Latest news with #homeequity
CBS News
a day ago
- 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.
Forbes
2 days ago
- Business
- Forbes
Current HELOC & Home Equity Loan Rates: June 2, 2025
Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home's value and pay that amount back in monthly installments. A home equity line of credit is a variable-rate second mortgage that draws on your home's value as a revolving line of credit. Both options use your property as collateral for your payments, which means your lender can seize your property if you can't repay what you borrow. Ideal for Medium-Sized Projects A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation. Access More Funds for Major Investments For larger projects or investments, a $250K HELOC provides the necessary funds with various LTV options. Explore these rates to determine the right balance between borrowing capacity and risk. Maximize Your Borrowing Power If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals. A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff. With a 10-year term, borrowers can enjoy a balanced monthly payment while still building equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs. A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals. Offering longer repayment and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning. The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments. When you buy your home with a mortgage, your lender pays for that home in full and you make monthly payments back to your lender until it's repaid. Every month, you earn more equity in your home as you repay your mortgage. Home equity is the amount of your home that you own, usually expressed as a percentage. You can calculate your home equity by taking the appraised value of your home and subtracting your mortgage balance or other home loans. A home equity line of credit, often referred to as a HELOC, lets homeowners convert the equity in a residential property into cash through a revolving line of credit that's secured by your home. When you get a HELOC, you can take the money available in installments as you need it and pay interest only on what you use. A home equity loan is a lump-sum loan that allows you to borrow money by leveraging your home's equity. The maximum amount you're allowed to borrow is based on how much equity you have in your home, up to the amount offered by that lender. These types of loans tend to have competitive interest rates since they're secured loans. Your home is used as collateral to secure the loan, meaning if you miss or fall behind on payments, you could face foreclosure.
Yahoo
3 days ago
- Business
- Yahoo
HELOC rates today, June 1, 2025: Interest rates on home equity lines of credit move lower again
HELOC interest rates fell again today as the versatile financial tool used to tap your home's value became ever so slightly more affordable. Known as a second mortgage, home equity line of credit accounts, and the lump sum version — the home equity loan — allow homeowners to keep their existing primary home loan while creating a new mortgage, especially designed for home equity access. Now, the details on HELOC rates today. Dig deeper: HELOC vs. home equity loan: Tapping your equity without refinancing According to Zillow, rates on a 10-year HELOC are down seven basis points to 6.77% today. The same rate is also available on 15- and 20-year HELOCS. VA-backed HELOCs moved lower by two basis points to 6.34%. Homeowners have a staggering amount of value tied up in their houses — more than $34 trillion at the end of 2024, according to the Federal Reserve. That's the third-largest amount of home equity on record. With mortgage rates lingering in the high 6% range, homeowners are not going to let go of their primary mortgage anytime soon, so selling a house may not be an option. Why let go of your 5%, 4% — or even 3% mortgage? Accessing some of that value with a use-it-as-you-need-it HELOC can be an excellent alternative. HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which today is 7.50%. If a lender added 1% as a margin, the HELOC would have a rate of 8.50%. However, you will find reported HELOC rates are much lower than that. That's because lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home. And average national HELOC rates can include "introductory" rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate. You don't have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit. The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat. Meanwhile, you're paying down your low-interest-rate primary mortgage like the wealth-building machine you are. Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000. That's an introductory rate that will convert to a variable rate later. When shopping lenders, be aware of both rates. And as always, compare fees, repayment terms, and the minimum draw amount. The draw is the amount of money a lender requires you to initially take from your equity. The power of a HELOC is tapping only what you need and leaving some of your line of credit available for future needs. You don't pay interest on what you don't borrow. Rates vary so much from one lender to the next that it's hard to pin down a magic number. You may see rates from nearly 7% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are. For homeowners with low primary mortgage rates and a chunk of equity in their house, it's probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Of course, you can use a HELOC for fun things too, like a vacation — if you have the discipline to pay it off promptly. A vacation is likely not worth taking on long-term debt. If you take out the full $50,000 from a line of credit on a $400,000 home, your payment may be around $395 per month with a variable interest rate beginning at 8.75%. That's for a HELOC with a 10-year draw period and a 20-year repayment period. That sounds good, but remember, it winds up being a 30-year loan. HELOCs are best if you borrow and pay back the balance in a much shorter period of time.
CBS News
4 days ago
- Business
- CBS News
How much home equity should I borrow in today's economy?
Withdrawing money from your home should always be done carefully, but especially so in today's economy. Getty Images While inflation may have cooled in April and in the months prior, the federal funds rate remains high and on pause, perhaps longer than many had anticipated. This has, in part, caused interest rates on everything from mortgages to personal loans and credit cards to remain elevated as well, giving Americans limited options for borrowing money affordably. During this same period, however, home prices have risen and the average home equity level has surged. Now, at around $313,000, according to a March report, the median homeowner has plenty of money in their home to borrow from. And, unlike the rates on many other products, the interest owners will have to pay if they choose to borrow with a home equity loan or home equity line of credit (HELOC) is much lower. Interest rates on both have steadily declined in recent months, with HELOCs hitting a two-year low and home equity loan rates falling to a 2025 low this month. So, if you need to borrow money, one of the cheapest ways to access a large sum in today's economy is with either a home equity loan or HELOC. But the current economic climate has multiple advantages and disadvantages and borrowing from your home equity, which causes your home to serve as collateral, can be risky if done without precision. Borrowers should determine how much equity to borrow in today's economy to prevent any threat of foreclosure. So how much should that be, then? That's what we'll analyze below. Start by seeing how much home equity you could borrow here. How much home equity should I borrow in today's economy? When borrowing home equity, you should only borrow an amount that you can comfortably afford to repay, preferably over a shorter period to offset interest costs. While many home equity lenders will allow you to borrow 85% of your home equity, that doesn't mean you should or that you should even come close to that limit. Instead, determine what you have available in your budget to make monthly payments, calculate how much you need and attempt to find a middle ground between both figures. That noted, the answer to this question is also a personal one, largely dependent on your view of the economy and predictions on what will happen over the lifespan of your home equity loan or HELOC. If you feel confident that inflation will continue to decline and that, eventually, interest rates will decline as well, then you may want to borrow more money. With a HELOC, after all, interest rates are variable and subject to change monthly. If you think rates will continue to drop, then borrowing more money now may not be as much of a concern on the assumption that repaying it will become more affordable over time. This is less of a concern with a home equity loan since it has a fixed rate that will remain the same unless refinanced. But with a home equity loan, you'll need to make repayments immediately versus the interest-only payments required with a HELOC. That difference in repayment structure should be accounted for, too, especially as the economic climate changes frequently. In short, home equity borrowing will only be as successful as your ability to pay back all that you've borrowed. Market conditions, interest rates, inflation and more can all impact that ability. Before getting started, then, calculate your monthly payment costs for both products (they have different rates) tied to what rates are available to you right now – and what those rates could look like over time. This will allow you to better determine short- and long-term affordability and help you more precisely determine an amount of equity to borrow that will fit your budget. Compare your HELOC and home equity loan rate offers here to learn more. The bottom line Despite the average amount of home equity being high and the average home equity borrowing rate low in today's economy – a perfect combination for borrowers – homeowners should still be strategic in their approach and that extends to borrowing the right amount of equity for their financial circumstances. For some, that may mean borrowing right up to that 85% limit while, for others, it may be materially less. Each homeowner's financial situation is different but what remains the same for each is that the home will always serve as collateral. So only withdraw as much as you can easily pay back both in today's uncertain economic climate and in future ones to better ensure success.
Forbes
5 days ago
- Business
- Forbes
Today's HELOC & Home Equity Loan Rates: May 30, 2025
Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home's value and pay that amount back in monthly installments. A home equity line of credit is a variable-rate second mortgage that draws on your home's value as a revolving line of credit. Both options use your property as collateral for your payments, which means your lender can seize your property if you can't repay what you borrow. Ideal for Medium-Sized Projects A $100K HELOC is suitable for more extensive renovation projects or other significant financial needs. Compare the rates and terms to find the best fit for your situation. Access More Funds for Major Investments For larger projects or investments, a $250K HELOC provides the necessary funds with various LTV options. Explore these rates to determine the right balance between borrowing capacity and risk. Maximize Your Borrowing Power If you have substantial equity in your home and need significant financing, a $500K HELOC offers a great deal of borrowing power. Evaluate these options to find the optimal rate and term for your goals. A 5-year term offers a shorter repayment period with typically higher monthly payments. These products are suitable for borrowers looking for a quicker payoff. With a 10-year term, borrowers can enjoy a balanced monthly payment while still building equity quickly. 10-year home equity loans are ideal for medium-sized projects or financial needs. A 15-year term provides lower monthly payments compared to shorter terms, offering more affordability while still progressing toward your financial goals. Offering longer repayment and lower monthly payments, 20-year home equity loans are suitable for larger investments and long-term financial planning. The 30-year term maximizes affordability with the lowest monthly payments. These options are best for substantial borrowing needs and long-term investments. HELOC rates are tied more closely to banks than are first-mortgage rates, which tend to track the performance of the bond market. The Federal Reserve, which controls the interest rates that banks charge each other, has signaled to investors that it expects to raise those rates several times in 2022 and beyond. You earn home equity every month when you make your mortgage payments. The more payments you make, the more your equity increases. A home equity loan is a lump-sum loan based on how much of your home you own outright. So if your loan-to-value ratio (LTV) is 50%, you can borrow, say, 80% of that LTV. Most lenders won't let you access 100% of your home's equity, but even getting a portion of it through a home equity loan could be a game-changer for your big financial needs. You'll calculate your home equity by taking your home's current value - based on its most recent appraisal - and subtracting it from your current mortgage balance. For example, say your home is valued at $500,000 and your mortgage's outstanding balance is $250,000. This would mean you have $250,000 in home equity, and your loan-to-value ratio (LTV) would be 50%. If you're looking for a home equity loan or line of credit, lenders usually only approve up to a certain LTV ratio. For example, some lenders require 80% LTV or less.
