Homeowners looking to access a large sum of money in today’s economic climate don’t have to look too far to find it. By turning to their accumulated home equity, owners can potentially finance a major expense (or multiple major expenses) simply by using the money they already have via their home’s value. 

While there are multiple ways to do this, many may be considering a traditional mortgage refinance or cash-out refinance. But in today’s unique and constantly changing interest rate climate, that could prove to be a costly mistake. Instead, right now, both home equity loans and home equity lines of credit (HELOCs) are arguably better than refinancing. Below, we’ll explain why.

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

Why home equity loans are better than refinancing right now

Here are three reasons why a home equity loan may be more beneficial than a refinance now:

You’ll maintain your existing mortgage rate

The average home equity loan interest rate is 8.41% as of November 19, 2024, but the average mortgage refinance rate for a 30-year loan is 6.93%. So, on the surface, it appears that refinancing is cheaper. But that refinance rate will require you to exchange your current mortgage rate to get the new one. 

That could be a costly mistake if you have a rate under 6.93%, as millions of Americans do right now. By applying for a home equity loan, however, you’ll still gain access to your equity, but you won’t need to bump your mortgage rate to get it. And if home equity loan rates drop in the future, as they have for most of 2024, you can simply refinance your loan to the better rate then.

Get started with a home equity loan online today.

You may qualify for a tax deduction

When you use a cash-out refinance, you apply for a loan larger than what you currently owe to your lender. You then use the former to pay off the latter and keep the difference as cash for yourself. Interest paid on mortgage loans is tax-deductible, but so is the interest on home equity loans if used for qualifying purposes. At that higher interest rate, you may qualify for a larger deduction (while still maintaining your current lower mortgage rate). 

The average home equity amount is high right now

A combination of low mortgage interest rates during the pandemic, a drop in available inventory and a hesitation to sell now that rates are high again (amid other complex but interrelated factors) has caused the average home equity amount to soar to just under $330,000 right now. If you want to access that with a refinance, as noted, you’ll need to give up your current mortgage rate to do so. And if you want to access it via a credit card or personal loan, the restrictions will be significant. It makes sense, then, to take advantage by using a home equity loan or HELOC instead of taking a gamble with a refinance right now.

The bottom line

With mortgage refinance rates elevated, the unique feature of a potential tax deduction tied to home equity borrowing and a six-figure average equity sum available now, for many homeowners in need of financing it makes sense to skip a refinance for a home equity loan now. That said, this type of financing is tied to your most important financial asset so the decision to withdraw it from it should be carefully weighed against the risks. Consider speaking to a financial advisor or home equity lender who can answer any questions you may have before getting started.

Speak to a home equity loan lender now.

Home equity is calculated by deducting your existing mortgage loan balance from your home’s current value. And, in today’s unique economic climate, that calculation has led to the average homeowner accumulating approximately $330,000 worth of equity. 

This can be accessed in a variety of ways, with both home equity loans and home equity lines of credit (HELOCs) being two of the less expensive options. Still, your home serves as collateral in these borrowing exchanges, so it’s critical that you use the money for the right reasons or you could jeopardize your homeownership if you fail to repay all that was withdrawn.

Fortunately, in the final weeks of 2024, there are still smart ways to use this home equity, some of which are more timely than others. Below, we’ll detail three great ways homeowners can start using their home equity before January 1, 2025.

Start by seeing what home equity loan interest rate you’d be eligible for here.

3 great ways to use home equity in the final weeks of 2024

Here are three smart — and effective — ways homeowners can utilize their home equity in the waning weeks of 2024:

Home projects

Not every home project is worth utilizing home equity for, particularly those that you can afford to pay for comfortably out of your everyday budget. For other, larger ones, however, it makes sense to turn to home equity. That’s because select home improvements and repairs can qualify for a tax deduction. 

In other words, interest paid on home equity loans and HELOCs can be tax-deductible if used for qualifying home projects. So if that’s your intended purpose, consider applying now. If you wait much longer, you may not get the funds disbursed in time to qualify for the tax deduction in 2024 — meaning you’ll delay the deduction until you file your next tax return in the spring of 2026.

Get started with a home equity loan online today.

Credit card debt consolidation

Credit card interest rates have been on a steady upward trend, the latest coming in recent weeks with the average interest rate soaring to 23.37%. So, if you have significant credit card debt (and many Americans do currently), it’s worth consolidating with a home equity loan or HELOC now, especially when considering that both products come with interest rates almost three times lower than the average credit card rate. This is traditionally one of the smarter ways to use home equity, but it’s particularly critical today, with credit card interest rates at a record high and with a minuscule likelihood of those rates falling. 

Business opportunities

A new year could mean new business opportunities to explore, and that often requires the need for startup capital to fund these possibilities. Home equity loans and HELOCs can provide that source of funding in a much more affordable way than a personal loan, with a near 13% average interest rate, could. 

And even if the need for this funding isn’t until the first quarter of 2025, it makes sense to take steps now, considering that it may be weeks until your home equity funds are disbursed. Start by ensuring your credit is in top shape. Then determine your exact financial needs and start shopping for lenders (since you don’t need to use your current mortgage lender) to improve your chances of finding the lowest rates and best terms.

Start shopping for home equity loans here.

The bottom line

Because your home is on the line when tapping into your home equity, it’s important to only utilize it for appropriate means. But in the final weeks of 2024, there are still timely and effective uses for this financing. Home repairs, debt consolidation, new business opportunities or a mix of all three could be smart reasons to use home equity now, positioning yourself for financial success into 2025 and beyond.