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While not by much, the recent downward trend in the home equity borrowing interest rate climate continued this week, according to a new report from Bankrate. The median rate on a home equity line of credit (HELOC) fell from 8.13% to 8.12% while the average home equity loan rate declined from 8.25% to 8.23%. The decline followed a similar trend from last week, keeping both home equity loans and HELOCs at the top of the list for homeowners looking for inexpensive ways to borrow large sums of money right now.
Add in the fact that home equity levels just hit a new record high and that tens of millions of homeowners have some borrowable portion of equity to utilize at their disposal, many may be wondering if now is the right time to submit an application? But is it? The interest rate climate could soon be changing again and, with it, rates on home equity loans and HELOCs. Against this backdrop, should prospective borrowers wait to apply? Or is being proactive the right move now? That’s what we’ll examine below.
Start by seeing how low of a home equity loan rate you could qualify for here.
Should borrowers wait to apply for home equity loans and HELOCs now?
Waiting to apply for a home equity loan or a HELOC now that rates are steadily declining again is a personal decision, largely based on which home equity borrowing product you intend to use.
With a HELOC, for example, waiting to apply and trying to time an application in line with a lower rate climate doesn’t make sense. HELOC interest rates are variable and subject to change monthly for borrowers based on market conditions. In other words, rate cuts, if they come this September and in the months after, as many are currently predicting, will impact existing HELOC users with no effort needed on behalf of the borrower. While rates here won’t decline in the same amount the federal funds rate will, a lower rate there will inevitably result in lower HELOC rates. So borrowers who want to use a HELOC now don’t need to wait to act as they’ll still be able to effectively exploit rate cuts to come, even if they secure their HELOC now.
The same can’t be said for a home equity loan, however, as the product comes with a fixed interest rate that will be locked in for the homeowner unless (or until) they elect to refinance to a lower one. So waiting here, if you’re anticipating a cooler interest rate environment, may make sense if it means being able to lock in a lower rate in the months ahead. Still, there’s no guarantee that rate cuts will be issued nor can borrowers effectively determine how potential cuts will be felt in the home equity loan climate. In other words, prospective borrowers will have to account for some unknowns if they ultimately decide a loan is their better option.
Take the time, then, to consider both home equity borrowing products carefully and don’t hesitate to contact a lender who can answer your questions and better help you determine the best path forward.
Contact a home equity lender to learn more about your options.
The bottom line
Borrowing from your home equity should always be done strategically – and applying for a home equity loan or HELOC should be, too, even with rates declining again. By first determining which product fits your unique needs, you can then better determine if it’s worth waiting to apply or if now is the right time to make a move. No matter which product you ultimately choose, however, be sure to calculate your repayment costs carefully as the home is collateral in either borrowing exchange and, thus, can be foreclosed on if repayments aren’t made as agreed to.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
