When used properly, home equity can provide a vital financial lifeline for homeowners in need of extra funding. Whether it be with a home equity loan, home equity line of credit (HELOC) or other source, home equity can provide homeowners access to a large, six-figure sum of money, often at an interest rate many points lower than what would be available with popular alternatives. And with the average homeowner in possession of around $319,000 worth of equity, according to the November 2024 ICE Mortgage Monitor report, there’s likely plenty of money to use both now and, potentially, for additional expenses in the future.

That noted, using your home equity needs to be a carefully considered decision, approached strategically. If you’re unable to repay all that’s borrowed you could risk your homeownership as the property serves as collateral in these exchanges. Understanding this risk, then, it helps to know some safe (and dangerous) ways to use home equity this December. Below, we’ll list two of each that homeowners should know before getting started.

See what home equity loan interest rate you could qualify for here.

2 safe ways to use home equity this December

Not sure if it’s secure to use home equity this month? Here are two of the safer (and smarter) ways to do it:

Home repairs and renovations

Home repairs and renovations are one of the better ways to access your home equity right now. Not only can doing so potentially boost your home’s value (and, thus, equity level) but if you qualify for IRS-eligible home projects, you’ll be able to deduct the interest on a home equity loan or HELOC from your taxes when you file your next tax return. And if you’re able to get funds disbursed this month, you may qualify for a partial deduction when compiling your return in January and February. Waiting until 2025, however, could potentially delay this valuable deduction into 2026.

Learn more about home equity loan tax benefits online now.

To consolidate high-interest debt

Interest rates on home equity loans and HELOCs are both under 9% right now for qualified borrowers. Rates on personal loans, meantime, are around 13% while credit card interest rates recently surged to an average of just over 23%. So if you want to consolidate one of the latter high-interest debts with a lower one, it makes sense to do so via your home equity. This is generally a smart way to approach your home equity overall but can be particularly helpful this December with holiday spending expected to exceed what it was in 2023. 

2 dangerous ways to use home equity this December

While everyone’s financial situation differs, here are two dangerous ways homeowners should avoid using their home equity this December:

To pay for holiday spending

It can be tempting to use your home equity to help with your holiday spending this year. With a HELOC functioning much like a credit card would, you may be thinking of using your home equity to fund purchases both large and small – and dealing with the expenses in January and 2025. But that would be a mistake. Home equity is a vital funding source that should be used in ways that can enhance your financial health – not harm it. Using it for home repairs and to consolidate debt accomplishes that goal but using it for extra holiday gifts does not. 

To purchase depreciating assets

It’s generally a mistake to use your home equity to purchase a depreciating asset like a vehicle and it’s still an error to do so now, even if you can fund it at a lower rate than what you may be able to secure with a car loan. Instead, consider using your home equity for purchasing assets that will increase in value (like a second home, for example) and skip using it for something that will drop in price almost immediately.

Learn more about the best (and worst) ways to use your home equity here. 

The bottom line

Your home can provide access to critical financing. But it shouldn’t be accessed in a cavalier and non-strategic manner, either. By using it for the above reasons and skipping it for the dangerous ones, you can potentially boost both your home’s value and your financial health, putting you on firmer financial footing heading into a new year.