Home equity lines of credit (HELOCs) have traditionally been a smart way for homeowners to access a large amount of money for a low cost. This product has been particularly advantageous in recent years, with rates on credit cards and personal loans both hitting the double-digit range. Credit cards, in particular, now come with a staggering average interest rate of just under 24%. HELOCs, in comparison, are averaging around 8.55% now — nearly three times cheaper than credit cards.

That lower interest rate is largely due to the home in question functioning as collateral in these borrowing exchanges. As such, borrowers should be strategic in their approach. If they’re ultimately unable to repay all that was withdrawn, they could risk their homeownership in the process. With that understanding, then, it helps to know some HELOC dos and don’ts heading into the new year. Below, we’ll break down four of them.

Start by seeing how low of a HELOC interest rate you could secure here.

HELOC dos and don’ts to know for 2025

By understanding these HELOC approaches and mistakes now, homeowners can better position themselves for success both in 2025 and the years that follow:

Do: Choose it over a home equity loan

Right now, home equity loan interest rates are slightly lower than HELOCs. But you shouldn’t let an 8.40% home equity loan rate entice you into choosing that option versus the 8.55% HELOC. That’s because home equity loans have fixed rates that homeowners will need to pay to refinance to a lower one in the future. But HELOCs change each month on their own. And that could mean lower payments soon, should additional rate cuts be issued as expected. 

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Don’t: Automatically use your current mortgage lender

There can be a misconception on behalf of homeowners in which they assume they need to use the lender they already have their mortgage with to then borrow with a HELOC. But this isn’t the case. So don’t automatically use your current mortgage lender without first shopping around to see what rates and terms competitors are offering instead. You may be surprised at how much better of an offer you can secure simply by comparing other lenders online first.

Do: Use it for select purposes only

A HELOC used for home projects and renovations is smart, as this use could result in you being able to deduct the interest paid from your taxes. Using it for holiday spending or to purchase depreciating assets in 2025, however, isn’t recommended. After all, you’re using equity from your most prized asset, so you’ll want to make sure anything you use it on is truly valuable. Ideally, you can use your HELOC to make home repairs that ultimately result in your home value growing even further.

Don’t: Stop monitoring the interest rate climate

Just because you’ve secured your financing doesn’t mean you should stop monitoring the wider interest rate climate. Any number of factors, either by themselves or in conjunction with others, could cause your rate to rise or fall. And if it’s the former, you’ll want to make plans in anticipation of a rate rise before it’s formalized. So keep monitoring inflation data, unemployment reports, Fed actions (or lack thereof), and more so you can better track how high your HELOC payments could become.

The bottom line

By approaching your HELOC with a strategic and careful approach — and by completing these actions and avoiding others — you can better improve your chances of home equity success, in 2025 and over the full repayment period.

Learn more about your HELOC options here today.