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3 big bonuses to opening a HELOC this August

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A HELOC could provide homeowners with large sums of money at a low interest rate if they act this August. assoonas/Getty Images

Inflation and higher interest rates have burdened millions of Americans in recent years. With the former causing the prices of everyday products and services to surge and higher interest rates meant to tame it resulting in growing borrowing costs, there have been few reliable alternatives to pursue.

Homeowners, however, have had a safe and effective way to access money via their home equity. Whether it be through a cash-out refinance, home equity loan or home equity line of credit (HELOC), homeowners have been able to rely on their current homes to get through today's unique economic climate. 

But as inflation cools down and interest rate cuts become more likely, some owners may be wondering about the best way to tap into their equity now. While each of the three aforementioned options can work, there's a compelling case to be made for opening a HELOC this August. Below, we'll detail three big bonuses that come with pursuing this option now.

Start by seeing how much home equity you have to utilize online today.

3 big bonuses to opening a HELOC this August

Not sure if now's a good time to open a HELOC? Here are three compelling reasons why it may be this August: 

A lower rate than the alternatives

While HELOC interest rates haven't been immune from the increase in rates in recent years, they're still significantly lower than many popular alternatives. With interest rates on credit cards averaging more than 20% right now and personal loan rates around 12%, the average HELOC rate of 9.17% is dramatically cheaper. 

Considering that repayment periods on HELOCs range from 10 to 15 years, on average, it's critical to secure an interest rate as low as possible. Fortunately, HELOCs offer one of the better ways to do so in an otherwise elevated rate climate.

See what HELOC rate you can qualify for online today.

The likelihood for the rate to drop further

HELOC rates are variable, meaning that they're subject to change over time (usually once per month). While that may have been a distinct disadvantage in recent years as rates surged, it's a unique advantage now as interest rate cuts appear more likely. 

And with the chances of a cut to the federal funds rate courtesy of the Federal Reserve over 85% right now according to the CME FedWatch tool, if you open a HELOC in August, you could see a rate reduction as soon as September (and possibly more later in the year and into 2025). Compared to the fixed rates that home equity loans come with (in which borrowers will need to pay for a refinance to lock in a lower rate), this makes HELOCs particularly attractive this August. 

Access to large sums of money

While higher interest rates have left many homeowners stuck in their current homes, concerned about losing their low interest rates, it's also resulted in a large increase in existing home equity, growing to near-record levels. The average homeowner currently has around $305,000 worth of equity in their homes right now. But that can change as the economy evolves so if you know you want to access money this way, this August could be the smart time to act. 

The bottom line

By pursuing a HELOC this August homeowners will be able to borrow money at a lower rate than a multitude of alternatives, and the rate they get in August could fall as soon as September. Plus, unlike other borrowing options, homeowners will gain access to potentially hundreds of thousands of dollars right now. And, as an added incentive, they'll be able to deduct the interest paid on a HELOC from their taxes if they use it for IRS-approved home repairs and renovations. But these benefits are timely and the home will serve as collateral in these borrowing circumstances, so it's critical to weigh the pros and cons now before acting. 

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