Smart Homeowners Opt for HELOCs in 2025: Lower Rates and Flexible Borrowing

As the summer vacation season approaches, many homeowners are taking advantage of the opportunity to pay off their debts and make home improvements. One popular option for homeowners is the home equity line of credit (HELOC), which allows them to tap into the equity in their home without refinancing their primary mortgage. HELOCs are a flexible way to borrow money using your home's value as collateral. You only pay interest on the amount you borrow, not the entire credit line, making them a smart alternative to paying off expensive credit card bills or making home improvements. However, the interest rate on a HELOC is not fixed and is based on an index rate (often the prime rate) plus a margin that can vary depending on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home. Currently, rates on 10-year HELOCs have backtracked by one basis point to 6.67%, while VA-backed HELOCs are lower by nine basis points to 6.24%. With mortgage rates still in the high 6% range, it's no surprise that homeowners are turning to HELOCs as a smart alternative to paying off their primary mortgage or using their equity for other purposes. When shopping for a HELOC, it's important to look for introductory rates but be aware that they will eventually adjust to a higher rate. For example, FourLeaf Credit Union is offering a 6.49% rate for 12 months on lines up to $500,000. After that period, the rate will become variable. It's also important to compare fees, repayment terms, and the minimum draw amount when choosing a HELOC lender. The draw is the amount of money a lender requires you to initially take from your equity, and you only pay interest on what you borrow. If you're a homeowner with a low primary mortgage rate and a chunk of equity in your house, now is probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Just remember to pay down the line of credit as soon as possible so you don't turn that plastic payoff into a long-term debt against your house.