If you need to borrow money and want to do so at an affordable interest rate, your home equity may be your best recourse right now. With interest rates on home equity loans and home equity lines of credit (HELOCs) in the single digits currently and with the median amount of equity hovering around $330,000 now, these products offer cost-effective access to a potential six-figure sum of money. 

That noted, the timing of any application needs to be strategic, particularly when utilizing such a vital asset as your home. If you fail to repay all that you’ve borrowed, you could risk your homeownership as a result. And with a new year approaching and the financial need high for many right now, there are some smart moves potential borrowers should make ahead of 2025. Below, we’ll break down three of them.

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

3 things home equity borrowers should do before 2025

Here are three important things homeowners considering borrowing from their equity should do now, before January 1, 2025:

Weigh a HELOC versus a home equity loan

Reverse mortgages are generally only applicable for homeowners 62 and older and cash-out refinancing would require owners to exchange their current mortgage rate for what will almost assuredly be a higher one. But that doesn’t mean that you should automatically choose a HELOC or a home equity loan instead. Both have unique pros and cons in today’s complicated rate climate that will need to be weighed carefully against each other.

Home equity loans, for example, have fixed and slightly lower interest rates currently. HELOC rates are bit a higher but they’re variable and likely to continue to decline – as they’ve done for most of 2024 – as additional interest rate cuts are issued. Home equity loans will need to be refinanced to take advantage of a lower rate. But both will qualify for a tax deduction if used for IRS-eligible home repairs, and both come with much lower interest rates than credit cards and personal loans right now. So research both to best determine which is more applicable for your financial circumstances.

Compare home equity loans and HELOCs online today.

Shop for lenders

While most home equity lenders will provide rates in the same, approximate range, they won’t be identical. And every basis point you can save on a rate could accumulate in significant savings, especially considering that average repayment periods come in 10 and 15-year terms. So it’s important to shop around for lenders to find the best rates and terms. And you’ll want to do this now, particularly if you want the funds to be used in the first quarter of 2025. It takes time to research lenders and compare offers. With it potentially taking weeks to have the funds disbursed, it’s helpful to start this process now so that you can have your money ready in January. 

Apply now (before 2025)

Once you’ve determined which home equity product is best for you – and once you’ve concluded the shopping process – you should apply for the money, now, before 2025. As mentioned above, it could take weeks between application approval and the funds being disbursed, so the earlier you apply, the better positioned you’ll be. It also makes sense to apply now, on the assumption that your credit score is high and your credit history is clean. If you overspend during the holidays and damage your creditworthiness in the process, you may not secure as favorable a rate and term as you would by applying earlier. Try to avoid making that mistake.

The bottom line

The timing around any credit application is critical to get right, particularly for home equity borrowers. So consider applying for a home equity loan or HELOC now, before 2025. But only do so after weighing the pros and cons of each product and after having done careful research to determine which lender is most affordable for your circumstances. By taking these three steps now, prospective home equity borrowers can improve their chances of financial success, both in the final weeks of 2024 and into 2025 and beyond.

Learn more about home equity borrowing here today.