Money Saving Monday: Home equity loans offer competitive rates for major expenses

SPOKANE, Wash. — Homeowners facing major expenses like college tuition or home repairs may find their best financing option in their home’s equity.

Home equity loans offer competitive rates for homeowners who need significant funds, often lower than credit cards or personal loans.

“A lot of times a home equity loan has a better interest rate because of the security it offers the lender, because you’re using your home as collateral,” explained a financial expert.

Lenders typically allow homeowners to access up to 80% of their property’s value, minus remaining mortgage balance. A homeowner with a $500,000 property who owes $300,000 could access approximately $100,000.

Experts also recommend considering a home equity line of credit (HELOC). “A home equity line of credit usually is a revolving product that comes with a variable interest rate,” the expert noted.

HELOCs function like credit cards, allowing homeowners to draw funds as needed, but with fluctuating payments due to variable rates.

Current conditions favor homeowners who’ve owned homes for years or refinanced when rates were historically low.

“A lot of people who have been in their home for 5+ years probably have a considerable amount of equity, and also probably have a really great interest rate from when rates were so low,” the financial expert observed.

However, homeowners should consider risks carefully. Using a home as collateral means potential foreclosure if payments aren’t made. Borrowers must ensure they can afford additional monthly payments alongside existing mortgages.

Financial advisors recommend shopping around with multiple lenders to compare rates, fees, and terms for the best deal.