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Taking out a home equity loan? These 5 factors matter most, according to experts

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Homeowners looking to access their home equity should understand some factors that can affect their application.

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High interest rates have forced many potential borrowers to put plans on hold. If you need money right now, you might have to turn to more expensive unsecured options, like personal loans or credit cards. Those options can get costly, as the average personal loan interest rate is almost 12% right now while credit card users are paying an average of more than 21% interest.

However, homeowners have a more affordable borrowing option with home equity loans. Unsecured borrowing options are in double digits, while home equity loans average 8.60% in interest.

“Almost 80% of homeowners have a mortgage interest rate below 5%,” says Tom Hutchens, the executive vice president of production at Angel Oak Mortgage Solutions. “By utilizing a home equity loan, a homeowner can tap into this equity while keeping their all-time low first lien interest rate in place.”

If you’re thinking about taking out a home equity loan, it first helps to know the factors that matter most. We asked some experts for their insight. 

Start by seeing what home equity loan interest rate you could qualify for here now.

4 factors to consider when taking out a home equity loan

Ready to proceed with borrowing from your home equity? Here are four factors to account for before doing so, according to the experts we consulted.

Affordability

A home equity loan or home equity line of credit (HELOC) is like a second mortgage. On top of your first mortgage payments, you’ll need to make payments on your home equity loan. If not, you could face foreclosure.

“A HELOC is essentially taking out further debt on your home,” Hutchens says. “Do you have a clear plan for how you intend to use that money and can you afford to continue to meet your debt payments? At the end of the day, you’ll need to pay back this loan while continuing to pay your remaining balance on your first-lien mortgage.”

See what your home equity loan payments could look like online today.

Repayment terms

Whether you take out a home equity loan or line of credit, it’s important to understand the terms of your agreement. Read the fine print so you aren’t caught off guard when it comes time to repay what you borrowed. 

“The most important thing is understanding the parameters surrounding the money and repayment,” says Adam Neft, a loan officer at GO Mortgage. “Know when the ‘full’ repayment period begins and how much that payment is. Nobody wants or likes a surprise.”

Home equity loans take out a lump-sum amount while HELOCs are a revolving line of credit you can draw from when you need it. Think about the type of home equity borrowing you’ll be doing: do you need all your money now or do you want to tap into it as you need it? Then factor repayment into your budget.

Loan usage

Access to your home’s equity is one thing, but that doesn’t mean you need to spend it.

“Try to fight the urge to use your home equity for direct consumption spending,” says Logan Mohtashami, a Lead Analyst at HousingWire. “A lot of homeowners have a ton of equity and feel like they can spend away when, in reality, you’re just adding more debt onto your books.”

Consider your financial needs and what a home equity loan or line of credit would do. It might be worth it if it would help lower your debt burden or pay off some financial obligations. But if you’re using it to pay for a wedding or vacation, try other financing options.

Financial needs

The average homeowner has around $300,000 in home equity right now. But that doesn’t mean you should use it all. With large amounts of available home equity, it’s easy to get caught up in using it all, even if you don’t need it. Instead, only borrow what you need, which could help during the application and approval process.

“Lenders typically offer home equity loans based on the loan-to-value (LTV) ratio, which is the loan amount divided by the appraised value of the home,” Hutchens says. “A lower LTV ratio can result in better loan terms.”

Do the math on your loan-to-value ratio to see how much equity you have in your home so you know what lenders will expect when you complete an application.

Expectations

A home equity loan or line of credit can be a huge financial lifeline for many homeowners who need to borrow money to cover significant expenses or pay off large financial needs. However, some might use these opportunities for the wrong reasons.

“A home equity line of credit can be used to pay off your high-interest credit card debt,” Mohtashami says. “However, this doesn’t mean you should feel free to spend money with those credit cards again.”

When you use your home equity loan or HELOC, remember that not paying it back could result in losing your home. Making responsible financial choices is important during and after borrowing from your home’s equity.

Learn more about your home equity options here.

The bottom line

Not every homeowner’s needs will be the same so it’s important to talk to a professional before you complete an application.

“No two situations are identical, so it’s not a ‘one size fits all’ proposition,” Neft says. “A good loan officer will explain the benefits and (potential) pitfalls of each option.”

Hutchens agrees, noting that your previous mortgage loan officer might provide insight into your options based on your situation. 

“A mortgage professional can review your situation and give you solutions for your specific needs,” he says. “There is a lot of information online but a mortgage professional is your best resource to tailor the right HELOC for your situation.”

Mohtashami notes that many lenders aren’t handing out home equity loans to unqualified applicants. Make sure you’re educated on your options by talking to a pro. “This isn’t the wild wild west anymore and lenders don’t freely offer home equity lines anymore,” he says. “However, having a trusted financial loan officer guide you early on can make the process easier.”

Get started here today.



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Climate groups working to mobilize early voters and track new climate voters in battlefield states

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Across Philadelphia, dozens of silver haired, climate-conscious canvassers are going door to door in the last weeks before Election Day, leaving green slips of paper with guides on how to register to vote this year. 

“It’s the most consequential one that I’ve been a part of,” climate canvasser Daniel Carlson told CBS News. “I’ve been voting for four decades.”

Carlson is part of Third Act, a climate activist group for people over 60. The group is trying to mobilize voters on climate change in an election that’s been dominated by worries about the economy, immigration and abortion access.

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Philadelphia — Environmental Voter Project organizer speaks to first time canvassers, October  2024.

CBS News / Seiji Yamashita


CBS News polling has found climate change is “not a factor” for 32% of voters in the presidential race, but for millions, it’s their top issue, according to the Environmental Voter Project, another non-profit group; EVP works on identifying climate-minded voters and get them to the polls.

In particular, EVP focuses on low-propensity climate voters — those who did not vote in the last presidential election and are concerned about climate change. 

Nathaniel Sinnett, executive director of EVP, said, “In Pennsylvania, we’ve identified 245,000 of these voters,” Sinnett told CBS News, and he’s found equally high numbers in other key battleground states where EVP is active. In 2020, Joe Biden’s margin of victory over Donald Trump in Pennsylvania was 80,555.

EVP says it uses predictive modeling and data analytics to identify millions of climate-focused registered voters, and then it relies on voter files to target its efforts toward environmentalists who are registered to vote but who have not been voting. 

“We really like what we’re seeing in the early voting, nearly 130,000 first-time climate voters have already cast ballots in the 19 states where we work,” says Nathaniel Sinnett, executive director of the Environmental Voter Project, or EVP. Five of the states where EVP is tracking voters are battleground states — the group says it has identified hundreds of thousands of low-propensity climate voters in these battleground states:

  • Arizona: 229,311
  • Georgia: 491,369
  • Nevada: 108,694
  • North Carolina: 266,227
  • Pennsylvania: 245,206

Sinnett acknowledged these models and data don’t guarantee a climate vote is a vote for the Democratic ticket, but early voting and environmental voters have historically leaned liberal. 

EVP tracks the voters it’s identified and whether they’ve cast a ballot, and on a more granular level, the group is tallying the climate-focused voters they’ve found who did not vote in 2020 but cast a 2024 ballot during early voting this fall. Based on early voting returns, according to Sinnett, in some battleground states, climate voters are turning out at higher rates than the general electorate.

EVP has identified nearly 230,000 first-time climate voters in Arizona in 2024, and as of Oct. 25, EVP has seen 5,514 of those individuals cast early ballots. In 2020, Arizona was decided by fewer than 11,000 votes. The group is seeing similar returns in other battleground states and hopes its efforts will help nudge climate-friendly candidates to victory.

“Climate voters are not the largest voting bloc in the country,” said Sinnett. “But this fall, climate voters can have a real impact on the margins, and in an election where all seven swing states are statistically tied, a little movement in the margins will decide everything.”

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Third Act’s Bill McKibben speaks to a crowd of volunteers at Arch Street Meeting House, October 2024.

CBS News / Seiji Yamashita


Third Act is another environmental group working on turning out climate-concerned voters, but its focus is on older Americans. It was founded by Bill McKibben, an environmentalist who has written more than a dozen books on the topic and has organized climate protests all over the world. Although climate politics is often associated with young voters, McKibben thinks his generation has a unique perspective, having seen the civil rights movement and the conservation movement of the ’60s, ’70s and ’80s. 

“In the course of our lifetimes, we’ve seen a lot of change, and much of it for the better. You know, when I was born, Kamala Harris and her husband couldn’t have been married in half the states.”

Like EVP, McKibben and his group have run into some reluctance by many climate-minded Americans to show up to the polls. 

“They care deeply about the climate, but maybe they’re just decided there’s nothing that can be done, or whatever it is. So, we’ve got to reach them and just say this isn’t everything,” McKibben told CBS News. “The purpose of an election is not salvation.”

Environmental salvation is likely on Carlson’s mind, though. The 60-year-old is a pastor by day, and he decided to make the trip from Schenectady, New York to Philadelphia to doorknock for the first time — he says he’s trying to do his part to help boost turnout in a consequential election. 

“The world that my generation will leave to the next generation is definitely compromised and damaged in some really considerable respects, but I want to do all that I can to be of as much help as I can to the generations that are to come.”

Helen Grady, 85, a former Philadelphia school teacher, was also motivated to start canvassing when she heard many college students were considering not voting.

“That really angers me, and it frustrates me when I hear somebody say, there’s no point to voting because both sides are broken,” she told CBS News. “I used to tell my high school students, ‘you don’t vote, you can’t complain.'”



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AI helps organization send poorest households impacted by Helene and Milton $1,000

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AI is helping a philanthropic organization give $1,000 cash payments to Hurricanes Helene and Milton victims in North Carolina and Florida who need it most.

About 1,000 households in areas hit hardest by the hurricanes will start receiving emergency payments from nonprofit GiveDirectly this week. Unlike other forms of assistance, the cash funds are transferred rapidly and doled out with no strings attached. 

GiveDirectly said it started sending payments to households it identified as being both low-income and located in parts of the U.S. that were devastated by the storms. It does so using a Google-developed AI tool to identify particular areas with both high concentrations of poverty and storm damage. 

After identifying hardest-hit, low-income households, the nonprofit then alerts recipients at those addresses that they are eligible for the payments remotely through a smartphone app powered by Propel, an electronic benefits transfers app used to manage SNAP benefits. 

“We use satellite imagery that shows us flooding and roof damage and we overlay that with data on high-poverty areas,” Dustin Palmer, who runs GiveDirectly’s U.S. programs, told CBS MoneyWatch. “We look for intersection of damage and areas that have high poverty as a community.”

The first payments are being disbursed Friday and through the weekend, and will be deposited through the Propel app’s virtual debit card.

The approach is designed to get cash to people who need it the most, as fast as possible.


Dak Prescott’s foundation sends over $1.8 billion in supplies to Florida hurricane victims

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GiveDirectly is raising funds for second round of aid

“$1,000 is a meaningful enough amount to help people get out of the house if they need to, and get supplies,” Palmer said. GiveDirectly is currently raising funds in order to administer another round of aid to hurricane victims. 

He did note the limitations of relying on a smartphone and app to make the payments, but said the benefits trump the drawbacks. 

“We are aware of limitations of that and we’re comfortable with the trade-off of having really high confidence that people are low-income and ready to receive the money right away. We are privileging that speed is of the essence in time of disaster,” Palmer said.  

When the company administers larger, longer lead programs, it also offers in-person enrollment options that don’t require a mobile device, he added. Propel serves roughly 5 million of the 41 million people enrolled in SNAP benefits, or about one in four SNAP recipients.

Case for guaranteed income

West said one-time cash payments can be a huge help to families recovering from a disaster, but the money can make a more profound difference if it’s given for a sustained time.

Research on guaranteed income programs shows recipients spend the money on their needs, said Stacia West, founding director at the University of Pennsylvania’s Center for Guaranteed Income Research. “There is no one who can budget better than a person in poverty,” she said.

In a study tracking spending across 9,000 participants in more than 30 guaranteed income programs in the U.S., the Center for Guaranteed Income Research has found that the majority of the money is spent on retail goods, food and groceries and transportation.

GiveDirectly also plans to launch disaster preparedness programs in the U.S. to allow households to fortify their homes in anticipation of a hurricane, or evacuate, for example. 

“With anticipatory action, we send money before a disaster. Giving people cash payments ahead of time lets people stock up on supplies to fortify their houses or move,” he explained. “It’s about being resilient to climate disasters.”

contributed to this report.



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Costco’s Kirkland Signature smoked salmon recalled over listeria concerns

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Costco’s Kirkland Signature smoked salmon recalled over listeria concerns – CBS News


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Salmon sold at Costco is the latest product to be recalled over listeria concerns. Acme Smoked Fish Corp., which supplies the fish to Costco, sent a notice to shoppers this week. It urged them to return Kirkland Signature smoked salmon bought between Oct. 9 and 13 for a full refund.

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