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Why home equity loans are better than refinancing right now
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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.
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H&R Block and Intuit drop on a report that Elon Musk’s DOGE may develop a new tax-filing app
H&R Block and Intuit shares dropped on Tuesday after the Washington Post reported that President-elect Donald Trump’s Department of Government Efficiency, which is run by billionaires Elon Musk and Vivek Ramaswamy, is looking at developing a free app for people to file their taxes.
The publication cited two people, who spoke on the condition of anonymity, in reporting that the leaders of the incoming administration’s DOGE discussed the idea of crafting a mobile app to file income tax returns with the Internal Revenue Service.
H&R Block shares tumbled 8.2%, while Intuit shed 5.1% on Tuesday. As the dominant players in tax preparation, H&R Block and Intuit, the maker of TurboTax, generate billions in revenue annually by offering online and in-person services.
The Biden Administration in March rolled out a pilot Direct File program through the IRS in 12 states. It allows qualified taxpayers file directly through a federal portal. Additionally, the IRS provides services through its Free File program for those who made an adjusted gross income of $79,000 or less.
More than 100,000 taxpayers used the new Direct File program to file their taxes this year, which marked the first time the system was in operation, according to the Treasury Department.
The DOGE, which has been directed by Trump to slash government spending and cut federal regulations, criticized the complexity of the U.S tax code in a Nov. 16 post on X, the social media service owned by Musk.
“In 1955, there were less than 1.5 million words in the U.S. Tax Code. Today, there are more than 16 million words,” its X account wrote. “Because of this complexity, Americans collectively spend 6.5 billion hours preparing and filing their taxes each year.”
Intuit and H&R Block also have free filing options.
That said, the Federal Trade Commission earlier in the year barred Intuit from advertising its popular TurboTax product as free when most people have to pay to use it. The FTC in February filed an administrative complaint against H&R Block, alleging it marketed its tax-prep products as free yet deleted the data as a way to pressure them to pay for pricier services. Both companies said they’d appeal.
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Washington — President-elect Donald Trump announced Tuesday that he has selected Dr. Mehmet Oz — a celebrity heart surgeon who hosted a daytime television show — to lead the Centers for Medicare and Medicaid Services.
The agency falls under the Department of Health and Human Services and oversees Medicare, the federal portion of the Medicaid program, the Children’s Health Insurance Program and the federal health insurance marketplace. Trump has selected Robert F. Kennedy Jr. for secretary of Health and Human Services. Both positions require Senate confirmation.
“America is facing a health care crisis, and there may be no physician more qualified and capable than Dr. Oz to make America healthy again,” Trump said in a statement. “He is an eminent physician, heart surgeon, inventor, and world-class communicator, who has been at the forefront of healthy living for decades.”
The president-elect said Oz will work with Kennedy, if he is confirmed, “to take on the illness industrial complex, and all the horrible chronic diseases left in its wake.” He also indicated there may be cuts to CMS, writing that Oz “will also cut waste and fraud within our country’s most expensive government agency, which is a third of our nation’s healthcare spend, and a quarter of our entire national budget.”
Oz was defeated by Democratic Sen. John Fetterman in the 2022 Senate race in Pennsylvania after receiving Trump’s endorsement.
This is a developing story and will be updated.
