Even though inflation has plummeted from the decades-high it was at in 2022, and while the Federal Reserve cut interest rates earlier this month, the economic burdens from recent years will take some time to recover from. And with concerns over unemployment growing and varied market reactions to those rate cuts, many Americans may be exploring ways to help finance extra costs right now. For homeowners, one of the most cost-effective ways to do so is by accessing your home equity with a home equity loan or home equity line of credit (HELOC). 

HELOCs, in particular, have some particularly timely advantages for borrowers right now. Because of the way they’re structured and because of today’s evolving rate climate, there are multiple ways a HELOC can help you save money this October and the months after. These savings can then allow borrowers to focus on using the HELOC for its intended purposes. Below, we’ll break down what borrowers should know now.

Start by seeing what HELOC interest rate you’d be eligible for here. 

How a HELOC can save you money this October (and the months after)

Not sure if a HELOC is the right home equity tool for you? Consider these three unique ways it can help borrowers save money:

Lower rates than popular alternatives

Have you explored alternative credit options yet? Don’t be surprised to see double-digit interest rates when you do. Personal loans, for example, have an average rate of just under 13% right now. Credit cards, meanwhile, are hovering near a record 23%. 

HELOCs, however, have a median rate of just 9.26% today. And you may be able to get a rate that’s even lower if you have top credit and take the time to shop around for the best offer. That lower rate will save you a significant amount of money both each month and over the life of the repayment period.

Start shopping for HELOCs online today.

A rate that can fall even further

In the rate climate of recent years, a HELOC’s variable rate structure was a distinct disadvantage as the Fed raised rates numerous times. But now, with the first rate cut since 2020 issued on September 18 and additional ones possible for November, December and into 2025, a HELOC becomes advantageous again. 

As rate cuts are issued, HELOC rates will fall in tandem each month, even though it may not be the same increment that rates are cut. No paperwork, refinancing or negotiating will need to occur. So the HELOC rate you get in September could very easily be lower in the weeks and months ahead, putting money directly back into your wallet.

No closing costs to refinance

Right now, home equity loans come with slightly lower rates than HELOCs. So it may be tempting to pursue that option instead. But home equity loan rates are locked, meaning that if you open one now and rates drop again soon, you’ll be stuck with the higher rate, unlike a HELOC which will adjust accordingly. 

Home equity loans can be refinanced, however. But it will cost borrowers 1% to 5% of the total loan value to complete that refinance while a HELOC will cost you nothing to take advantage of the prevailing, lower rate. 

The bottom line

As rates decline, borrowers will need to take a different approach than they had in much of the last two years. One smart way to access large sums of money now is with a HELOC. And you can save money by pursuing this option when stacked against the higher rates that popular alternatives offer now. Plus, rates on a HELOC could drop automatically in the near future as additional rate reductions are issued and you won’t need to pay closing costs to get that better rate. 

Just be sure, no matter the home equity product you ultimately choose, to only borrow an amount of money that you’re comfortable repaying. Your home serves as collateral in these circumstances and you don’t want to jeopardize your homeownership if you can’t repay all that you’ve deducted from your equity.