CBS News
Is a home equity loan or HELOC better amid rising inflation?
Inflation came in hot for the third month in a row in March. Prices were 3.5% higher in the month than they were one year earlier. Not only did this figure outpace the 3.4% inflation rate economists expected for the month, it’s up from February’s 3.2% inflation rate which was an uptick from the 3.1% price growth seen in January.
That could be bad news if you need to borrow money. After all, interest rates are already high and inflationary periods can lead to rate increases. So, the already high cost of borrowing money could climb even higher ahead.
Then again, there is still at least one relatively low-cost borrowing option to consider (when compared to other options). That is to borrow against your home equity. This option typically comes with competitive interest rates because these loans are secured by your home. And you could have quite a bit of it to borrow against. The average American homeowner has $299,000 worth of untapped equity (around $190,000 of which is accessible).
That said, there are multiple ways to access your equity. Two of the most popular ways are home equity loans and home equity lines of credit (HELOCs). But, which of these two options is better amid rising inflation?
Compare leading home equity lending options now.
Is a home equity loan or HELOC better amid rising inflation?
The choice between a home equity loan and a HELOC typically boils down to two things:
- What type of interest rate you want: Home equity loans usually offer fixed interest rates while HELOCs can come with variable interest rates.
- How you want to access your equity: Home equity loans offer funding in one lump sum while HELOCs act as revolving lines of credit – giving you access to your equity when you need it through the HELOC’s draw period (typically the first five to 10 years of the loan) and up to a pre-set credit limit.
So, which of these options is better in today’s inflationary environment?
“HELOCs offer a lot of flexibility, but one of the concerns with a HELOC is that it has a variable interest rate and it’s typically tied to the federal funds rate,” says Darren Tooley, senior loan officer at the wealth management firm Cornerstone Financial Services. And that can be a real concern in today’s inflationary environment.
“In response to higher inflation, the Fed will typically respond by increasing the federal funds rate,” says Tooley, which can lead to higher variable HELOC interest rates. “This is why in times of higher inflation, a fixed rate home equity loan is usually the better option.”
“With rising inflation, we can assume interest rates will remain the same or in fact, rise,” explains Mark Charnet, founder and CEO of the financial planning firm, American Prosperity Group. “It is therefore logical to assume that the home equity loan with a fixed interest rate for the life of the loan would be a superior way to access your home equity.”
Take out a home equity loan now for fixed, predictable payments.
Why you should consider a home equity loan now
If you need access to money to cover a relatively large expense, a home equity loan may be better than other popular financing options. Here’s why:
- Personal loans: While home equity loans and personal loans are typically both fixed-interest products, interest rates on home equity loans (averaging between 8.70% and 8.73%) are typically lower than those on personal loans (averaging 12.18%). You may also be able to access more funding with a home equity loan than you can with a personal loan.
- Credit cards: Home equity loans typically come with significantly lower interest rates than credit cards (with credit card interest rates averaging over 20%). While home equity loans generally come with fixed interest, the interest rates on credit card accounts are typically variable – which may lead to increasing payments in an inflationary environment. Home equity loans will also likely give you access to a larger amount of funding than credit cards.
- Cash-out refinancing: A cash-out refinance gives you access to your equity while refinancing your first mortgage at today’s interest rates, which may not be ideal in today’s high interest rate environment. That is, unless you recently purchased your home when mortgage rates were peaking and your current mortgage rate is higher than the rates you can get today.
Tap into the advantages of a home equity loan now.
The bottom line
When comparing a home equity loan to a HELOC amid rising inflation, the experts we spoke to seem to lean toward the fixed-rate home equity loan as the better option. That’s because inflationary periods may lead to higher interest rates, which could push the monthly and long-term cost of a HELOC higher while the monthly and long-term cost of a home equity loan are usually fixed.
A home equity loan may be better than other popular financing options, too. You’ll probably be able to access more funding at a better rate with a home equity loan when compared to a credit card or personal loan. And, home equity loans don’t change your first mortgage – as is the case with a cash-out refinance.
So, if you have a significant financial need, consider taking out a home equity loan today.
CBS News
Last-minute government funding bill in limbo after opposition from Trump, others
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
CBS News
“CBS Evening News” headlines for Wednesday, Dec. 18, 2024
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
CBS News
The Scott Peterson case: New evidence?
What started out as a college romance ended in murder and mystery.
1994 – Scott Peterson and Laci Rocha met in 1994 while both were attending college at California Polytechnic State University. They married two years later. In 2002, Laci became pregnant. The two lived in Modesto, California and planned to raise their unborn son Conner there.
Laci Peterson Missing
December 24, 2002 – Scott Peterson says that on Christmas Eve morning, he left his pregnant wife alone to go fishing about 90 miles away at the Berkeley Marina. He says that Laci planned to walk the couple’s dog, McKenzie, and mop the kitchen floor. When Scott returned home hours later, he says he found McKenzie there alone, still wearing a leash – but no sign of Laci. That evening, Laci’s stepfather called the police to report her missing.
Searching for Laci
Family, friends, and volunteers launched a huge search for Laci Peterson.
Scott Peterson was interviewed by police in the early hours of Christmas Day. Now-retired Modesto Police Detective Jon Buehler says Scott didn’t seem as interested as one would expect. “Oftentimes, a victim who’s left behind is firing tons of questions at us … And we didn’t get any of that from him,” Buehler told “48 Hours.”
Amber Frey
December 30, 2002 – Less than a week after Laci Peterson went missing, Modesto detectives raced over to investigate an intriguing lead: a Fresno massage therapist named Amber Frey revealed that she had been dating Scott Peterson for over a month. She told police that Peterson had lied to her and said he was single.
Secret Recordings
Former Detective Buehler notes, “Her recall was fantastic. It was almost like it was a script from a Hallmark TV show or something.” Amber Frey recalled every detail of their romantic dates, down to what they were wearing. Hoping for clues that might lead them to the missing woman, detectives ask Frey to record phone calls between her and Scott Peterson, and she agrees.
Affair Revealed
January 24, 2003 – In an explosive press conference one month after Laci Peterson goes missing, Amber Frey publicly reveals her affair with Scott Peterson. “I am very sorry for Laci’s family and the pain that this has caused them,” she said. “And I pray for her safe return, as well.”
Prior to Frey going public, Peterson had told her in a recorded call that he was in Paris when he was really in Modesto while the search for Laci was still on. Eventually Scott admitted to her, “I’ve lied to you that I’ve been traveling.” Those recorded calls would later become part of a damning case against Peterson.
Bodies Found
April 13 and 14, 2003 – Two bodies are found on the shores of the San Francisco Bay. They are later identified as Laci Peterson and her unborn child. The two bodies were found about a mile apart.
Scott Peterson Arrested
April 18, 2003 – Authorities caught up with Scott Peterson at a golf course in San Diego and arrested him. Authorities found a wad of cash, his brother’s ID card, and multiple cell phones inside the vehicle. Days later, Peterson pleaded not guilty to two counts of capital murder.
Trial and Error
June 1, 2004 – Scott Peterson’s trial begins in San Mateo County, California. Because of massive publicity the trial was moved from Modesto to Redwood City, in San Mateo County. The decision was made because the judge decided it would be difficult for Peterson to get a fair trial too close to home, where emotions were running high.
High Suspicions
August 10, 2004 – In what many consider a major turning point of the trial, Amber Frey took the stand for the first time to tell the jury about her relationship with Scott Peterson, a secretly married man, and about all the lies he told her. Frey painted a picture of a dishonest man who could tell falsehoods with ease, hurting his credibility.
Jurors heard the lies for themselves in those recorded phone calls Frey made.
Justice for Laci and Conner
November 12, 2004 – Scott Peterson was found guilty of first-degree murder for the death of his wife Laci and second-degree murder for the death of his unborn son Conner. Crowds outside cheer.
Peterson Jurors
March 16, 2005 – Four months after his conviction, Scott Peterson is sentenced to death. At a press conference, Juror No. 7, Richelle Nice, [pictured center] called Peterson a “jerk” and commented “San Quentin is your new home,” referring to the prison where he would serve his sentence. Nice was nicknamed “Strawberry Shortcake” during the trial because of her hair color.
Death Sentence Overturned
August 24, 2020 – After two appeals, Scott Peterson’s death sentence was overturned by the California Supreme Court after deciding that the original trial judge made a mistake when jurors were being picked for trial. The result of that mistake, Peterson’s supporters say, was that the jury was stacked with pro death penalty jurors. Peterson, shown here in 2018, will now receive a new trial for only the sentence phase.
The court upheld his murder convictions.
Juror No. 7
October 14, 2020 – The California Supreme Court orders a lower court to reexamine Peterson’s murder convictions and decide if he should get an entire new trial. Scott Peterson’s supporters say it all comes down to the actions of that juror once nicknamed “Strawberry Shortcake” – Richelle Nice, pictured here in 2005.
During jury selection, prospective jurors filled out a questionnaire asking if they had in the past been in a lawsuit and if they had been crime victims. Nice checked no. “It’s pretty clear… that she lied to us straight to our face about her own situation,” Peterson’s current attorney Pat Harris told “48 Hours.” In fact, Nice was involved in two domestic disputes in the past. But prosecutors say when Nice filled out that questionnaire she didn’t lie, she just didn’t think her past experiences were relevant to the questions and didn’t see herself as a victim. Now a lower court will consider if Peterson will get a complete retrial. Richelle Nice declined to speak with “48 Hours.”
New Evidence?
March 7, 2021 – CBS News’ Jonathan Vigliotti interviewed Scott Peterson’s sister-in-law Janey Peterson in her “war room” of evidence she claims proves his innocence. She claims witnesses saw Laci walking in the neighborhood near the Peterson home after the time Scott said he left for the fishing trip. If that’s true, Scott couldn’t have killed Laci.
Scott Peterson’s attorney explains, “there’s been a lot of criticism because we didn’t call some witnesses who saw Laci that day,” and that the thought process at the time was that “a number of the witnesses who saw her didn’t have great – memories or had contra – were contradicting each other.”
Retired detective Jon Buehler says there are no witnesses who saw Laci alive that morning. He says there were other young women in the neighborhood who were pregnant and looked similar to Laci, and that “it would be real easy for somebody to mistakenly see one of those three girls as being Laci.” Still, Janey Peterson insists that Scott is innocent.
A Burglary
Perhaps more important to a new defense case is what Janey Peterson believes actually happened to Laci. She points to a burglary she believes happened on the same day Laci disappeared, right across the street from the Peterson home. Scott Peterson’s supporters theorize that Laci confronted the burglars and that ended badly. But police quickly arrested the burglars – Steven Todd and Donald Pearce – pictured here in a 2003 Modesto Police Department press release.
Awaiting a Decision
April 27, 2021 – Scott Peterson appeared in court remotely for a status hearing on a new death penalty trial.
Dec. 8, 2021: Scott Peterson was resentenced to life in prison without the possibility of parole for the deaths of his wife and unborn child.
2024: The Los Angeles Innocence Project took up Peterson’s fight for a new trial. Since then, a California judge has granted his defense team access to previously undisclosed evidence as well as permission to do additional DNA testing.
Peterson and his supporters maintain the wrong man is in prison for Laci and Conner’s deaths. According to Detective Buehler, “Well, I guess it’s possible. But you know, there’s still people that believe the Earth is flat too.”