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While there are a variety of ways to borrow money, homeowners have an alternative that many others do not – they can access their home equity. Whether it be via a home equity loan, a home equity line of credit (HELOC) or cash-out refinance, owners can leverage their existing home equity to gain access to a potentially large sum of money. And with the average home equity amount sitting close to $320,000 right now, there’s a lot there to utilize, offering a way to pay for expenses both large and small.
Still, borrowing money should always be approached strategically, particularly when the funding source is your home. Fail to pay back all that’s been withdrawn and you could risk losing your home to the lender. So it’s important to choose carefully. Ahead of a new month then, in which another inflation reading is scheduled to be released by the Bureau of Labor Statistics and the second Federal Reserve meeting of 2025 set to review monetary policy, changes could be ahead.
Understanding this potential, prospective home equity borrowers may be wondering if a HELOC or home equity loan will be better to open this March. Below, we’ll break down what to consider right now.
Start by seeing how much home equity you could borrow now here.
Will a HELOC or home equity loan be better this March?
The answer to this question is not definitive, even for March 2025. For some homeowners, a HELOC could be most applicable to their situation, while, for others, a home equity loan could be the clear choice this month. Here’s why each may be better for you:
Why a HELOC could be better this March
Currently, HELOC interest rates are more than a quarter point lower than home equity loans (8.12% versus 8.40%). That may seem like a negligible difference on paper, but it can add up to real savings over the traditional 10- or 15-year HELOC repayment period. Overall, HELOC rates just dropped to a two-year low this week. And since HELOC rates are variable (they change monthly for borrowers), that rate could fall even further in the weeks and months to come.
If interest rate cuts resume, HELOC rates will almost assuredly drop further. But even if rate cuts are simply discussed in March, lenders may get ahead of any official Fed rate action and start lowering their rates in anticipation. Still, it’s important to remember that HELOC rates can move upward as easily as they can fall, so some volatility will need to be priced in by borrowers before applying, particularly in the unique interest rate climate of March 2025.
See what HELOC interest rate you could start with here.
Why a home equity loan could be better this March
On the other hand, if you prize reliability and predictability and don’t want to deal with the stress and management of a constantly fluctuating interest rate, particularly now, a home equity loan could be the better option this March. Home equity loan interest rates are only marginally higher than HELOC rates, and they’re fixed, only to be adjusted if you pay to refinance them at a later date.
Considering that you’re putting up your home as collateral, many homeowners may find it advantageous to only borrow with a product that has a fixed interest rate. And this will also protect against potential interest rate hikes. Home equity loan rates are largely driven by the Fed’s rate policy. While rate hikes seem unlikely right now, especially for this March, they seem more realistic than they would have a few months ago, considering that inflation has now risen in four consecutive months. Should it continue to do so, rate hikes may resume – but the home equity loan rate you locked in this March will remain comparatively low.
The bottom line
The choice between a home equity loan or HELOC this March will largely depend on your repayment preferences. Do you prefer a lower rate that could change? Then a HELOC may be better. But if you prefer the slightly higher but secure fixed rate, a home equity loan will be more applicable. Explore both options carefully, then, and consider speaking to a lender who can answer your questions to better determine which is most suitable for you, both this March and over the extended repayment period.
Learn more about your HELOC and home equity loan options here.
