains. That makes this type of borrowing a flexible financial safety net for future expenses. Timing may work in your favor with HELOCs. Since these products have variable rates, expected Federal Reserve rate cuts mean your rate could drop over time. Perveiler notes that today's rates are already lower than earlier this year, and they could fall further if the market shifts. Weigh the advantages and drawbacks of HELOCs and home equity loans Perveiler explains that HELOCs let you borrow only what you need. This helps you keep monthly payments manageable while taking advantage of lower starting rates and higher loan limits than credit cards. But their variable rates mean your payments can increase if market rates rise. Home equity loans work differently. They have fixed rates, which means predictable payments throughout the loan term. You get a lump sum upfront that you can spend or invest as you see fit, with no ongoing account fees. The downside is the risk of borrowing too much and paying unnecessary interest, or borrowing too little and needing another loan later. Origination fees and closing costs can also make them more expensive than HELOCs in some cases. The bottom line "Using your home equity can be valuable [for] consolidating debt, [funding high-return] investments or [improving] your monthly cash flow," says Calixto. "When used responsibly, [it] can be a powerful [way to] build wealth and increase financial flexibility." Before committing to either home equity borrowing option, speak with at least three lenders to compare rates, fees and terms. A trusted mortgage professional can help you achieve the right balance between immediate savings and long-term financial security.
CBS News
15-05-2025
- Business
- CBS News
Is your home equity trapped right now? Here's what experts say to do.
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are still reliable ways to free up equity in your home, even in today's economic climate. Getty Images Homeowners have various financing options through their home equity. But in today's economic climate, it's become harder to access. After its third meeting in 2025, the Federal Reserve held interest rates steady again, bringing no reprieve to borrowers in its quest to fight inflation. Due to ongoing uncertainty and fluctuations in the market, some banks have tightened their lending criteria in certain areas. So while homeowners have benefited from increasing home values, not everyone can take advantage of home equity borrowing. According to the March 2025 Intercontinental Exchange (ICE) Mortgage Monitor Report, homeowners are sitting on an average of $313,000 in home equity. But due to stricter credit requirements, rising borrowing costs due to elevated rates, and a shifting job market, equity is essentially inaccessible for some and "trapped." If you're a homeowner, you might feel your home equity is trapped and wonder what next steps you can take. We spoke with home lending experts to uncover what's driving this and what you can do to effectively use your home equity. Start by seeing how much home equity you could borrow here. Is your home equity trapped right now? Home equity has long been a powerful borrowing tool for homeowners. Whether it's used for debt consolidation or home renovations, it's a way to get the most out of your home while keeping borrowing costs relatively low. But "trapped" equity, which means equity that is built in but not readily or easily accessible, can be holding people back for several reasons, including: Elevated interest rates Some homeowners were fortunate enough to secure historically low mortgage rates several years ago. While having a low mortgage rate is a benefit, it can also lead to home equity being "trapped." First, many homeowners don't want to sell their home now because it would meant they'd have to give up their low mortgage rate. If they sell now, they can cash in on that equity. But if they want to buy another home, they have to contend with current mortgage rates, which are significantly higher than several years ago. According to a survey, 55% of respondents who have been thinking of selling their homes for more than one year feel locked in due to mortgage rates. Currently, 82% of outstanding mortgages have a sub-6% rate, according to Compare that to current Freddie Mac data, which shows that mortgage rates on a 30-year fixed-rate mortgage are currently 6.76%. "With fewer homes for sale, selling to access equity often means buying another home at today's high prices and rates. That's a tough pill to swallow, so many stay put, keeping equity locked," says Steven Glick, director of mortgage sales at HomeAbroad, a real estate investment fintech company. Another common way for homeowners to tap their equity is through a cash-out refinance. But with elevated interest rates, for many Americans, it simply doesn't make sense. "A lot of people either bought or refinanced during 2020, 2021, when rates were pretty low. When you want to get equity out of your home, typically you really do that in one of three ways," says Rose Krieger, senior home loan officer at Churchill Mortgage. "The first one would be a cash-out refinance, which would affect your overall interest rate. You would be subject to the current market rates. For a lot of people, that's double, if not a little bit more than what their current interest rate is, which would significantly increase their monthly payment." Compare your home equity borrowing options to determine which is most cost-effective now. Stricter lending requirements Home equity borrowing options are an attractive alternative to other loan products, especially high-interest credit cards. Even so, borrowers must meet the eligibility requirements set by home lenders and financial institutions. That means looking at your credit history, debt-to-income ratio and employment situation. Some employment sectors are seeing tumultuous upheavals that can affect home equity borrowing. "Layoffs in sectors like tech and government make lenders cautious. They worry you might not repay if your income is unstable. Plus, fears of a recession or tariff-driven market swings add risk, so banks tighten the purse strings," says Glick. Point estimates that every year, 1 in 11 homeowners who have a mortgage experience a job loss, decrease in pay, or transition to self-employment. These events may affect credit, job stability, and income verification. Because of that, equity may become "trapped" because borrowers no longer meet the basic underwriting criteria set by home lenders. What to do if your home equity is trapped If you feel like your home equity is trapped, it can be frustrating. You may feel you can't take advantage of the built-in wealth your home provides. Here are some practical tips to help you tap your home equity: Look into alternative home equity borrowing options Given the high-rate climate we're in, a cash-out refinance may be off the table. But there are two other home equity borrowing options that may be a better option during these times. "So the best option for homeowners who want to tap into equity without refinancing, I would say it's HELOCs, which is the most flexible way," says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors. Home equity loans are another option. Unlike home equity line of credit interest rates, which are typically variable, home equity loan interest rates are fixed. Evangelou says home equity loans are "great for one-time, large expenses. Budgeting is easier because you know your payment. You know your payment and the interest costs from the start." With home equity loan and HELOC borrowing, you can maintain your current mortgage rate while tapping your home equity. "I feel like the HELOCs are more popular right now because they do not affect your first mortgage rate. So if your rate is two and a half right now and you get a HELOC, you're still going to have that two and a half rate on your first mortgage," says Krieger. Improve your credit If you're unable to access your home equity due to your credit, you can take steps to improve your rating. Both payment history and credit utilization have a major impact on your credit score. Krieger recommends working on your credit, but also discussing your options with a lender. "Just paying off all your debt isn't the answer. We usually have different systems, computer software that we can use to help give you an idea of what to pay off versus what not to pay off to get your credit where it needs to be for a HELOC. I think that would be one of the easiest ways," says Krieger. Stabilize employment history If you've been laid off or transitioned to self-employment, it may be tough to qualify for home equity borrowing products. Home lenders like stability and want the assurance that you have the means to repay what you borrow. Focus on stabilizing employment history and income so you have the verification you need. "For self-employment, typically you're required to be on that job for two years. But with HELOCs, the rules can be a little different at times," says Krieger. The bottom line As a homeowner, you've likely seen remarkable growth in your home equity over the past few years. But if your home equity is trapped, you may not be able to take advantage of it the way you want. Taking steps to improve your credit, stabilize employment, and looking into alternatives to a cash-out refinance can help. Look at various home lenders' terms and eligibility requirements. Compare home equity line of credit and home equity loan rates. Despite rates being higher than they were several years ago, relative to other borrowing options, they still typically come out on top in terms of cost savings.
CBS News
24-04-2025
- Business
- CBS News
What could happen to mortgage rates this May?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Some changes could be coming for mortgage rates this May, experts say. Getty Images Mortgage rates remain higher than many homebuyers prefer right now as inflation persists and the Federal Reserve maintains elevated benchmark rates. And with May approaching, bringing both market changes and another scheduled Fed meeting, uncertainty looms. So what could happen to mortgage interest rates this upcoming month? We consulted mortgage lending experts to break down three possible scenarios for May's mortgage rates. Below, they explain what might push rates up, down or keep them steady — and what that means for your homebuying decisions. Compare today's top mortgage loan options online now. What could happen to mortgage rates this May? "I'm predicting mortgage rates will go slightly lower in May 2025, likely settling between 6.4% and 6.6% for a 30-year fixed," says Steven Glick, a licensed mortgage loan officer and director of mortgage sales at HomeAbroad, a real estate investment fintech company. Other mortgage experts echo similar sentiments about limited movement ahead. For example, Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider, expects daily volatility — but within a 0.25% to 0.375% range in movement overall for the next few months. But mortgage forecasts are just educated guesses based on trends we're seeing. Let's examine what could drive rates in each possible direction next month: Why mortgage rates could drop in May "For rates to dip, we'd need a clear sign the economy's cooling off," explains Glick. "If inflation falls closer to the Fed's 2% target [and] the Consumer Price Index drops to 2.5% or lower in April's report, that could spark talk of a Fed rate cut." When Treasury yields drop in response to cooling inflation, mortgage rates often follow. Consumer behavior already suggests this cooling may be underway. "The consumer has lost some confidence in the market," notes Dean Rathbun, executive vice president at United American Mortgage Corporation. He's seeing reduced spending on goods and services. This could signal to markets that economic growth is stalling, potentially leading to lower interest rates. Find out how affordable the right mortgage loan could be now. Why mortgage rates could stay the same in May "Rates could hold steady if the economy keeps humming along without big shocks," says Glick. "If inflation stays around 2.8% to 3%, and job growth continues at a moderate pace, the Fed's likely to keep their hands off the benchmark rate at the May meeting." This scenario would keep Treasury yields near 4.3%, resulting in mortgage rates remaining in the mid-6% range. Why mortgage rates could rise in May "Rates could climb if the economy heats up," warns Glick. "If inflation jumps past 3%, yields could hit 4.5%." A stronger-than-expected jobs report would likely cause lenders to increase rates, with Treasury yields rising in response to signs of economic strength. Market uncertainty creates another path to higher rates. "The mortgage markets like security and certainty, neither of which they are seeing right now," explains Rathbun. "Therefore, rates increase to offset the potential risk that bonds incur." Mayfield adds that international factors could drive mortgage rates up. "China is a major holder of U.S. Treasuries and mortgage-backed securities," she says. "If they retaliate by selling these assets, we could see a spike in mortgage rates." Smart strategies for navigating uncertain rate environments With May's mortgage rate direction unclear, practical strategies are more helpful than perfect predictions. Mortgage professionals recommend the following: Plan ahead: "Begin the pre-approval process early, even before you're ready to make an offer," advises Debbie Calixto, sales manager at mortgage lender loanDepot. This gives you time to improve your credit score debt-to-income ratio "Begin the pre-approval process early, even before you're ready to make an offer," advises Debbie Calixto, sales manager at mortgage lender loanDepot. This gives you time to improve Focus on your timeline (not the market's): Buy when it makes sense for your life situation. "It's nearly impossible to predict or perfectly time the mortgage market," Calixto explains. If rates drop later, refinancing remains an option Buy when it makes sense for your life situation. "It's nearly impossible to predict or perfectly time the mortgage market," Calixto explains. If rates drop later, Consider alternative loan products: "Check out adjustable-rate mortgages (ARMs)," suggests Glick. "[They] often start lower than fixed rates." These can be advantageous if you know you'll sell or refinance within a few years. "Check out adjustable-rate mortgages (ARMs)," suggests Glick. "[They] often start lower than fixed rates." These can be advantageous if you know you'll sell or refinance within a few years. Explore rate buydowns: "If you've got cash to spare, paying points upfront to lower your rate can cut your monthly payment," Glick notes. This strategy is ideal if you plan to stay in your home long-term. The bottom line While rates could stay steady or drop slightly in May, they could also rise if market conditions shift. "If you're comfortable with your estimated monthly payment at current rates, it's wise to secure that rate," advises Calixto. Now is a good time to contact several lenders for personalized guidance. Ask about rate-lock options, compare loan products and determine your comfort level with today's payments. And remember, the peace of mind from a secured rate often outweighs the gamble of waiting for drops.
CBS News
31-03-2025
- Business
- CBS News
What's the mortgage interest rate forecast for April 2025?
High housing costs have stalled many Americans' homebuying plans in recent years. But mortgage interest rates have dipped below their recent peaks, offering prospective buyers some relief. Despite this progress, economic uncertainties loom — which could affect the lending market. If you're house hunting, knowing where rates might head this April could help you calculate potential monthly payments and set a realistic budget before you fall in love with a home. See what mortgage interest rate you could qualify for here . Mortgage interest rates in April will likely stay in the 6.5% to 7% zone, according to Steven Glick, a licensed mortgage loan officer and director of mortgage sales at HomeAbroad, a real estate agency. However, a couple of other scenarios could play out. We spoke with three industry professionals who broke down what economic conditions would trigger rates to rise, fall or hold steady in the coming weeks: These economic factors could push mortgage rates higher: A significant Fed policy change might lead to lower mortgage rates. Here are three potential rate-reducing factors: See how low of a mortgage interest rate you'd currently qualify for now . The current economic picture shows mixed signals, which may keep mortgage rates stable: Mortgage professionals recommend watching five factors closely if you're buying a home soon: Mortgage rates in April will likely stay steady, according to the experts we spoke to. They might ease later in 2025, but waiting could backfire if home prices rise or inventory tightens. Your best move? Consult a few lenders now to understand your options. "Focus on your affordability," Calixto advises. "If you find a home that fits your needs and the monthly payment is manageable, that's a signal it may be the right time to buy." Get pre-approved to know what you qualify for and be ready to act quickly. Remember, you can always refinance later if rates fall.
CBS News
31-03-2025
- Business
- CBS News
What's the home equity loan interest rate forecast for April 2025?
High interest rates have made borrowing money tough for Americans in recent years. Sticky inflation and the Federal Reserve's corresponding rate increases drove up costs across all loan types, putting many financial goals out of reach. There's hope, however, if you own a home. Home equity loan rates have dropped over the last year, approximately, even as other financing options remain expensive. Some homeowners may now find it more affordable to use this to finance renovations, consolidate debt or even to pay for education expenses. But the shifting economic environment could continue to impact these rates over time. What might happen to them in April 2025? We spoke with three home equity experts to get their forecasts. They share their market insights and what you should know if you're considering tapping into your home's value this spring. Start by seeing how much home equity you could borrow here . The experts we spoke to predict home equity loan interest rates will hold steady in April 2025. "I'm expecting [they] will hover around 8.3% to 8.5% — stable from where we're at now, maybe a slight dip," says Steven Glick, a licensed mortgage loan officer and director of mortgage sales at HomeAbroad, a real estate agency. This stability stems from the Federal Reserve's recent pause on rate cuts and the 10-year Treasury yield sitting near 4.2%. Debbie Calixto, sales manager at mortgage lender loanDepot, agrees, noting that "rates are likely to stay near the mid-to-low 8% range." She points out that while inflation is cooling and the economy shows signs of slowing, any policy shifts might not impact rates until later in the year. See what home equity loan rate you could lock in now . These three factors will determine where home equity loan rates go this spring, according to industry professionals: The Federal Reserve's decisions can influence what you'll pay for a home equity loan . "Home equity rates are closely tied to the prime rate, which follows the Fed's target federal funds rate," says Chad Wilcox, senior vice president of lending at Credit Union of Colorado. Glick emphasizes that the Fed's moves (or lack thereof) set the tone. "[The] March 19 decision to pause cuts keeps borrowing costs steady," he points out. While the connection isn't direct, Fed signals still matter. When the Fed signals cuts, it nudges lender confidence and may slightly ease rates. Inflation trends also shape home equity loan rates. "Rates remain elevated because inflation — while down from peak levels — has been sticky," Wilcox explains. "Strong wage growth and consumer demand have made the Fed cautious, keeping lending rates higher across the board." Current economic policies, like tariffs or spending shifts, add another layer of uncertainty to the rate outlook, Glick emphasizes. "The Fed's worried these could heat inflation, which might push lenders to bump rates to cover risk." Market watchers are monitoring April policy announcements that could signal which direction rates might head next. Beyond Fed headlines, pay attention to what's happening in the bond market. "Long-term bond yields, especially the 10-year Treasury, serve as a key benchmark for lenders when pricing home equity loans," says Calixto. "If it climbs — say, from tariff-driven price hikes — rates could creep up," warns Glick. "If it drops, we might see some relief." These yield movements typically happen before lenders adjust their rates. So, you get a preview of possible home equity loan costs in the coming weeks. "Right now, American homeowners are sitting on over $34 trillion in home equity, the strongest position since just after World War II," Calixto highlights. This creates an opportunity for many homeowners, especially with home prices continuing to rise. Also, pre-pandemic mortgage rates have created a unique situation today. "About half of mortgage holders have an interest rate under 4%," says Patrick O'Shea, a mortgage advisor at Edge Home Finance, a mortgage broker. "That makes home equity loans more attractive than a cash-out refi." If you're locked into a rate below 6%, a home equity loan lets you access cash without changing your favorable mortgage rate. Glick has observed a steady demand for home equity loans. "People aren't selling, so they're borrowing against what they've got," he says. Lenders are responding with competitive offers, even as they maintain careful underwriting standards. Home equity rates should remain stable through April, making this a good time to consider accessing your property's value. But O'Shea cautions against rushing into it. "Sometimes, curbing your spending or coming up with alternative ways to get out of debt is better than borrowing more money," he suggests. Meeting with a few lenders will help you understand your options and make the best decision. Learn more about your current home equity loan options here .
