Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home’s value and pay that amount back in monthly installments.

What the market trends are: With current HELOC rates slightly lower, they could be the cheaper option for short-term borrowing, but rising rates could make them more expensive over time. If you prefer stability, a home equity loan's fixed rate might be worth the extra cost.

HELOC rates again came in lower this week, with the the $30,000 home equity line of credit dropping to an average of 8.36 percent — closing out 2024 with a record low for the year, according to Bankrate’s national survey of lenders. In contrast, the average $30,000 home equity loan rate remained the same, at 8.41 percent.

The more equity (value) you’ve built up in the home, the more money you can access via a HELOC. A HELOC allows you to borrow exactly what you need, typically for lower rates than other forms of credit,

The utilization of your home equity needs to be done both carefully and strategically. And it can be done so effectively with a HELOC if borrowers first understand these critical pros and cons of HELOC rates today: