CBS News
When does a home equity loan make sense?
Borrowing money comes with a unique set of challenges in today’s economic landscape. For starters, the Fed’s benchmark rate is still paused at a 23-year high, which has caused interest rates on lending products, like credit cards and personal loans, to stay elevated. And, persistent inflation has also led some experts to push back their rate cut expectations for 2024, so it’s unclear if or when we’ll get some relief from today’s high-rate environment.
But there are still a few ways to borrow affordably right now. For example, homeowners currently have a unique opportunity to leverage the equity built up in their properties by using a home equity loan. And, the average homeowner currently has around $299,000 worth of home equity — approximately $190,000 of which is tappable — giving them a significant source of funds to borrow from. Home equity loan rates are also relatively low today compared to other lending products, averaging 8.59% (as of April 16, 2024).
However, taking out a home equity loan is not a decision to be made lightly. It’s essential to carefully consider the circumstances in which a home equity loan can make the most financial sense.
Ready to tap into your home’s equity? Compare your home equity loan options now.
When does a home equity loan make sense?
Here are a few scenarios where a home equity loan may be the best option:
When you’re making home renovations or improvements
One of the most common reasons homeowners consider a home equity loan is to finance major home renovations or improvements. Whether it’s a kitchen remodel, an addition or energy-efficient upgrades, a home equity loan can provide the necessary funds to increase the value of your property.
Using your home equity funds for this purpose can also be a strategic move, as the improvements made to the home can potentially lead to an increase in equity and an uptick in the home’s resale value, making the loan a worthwhile investment. And, the ability to deduct the interest paid on a home equity loan used for home improvements can further enhance the financial benefits of this approach.
Explore your top home equity loan rates today.
When you need or want to consolidate debt
If you’re burdened with high-interest debt, such as credit card balances or personal loans, a home equity loan can be an effective way to consolidate those debts. By using the equity in your home as collateral, you can often secure a lower interest rate than you’re paying on your current debts, which can lead to significant savings over time.
For example, the average credit card rate hovers near 21% currently, but the average home equity loan rate is below 9%. So, if you’re able to lower your interest rate by rolling your high-interest debt into a home equity loan, that move may help you pay off your debts more efficiently and potentially improve your credit score over time.
To cover college tuition and education expenses
If you’re looking to finance your children’s or loved ones’ educations, a home equity loan can be a viable option. That’s because the interest rates on these loans are often lower than those on private student loans, making it a potentially more affordable choice — and home equity loans offer different terms than student loans, too.
This route can be particularly useful for families who have exhausted other educational funding sources, such as scholarships, grants and federal student loans. By leveraging the equity in your home, you can provide your children or loved ones with the resources they need to pursue higher education without overburdening your own budget.
When you need emergency funds for unexpected expenses
Unforeseen expenses, such as medical bills or major car repairs, can put a significant strain on your financial resources. But a home equity loan can serve as a safety net, providing access to funds when you need them most.
This can help you avoid dipping into your savings or relying on high-interest credit cards, which can have long-lasting financial consequences. Having the funds from a home equity loan on hand can also provide peace of mind, knowing that you have a reliable source of funds to draw upon in times of financial hardship or unexpected emergencies.
To take advantage of investment opportunities
If you’ve identified a compelling investment opportunity, such as a real estate venture or a promising business opportunity, a home equity loan can provide the necessary capital to take advantage of it. This can be a smart strategic move, as the potential returns from the investment may outweigh the cost of the loan if successful.
However, it’s crucial that you carefully evaluate the risks and ensure that the investment aligns with your long-term financial goals. Investing the proceeds from a home equity loan can potentially yield higher returns than the loan’s interest rate, but it’s essential to thoroughly research and understand the investment before committing your home’s equity.
What to know about borrowing from your home equity
It’s important to note that while a home equity loan can be a useful financial tool, it’s not without its risks. By using your home as collateral, you’re putting your property at risk of foreclosure if you’re unable to make the loan payments. And, if the value of your home decreases, you may end up owing more on your home than it’s worth.
To ensure that a home equity loan makes sense for your specific situation, be sure to carefully evaluate your financial goals, budget and the potential risks associated with what you’re using the funds for. You may also want to consider consulting with a financial advisor or a seasoned mortgage professional to better understand the implications and explore any alternative options that may be more suitable for your needs.
The bottom line
A home equity loan can be a valuable financial tool in many circumstances, as this type of funding is typically affordable compared to other borrowing options. Still, it’s crucial to weigh the benefits against the potential drawbacks. By understanding the circumstances in which a home equity loan can be the right choice, you can make an informed decision that aligns with your long-term financial well-being.
CBS News
Biden sends more troops to North Carolina for continued Hurricane Helene response
President Biden approved the mobilization of another 500 active-duty troops to North Carolina to assist in the recovery efforts after the deadly and devastating Hurricane Helene.
“With a total of 1,500 troops now supplementing a robust on-the-ground effort – including more than 6,100 National Guardsmen and more than 7,000 Federal personnel – the Biden-Harris Administration is mobilizing all relevant resources to support families as they begin their road to rebuilding,” the White House said in a statement Sunday.
Mr. Biden previously announced that the federal government would cover “100%” of costs for debris removal and emergency protective measures in North Carolina for six months. The Biden administration has also released more than $137 million in federal funds – including $100 million in transportation funds for North Carolina to begin rebuilding damaged roads and bridges.
More than 800 people unable to return home are staying in lodging provided through FEMA, and 22 shelters are still housing nearly 1,000 people as mobile feeding operations continue to help survivors.
“My Administration is sparing no resource to support families as they begin their road to rebuilding,” Biden said. “We will continue working hand-in-hand with local and state leaders – regardless of political party and no matter how long it takes.”
Earlier Sunday, North Carolina Sen. Thom Tills called for more resources to bolster the relief effort and likened the damage to Hurricane Katrina’s mark on Louisiana in 2005.
“The scope of this storm is more like Katrina,” he told CBS News’ Margaret Brennan on “Face the Nation with Margaret Brennan”. “It may look like a flood to the outside observer, but again, this is a landmass roughly the size of the state of Massachusetts, with damage distributed throughout. We have to get maximum resources on the ground immediately to finish rescue operations.”
Mr. Biden, Vice President Kamala Harris and former President Donald Trump have all traveled to some of the impacted regions.
Hurricane Helene caused catastrophic damage from Florida into the Appalachian mountains and killed more than 225 people across multiple states. That number includes 114 killed in North Carolina alone.
The White House said Mr. Biden has also been briefed on Hurricane Milton, which is forecast to make landfall in Florida’s Tampa Bay area as a major storm on Wednesday.
U.S. disaster relief chief blasts false claims about Helene response
Deanne Criswell, who leads the Federal Emergency Management Agency, said on Sunday that the recent false claims and conspiracy theories about the federal response to the storm are “demoralizing” aid workers.
“It’s frankly ridiculous, and just plain false. This kind of rhetoric is not helpful to people,” she said. “It’s really a shame that we’re putting politics ahead of helping people, and that’s what we’re here to do. We have had the complete support of the state,” she said, referring to North Carolina.
Republicans, led by Trump, have helped foster a frenzy of misinformation over the past week among the communities most devastated by Helene, promoting a number of false claims, including that Washington is intentionally withholding aid to people in Republican areas.
Trump accused FEMA of spending all its money to help immigrants who are in the United States illegally, while other critics assert that the government spends too much on Israel, Ukraine and other foreign countries.
Tillis, a Republican, on Sunday rejected that claim, telling “Face the Nation with Margaret Brennan” that resources being used on immigration is “not yet … affecting the flow of resources to western North Carolina.”
Tillis said the stream of misinformation about relief efforts in North Carolina is a “distraction.”
“I believe that we have to stay focused on rescue operations, recovery operations, clearing operations, and we don’t need any of these distractions on the ground,” Tillis said. “It’s at the expense of hard-working first responders and people that are just trying to recover their lives.”
Mr. Biden said in a statement Sunday that his administration “will continue working hand-in-hand with local and state leaders –- regardless of political party and no matter how long it takes.”
CBS News
Rep. Mike Turner says all “candidates need to deescalate” after Trump assassination attempts
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.
CBS News
UNICEF executive director Catherine Russell says Gaza is a “hellscape for children”
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.