3 smart ways to use your home equity this November

The next Federal Reserve meeting is barely two weeks away and, with it comes a presumed new cut to the federal funds rate. That will be the second reduction in just two months and possibly just one part of an ongoing rate reduction campaign. This is great news for borrowers, particularly those considering tapping into their existing home equity via a home equity loan or home equity line of credit (HELOC). And with the average amount of home equity hovering close to $330,000 right now, there’s plenty of funding available for many homeowners.

Because the home serves as collateral in these circumstances, though, borrowers will need to take a strategic approach to using their home equity. You shouldn’t just tap into your home equity for any reason. Like all borrowing products, there are some better, timelier ways to use your home equity than others. Below, we’ll break down three smart ways to use it for November.

See how much home equity you’d be eligible to borrow here.

3 smart ways to use your home equity this November

Not sure if it’s worth withdrawing a portion of your home equity for November? It could be if you use it for one or more of these reasons:

Pay off your high-rate credit card debt

The average credit card interest rate is 23% right now. The average home equity loan rate? Just 8.36%. So with credit card rates almost triple what home equity loan rates are, it makes sense to pay off the former with the latter. This will save you hundreds and possibly thousands of dollars if done right now. Considering that the average American currently owes around $8,000 in credit card debt, it’s beneficial to get started now before the debt compounds further, putting your financial freedom even further out of reach.

Get started with a home equity loan now.

Make home repairs and renovations

Interest paid on home equity loans and HELOCs is tax-deductible if used for qualifying home repairs and renovations. But with just 10 weeks left in 2024, the window of opportunity to use this deduction this year is closing. It’s beneficial, then, to use your home equity for this reason now. If you wait much longer (remember, depending on the lender, it can take weeks to have funds disbursed), you may lose your window of opportunity. At that point, you won’t be eligible to deduct the interest paid until 2026. So don’t wait to act, assuming this is your intended use for the funds. 

Re-invest it in a second home

Withdrawing equity from one home to purchase a second one requires a delicate balance. But, if done correctly, it can provide an additional source of income via a rental property. And with interest rates on mortgages also on the decline now, this November could be the smart time to use your home equity to buy a second home. Just be sure to calculate all of your potential costs – at today’s averages plus what they could be as rates fall – to more clearly determine the affordability of this unique approach. 

The bottom line

If you’re going to withdraw from your home equity now, make sure it’s for a good reason. What qualifies? Paying off high-rate credit card debt, making home repairs and renovations and re-investing it to purchase a second home can all be valuable uses. Each homeowner’s goals and financial circumstances are different, however, so be careful with how you approach this borrowing option. Since your home functions as collateral in the exchange, you’ll want to be sure that you’re only withdrawing an amount that you can afford to pay back.