Home equity borrowing just delivered another bit of good news for homeowners watching rates closely. According to a midweek update from Bankrate, both home equity loans and HELOCs stayed below the 8% mark, giving borrowers a relatively affordable way to tap equity without the headache of refinancing their first mortgage into a worse rate. The median rate on a five-year home equity loan is sitting at 7.99%, while the average HELOC rate is even lower at 7.81%, keeping both options firmly in "worth considering" territory for people who need cash for major expenses.
That affordability is a noticeable shift from where things stood not long ago. HELOC rates, in particular, were hovering around 10% back in September 2024, which made borrowing against your home substantially more expensive. Now that borrowing costs have cooled, the opportunity is real—but so is the risk of moving too quickly or choosing the wrong product for the wrong reason. If you're considering a home equity loan or HELOC while rates are under 8%, there are three smart moves that can help you take advantage of the moment without setting yourself up for surprises later.
The first is to be clear-eyed about what you're actually signing up for with a HELOC. A HELOC is attractive right now because its variable rate tends to respond when broader interest rates trend down, and that's helped push today's costs lower than last year's. But the same feature that makes a HELOC feel like a win in a cooling cycle can become a problem if rates level off or climb again. Because HELOC rates can reset monthly, you're agreeing to live with some payment volatility, and the safe approach is to make sure your budget can handle a higher rate than today's—even if you never end up paying it.
The second move is to understand the hidden friction of refinancing a home equity loan. Some borrowers look at today's fixed home equity loan rates and assume they can lock one in now, then refinance cheaply later if rates drop further. The catch is that refinancing typically comes with closing costs that can run roughly 1% to 5% of the loan amount, which can erase the benefit of a modest rate drop. It also assumes the rate environment cooperates quickly enough to make refinancing worthwhile, which is far from guaranteed. A home equity loan can be a strong choice for stability, but it's not ideal if your entire strategy depends on refinancing soon.
The third move is to shop beyond your current mortgage lender. Many homeowners default to the bank they already use because it feels simpler, but the best terms often come from lenders competing aggressively for new business. In a cooler rate climate, that competition can show up as better pricing, lower fees, or more flexible terms, and you won't see it if you only take one quote. A smarter approach is to collect multiple offers, compare the full cost structure, and then either choose the best deal or use it to negotiate with your current lender.
Home equity borrowing is meaningfully cheaper today than it was in the recent past, and that opens doors for homeowners who need financing. But the real win isn't just getting a rate under 8%—it's choosing the right product, planning for rate and payment realities, and making sure fees don't quietly eat your savings. If you take a measured approach now, you give yourself the best chance to benefit from today's conditions without regretting the decision halfway through repayment.
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