3 Smart HELOC Moves to Make This Month

A home equity line of credit (HELOC) has traditionally been a smart way for homeowners to borrow money. With their home serving as collateral, lenders typically offer lower interest rates than what’s normally available with alternatives. And with the home on the line, lenders have an easy, six-figure source of financing to borrow from. That can’t be said for alternatives like personal loans or credit cards. But the timing surrounding a HELOC application needs to be strategic, particularly when risking your home. Because rates on HELOCs are variable and liable to change over time, then, it’s critical that your timing is precise.

Fortunately, this February marks a smart time to borrow via a HELOC – if borrowers make some strategic moves in the short month. Below, we’ll break down three to consider making now.

With just 28 days in February, homeowners will need to make each count when considering a HELOC. Here are three smart (and timely) moves to make this month:

HELOC interest rates are driven by multiple factors with the Federal Reserve’s monetary policy being one of the key ones. This is why HELOC rates have steadily declined for the last year, falling to an 18-month low to start 2025. But there is no Federal Reserve meeting scheduled for February (the bank paused interest rate cuts at its January meeting). So rates are likely to stay at the same level this month, giving borrowers some breathing room to shop around to find the lowest rate and best terms.

Consider getting offers from at least three different lenders (you can use a different bank from your current mortgage lender) to establish a baseline. Then go back to your current lender to see if they can beat the offer. But do so now, before the Fed’s March meeting potentially impacts rate offers.

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The average home equity loan rate is 8.44% while the average HELOC interest rate is 8.26% as of February 4. But that difference in rates is small and shouldn’t be the sole consideration when borrowing from your home. So closely compare a HELOC to what you can obtain with a home equity loan now. Remember that the latter has variable rates subject to change (current borrowers will see their HELOC rate change each month) while home equity loan rates will stay fixed for the full loan term. So if you’re taking your time to find the lowest rate HELOC this February, it makes sense to compare it to what’s also available with a home equity loan to better determine which is more advantageous for your circumstances and needs.

A HELOC can be beneficial when interest rates are consistently being cut, as they were in the fall of 2024. But they can also be dangerous when rates are stubborn or, worse, when they rise. So make sure to consider the wider rate climate closely when doing your HELOC homework this month and be realistic about the potential for rates to fall further in the months ahead. You’ll want to avoid the assumption that HELOCs will become cheaper over time to ensure your ability to comfortably afford repayments. If you’re unsure about the risks, consider a fixed-rate home equity loan as a viable alternative.

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This article was originally written by Angelica Leicht and published in www.cbsnews.com