The start of a new month offers borrowers and savers an opportunity to revisit their financial situation for opportunities to improve their economic health. For some homeowners, this may take the form of home equity borrowing via home equity loans or home equity lines of credit (HELOCs). With the average homeowner having approximately $330,000 worth of equity to utilize as they see fit — and with interest rates on both products many points lower than alternatives like credit cards and personal loans — this is arguably one of the best ways to borrow a large sum of money right now.

That said, home equity borrowing comes with inherent risks as well, not least of which is the potential to lose your home in this exchange if you can’t repay all that you’ve borrowed. So it’s critical to approach this scenario with care and a strategic approach. Below, we’ve gathered three smart (and timely) home equity borrowing moves homeowners can make this November.

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

3 smart home equity borrowing moves to make this November

Ready to start filling out an application? Make sure to do these three things first.

Weigh HELOCs and home equity loans carefully

A home equity loan has a lower interest rate than a HELOC right now (8.35% versus 8.68%). But the former is fixed and won’t move up or down unless refinanced (and you’ll need to pay closing costs to complete that move). HELOC rates, on the other hand, are variable. This is a risk in a climate in which rates are rising but could be advantageous now as rates appear to be on a downward trend. Still, HELOC rates change monthly and they can rise as easily as they could fall, so calculate the potential payments tied to a few different rate scenarios to determine which option is truly best for you this November versus what just appears to be better.

Explore your best HELOC and home equity loan options here.

Don’t assume rates will continue to fall

If you’re planning to wait for home equity loan rates to fall to act, then know that that could be a mistake. Similarly, don’t open a HELOC assuming your rates and payments will drop each month now that inflation is close to where the Federal Reserve wants it to be. Rates are fluid and can and will change often. 

Mortgage rates, for example, plunged to a two-year low right before the Fed cut rates in September. But they’ve since risen by almost a full percentage point even without a Fed meeting in October, thanks to other determining factors. So don’t assume home equity rates won’t suffer similarly. In other words: If you can get a rate on a home equity loan or HELOC that’s manageable now, then act. There’s no guarantee that a better offer is on the horizon.

Use it for the right reasons

With the winter holiday season quickly approaching and expectations that holiday spending will rise by around 7% from 2023, it can be tempting to use home equity for obvious but risky reasons. Avoid that temptation. Use your home equity this November and in the months that follow for reasons that will improve your financial health — not worsen it. This includes paying off high-interest debt or making home repairs and renovations that you can then use as a deduction on your 2024 taxes. Don’t, however, use it to boost your holiday spending budget or for one-off big-ticket purchases like vacations or depreciating assets like cars. That can quickly lead to a spiraling debt situation. 

The bottom line

Home equity can be a useful and affordable tool for homeowners, both this month and over the full repayment period. Those considering using it this November, however, should carefully weigh both HELOCs and home equity loans to determine which is truly advantageous for their intended use but they should also be cautious and not simply assume rates on both products will continue to fall, as they may not. Finally, they should avoid the temptation to spend home equity on timely holiday purchases and needs and remember the best ways to use home equity and use it for those purposes instead. By keeping these moves in mind, borrowers will best position themselves for financial success this month and long term.