The average homeowner is sitting on a large, six-figure amount of home equity right now.
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According to a report released in early March, the average home equity amount currently sits at $313,000. While that may be down from the $327,000 level it hit in the second quarter of 2024, it still represents a large, six-figure sum of money available to homeowners now, even accounting for the traditional 20% equity threshold many lenders will require borrowers to keep in their homes.
And while that amount of money can be utilized in any number of ways, from financing home projects and renovations to paying for a college education and consolidating debt, it won't be cost-free, either. The primary ways in which homeowners can access their home equity will all come with a cost and an interest rate to account for. This is particularly critical to understand now, in the dynamic interest rate climate of 2025.
Fortunately, there are still affordable ways to borrow from your home equity now, one of which can be realistically labeled as one of the cheapest borrowing options on the market. Below, we'll break down what to know.
Start by seeing how much home equity you could borrow here.
What's the cheapest way to get equity out of your home now?At the start of May 2025, the least expensive way to borrow home equity in the conventional sense is via a home equity line of credit (HELOC). With the average HELOC interest rate at just 7.95% right now, a HELOC is significantly cheaper than a home equity loan (which currently has rates as high as 8.51% for 10-year terms). However, unlike a home equity loan with a rate that will remain fixed until refinanced, a HELOC has a variable interest rate subject to adjustments monthly for borrowers. That could make it even more affordable in the months ahead, as many expect interest rate cuts to resume later in the year, potentially as soon as the June Federal Reserve meeting.
That noted, there are other ways to borrow your home equity besides just with a home equity loan or a HELOC. Cash-out refinancing, for example, may be considered. This is when you take out a new loan larger than your mortgage balance, pay off the balance and pocket the difference between the two as cash. But that will likely be a much more expensive way to access your equity because the exchange of loans will also require an exchange in interest rates, meaning your currently low mortgage interest rate could surge from where it is now. So, crunch the numbers and compare your cash-out refinance costs to what's available with a HELOC to accurately determine which is more financially appropriate for you.
Technically, the very cheapest way to get equity out of your home is with a reverse mortgage. Unlike HELOCs, home equity loans and cash-out refinances, a reverse mortgage won't require any monthly repayments to be made at all. The equity withdrawn, however, will need to be repaid in full if the homeowner dies or if the home is resold. Additionally, most reverse mortgage options are reserved for homeowners age 62 and older, so this is not a readily available alternative.
And what if you elected to forego home equity borrowing, specifically, for other credit options? Well, in that case, a HELOC will still be your cheapest option. With personal loan interest rates averaging around 12% now and credit card interest rates just slightly below a record 23%, neither offers a cost-effective alternative right now.
This all said, the interest rate climate is dynamic and, depending on the product, rates change daily. So, it's important to monitor the market for changes that could impact rates and offers. But, right now, if you're looking for the cheapest way to borrow home equity specifically, a HELOC is your least costly choice.
See what HELOC rate you'd be eligible for here.
The bottom lineHomeowners in need of inexpensive financing would be hard-pressed to find a better option than a HELOC right now. Not only does a HELOC have lower interest rates than a home equity loan, but it won't require you to exchange your currently low mortgage rate the way a cash-out refinance would nor would you have to meet age requirements the way a reverse mortgage mandates. That all said, the HELOC's variable rate makes its future costs impossible to predict with precision, so potential borrowers would be served well by calculating a variety of realistic repayment scenarios to ensure long-term borrowing affordability.
Matt Richardson