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3 home equity loan risks to know going into 2025
Both home equity loans and home equity lines of credit (HELOCs) offer homeowners access to their accumulated home equity at a much cheaper price point than many alternative credit options. While credit card interest rates sit just under 24% now – a record high – and personal loan interest rates hover around 12%, qualified homeowners can secure a home equity loan with a rate of 8.38% now and a HELOC at 8.53%. That equates to significant savings each month – and over the typical 10 or 15-year repayment period home equity loans typically come with.
Still, borrowing from your home equity isn’t risk-free, either. If you fail to repay all that you’ve borrowed (with interest), you could risk losing your home in the exchange. But even if you can comfortably manage your home equity loan payments, there are some other notable risks to avoid, particularly in today’s evolving economic climate with inflation rising and interest rates being reduced. Below, we’ll break down three home equity loan risks to know going into 2025.
Start by seeing what home equity loan rate you could lock in here now.
3 home equity loan risks to know going into 2025
Borrowing with a home equity loan can be both smart and effective, especially in today’s unique economic climate. To make it more valuable, homeowners should be aware of these risks (and take steps to avoid them):
Interest rates could rise
The hope that inflation would cool in a straight line downward – and that interest rates would follow – hasn’t played out in recent months. Inflation rose in October and again in November and now sits at 2.7%, almost a full percentage point above the Fed’s 2% goal. So waiting for a lower home equity loan rate to materialize in 2025 is risky when you can secure one close to 8% right now.
Unlike mortgage interest rates, which are driven by a variety of factors, home equity loan rates track closely alongside the federal funds rate. So if rate cuts are paused or hiked again next year, interest rates on home equity loans could rise. And they will rise on HELOCs, which have variable interest rates that change each month. Understanding this dynamic, then, prospective borrowers can avoid this risk altogether by locking in a low home equity loan interest rate now – and refinancing it should rates fall by a considerable degree in the future.
Get started with a home equity loan online today.
Home values could change
Your home equity is calculated by deducting your current mortgage balance from your estimated home value at the time of application. But home prices can change and what your home is worth now may not be what it’s worth in six months or in December 2025. That’s a positive if your home value is on the rise as it could allow you to borrow even more money (the average home equity amount currently sits at around $320,000) but it’s a major risk if your home value drops.
A significant value decrease could lead you to be “underwater” by owing more to the lender than your home is worth. This is particularly risky with home equity loans, which offer borrowers a lump sum of money versus a HELOC that functions as a revolving line of credit. So, before applying, make sure that your home value is secure and, preferably, on the rise.
Your debt could increase
If you use your home equity loan to pay off or to consolidate high-interest rate debt, like credit cards, then you could make strides toward boosting your financial health. But if you use it for the wrong reasons, like paying for depreciating assets such as cars or one-time expenses like weddings, you could put yourself into a growing debt spiral that will be difficult to get out of. So make sure you’re using your home equity loan for safe and effective purposes (like home repairs and renovations, which come with potential tax benefits) and avoiding using it in ways that could lead to your debt becoming harder to pay down than it already is.
The bottom line
A home equity loan offers borrowers access to a large, potentially six-figure sum of money, at an interest rate much lower than some popular alternatives. But it does come with risks that homeowners will need to navigate around, too. By being aware of these risks going into 2025 and by utilizing your funds for the most appropriate and secure reasons, you can position yourself for sustained home equity borrowing success both in the new year and in the years that follow.
Learn more about borrowing with a home equity loan here now.
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U.S. mulls ban on Chinese-made TP-Link routers over security concerns
The U.S. is considering banning the sale of TP-Link internet routers, which are made in China, over concerns the home devices pose a security risk, the Wall Street Journal reported.
Authorities may ban the popular routers, which were linked to Chinese cyberattacks, as early as next year when President-elect Donald Trump takes office, according to the report.
Trump has signaled that he is prepared to take a tough stance on China in his second term in office, including by introducing levies of as much as 60% on Chinese-made goods.
TP-Link says its routers do not account for a majority of the internet router devices in U.S. homes and small businesses. The routers are available for purchase on Amazon.com, where they are a best-seller. Amazon did not immediately respond to CBS MoneyWatch’s request for comment on the potential ban.
The company’s connectivity products are used by the U.S. Defense Department and other federal government agencies, too, according to the WSJ.
For its part, TP-Link told CBS MoneyWatch that the company’s “security practices are fully in line with industry security standards in the U.S.”
“We implement rigorous secure product development and testing processes, and take timely and appropriate action to mitigate known vulnerabilities,” a TP-Link spokesperson said in a statement to CBS MoneyWatch.
Many consumer brands targeted by Chinese hackers
The company added that many consumer electronics brands are targeted by China-based hacking groups and that it welcomes “opportunities to engage with the federal government to demonstrate that our security practices are fully in line with industry security standards, and to demonstrate our ongoing commitment to the American market, American consumers and addressing U.S. national security risks.”
The Justice Department is investigating whether the routers’ relatively low price violates a law stipulating that companies can’t sell goods for less than the cost of production, the WSJ reported, citing a person familiar with the matter. On Amazon.com, a handful of router models by T-Link are available for sale with a base model costing around $99. The routers are available for sale through a business unit in California as well.
In a statement to CBS MoneyWatch, TP-Link said that while it does undercut competitor prices, it does not sell any products below cost.
Compromised routers
In October, Microsoft published an analysis which found that a Chinese hacking entity had access to a trove of compromised TP-Link routers.
“CovertNetwork-1658 specifically refers to a collection of egress IPs that may be used by one or more Chinese threat actors and is wholly comprised of compromised devices. Microsoft assesses that a threat actor located in China established and maintains this network. The threat actor exploits a vulnerability in the routers to gain remote code execution capability,” the report explains.
TP-Link said that it takes “appropriate action to mitigate any vulnerabilities” the company becomes aware of. It has also signed the U.S. Cybersecurity and Infrastructure Security Agency, or CISA, Secure-by-Design pledge.
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“Murder hornets” eradicated in the U.S., agriculture officials say
The Northern giant hornet, more commonly known as the “murder hornet,” has been eradicated in the U.S., agriculture officials said Wednesday.
The ominously nicknamed invasive species was confirmed to be in the U.S. in 2019 after officials in Washington state received and verified two reports of the hornet. Efforts quickly began to track and get rid of them.
The 2-inch-long hornet, with a stinger longer than that of a typical wasp, can deliver potent venom, but is largely dangerous to bees and other insects, not humans. Eradication efforts started because of the threat the hornet posed to bees and agriculture across the country.
“By tackling this threat head-on, we protected not only pollinators and crops, but also the industries, communities, and ecosystems that depend on them,” Dr. Mark Davidson, deputy administrator at USDA’s Animal and Plant Health Inspection Service, said in a news statement.
How “murder hornets” were eradicated
State, federal and international government agencies worked together to eradicate “murder hornets” in the U.S., the officials said.
To do so, first entomologists had to find the hornets’ nests. Finding the nests can be a challenge, because the hornets typically build their nests in forested areas, often in an underground cavity, according to the U.S. Department of Agriculture. In some cases, entomologists captured a live hornet, attached a radio tag to it, released it, and tracked the hornet back to its nest. Figuring out how to securely attach a radio tag to a hornet without harming it was a hurdle.
After finding a nest in a tree, a team plugged the nest with foam, wrapped the tree in plastic and vacuumed out the hornets. They also injected carbon dioxide into the tree to kill any remaining hornets.
In 2022, scientists said they were setting about 1,000 hornet traps in Washington. Hornets caught in traps help scientists find the location of nests. The previous year, Washington state officials destroyed a nest, finding nearly 1,500 hornets “in various stages of development.”
The public also helped officials track down hornet nests. If not for help from the public, there’s a good chance that the hornet could have been around for years to come, Sven Spichiger, Washington State Department of Agriculture pest program manager, said during a news conference Wednesday.
“All of our nest detections resulted directly or indirectly from public reports,” Spichiger said in a press release. “And half of our confirmed detections came from the public.
Could the hornet come back to the U.S.?
While officials in Washington celebrated the eradication of the invasive hornet species, Spichiger acknowledged they could come back to the U.S. He said officials would continue to keep an eye out for the hornet and encouraged members of the community to do the same.
“They got here once and they could do it again,” Spichiger said.
CBS News previously reported that it was unclear how the hornets first arrived in the U.S., though invasive species can be “unwitting hitchhikers” on things like shipping containers.
Even now, five years after the hornets appeared in the U.S., Spichiger said officials will never know exactly how they got to the country.
What makes “murder hornets” unique?
The hornet, an invasive species from Asia, can kill an entire hive of honeybees in as little as 90 minutes, according to agriculture officials.
“The hornets can enter a ‘slaughter phase‘ where they kill entire hives by decapitating the bees. The hornets then defend the hive as their own, taking the brood to feed their own young,” according to the Washington State Department of Agriculture. “They also attack other insects but are not known to destroy entire colonies of those insects.”
The hornets typically only attack people or pets when threatened, but can sting repeatedly.
The hornet species has a large orange or yellow head and black-and-orange stripes across its body.
They were first detected in North America in British Columbia, Canada ,in August 2019, authorities said, and then were confirmed in Washington state by the end of 2019.
While the U.S. appears to have gotten rid of them, at least for now, scientists in Spain last month reported sightings of the hornet species in Europe. They described two sightings of the hornet in the journal Ecology and Evolution.