3 times to use a HELOC in 2025

Need to renovate your kitchen now? Then it could be a good time to apply for a HELOC. Maskot

Your home equity can be a viable financing source in any economic climate, but in today's elevated one, it's one of the better ways to borrow money. The average interest rate on a home equity line of credit (HELOC), for example, is just under 8% right now, and it's fallen by around two percentage points just since September 2024. And should certain economic factors that drive HELOC rates remain in play, rates on the line of credit could fall again, perhaps as soon as this week. In other words, it's a very credible way to borrow some of the average $300,000-plus home equity homeowners have right now.

But in the economic climate of 2025, there are better times to use a HELOC than others. This consideration is especially important to get right, considering that HELOCs utilize the home in question as collateral. Failure to repay as agreed could result in foreclosure. Using it at the right times, then, is critical. But when, exactly, are the right times to use a HELOC in 2025? That's what we'll analyze below.

Start by seeing what HELOC rate you could qualify for here.

3 times to use a HELOC in 2025

While each homeowner's circumstances are different, many could benefit from using it during one or more of these times this year:

When financing home projects

This is traditionally one of the better times to use a HELOC in any economic climate, and it's not different in the unique one of May 2025, either. That's because interest paid on a HELOC is tax-deductible if used to pay for eligible home projects and renovations. A kitchen or bathroom remodel undertaken this spring and summer, for example, could be a smart way to use the HELOC. Generic repairs and appliance replacements, however, will typically not qualify. But if you're already underway with a spring home project or plan to be soon, this could be one of the optimal times to pay for it with a HELOC.

Get started with a HELOC online today.

When price changes are affordable

A HELOC has a variable interest rate, which means, right now, current borrowers have been experiencing and are positioned to further experience lower rates and lower monthly payments. But this rate changes monthly for borrowers and it could cause payments to rise or fall, perhaps in an unexpected way. So you'll need to calculate your future repayment costs tied to both today's available rates as well as what they could look like over the full draw and repayment periods. If you can afford these price changes, then this could be the right time to pursue a HELOC, thanks to its affordability compared to the broader borrowing climate. If you can't, however, then it may be time to explore the fixed-rate home equity loan as an alternative.

When looking for the cheapest home equity borrowing option

In the interest rate climate of just a few years ago, when it came time to secure the cheapest home equity borrowing option, a HELOC was generally not considered a top choice. But if you're looking for the cheapest home equity borrowing option in 2025, you'd be hard pressed to find something less expensive than a HELOC. 

Not only does a HELOC have a lower rate than a home equity loan right now, it also won't require you to forego your existing, presumably low mortgage rate, as you would have to with a cash-out refinance. You also won't have to deal with the age restrictions associated with a reverse mortgage. And you'll save considerably more by borrowing with a HELOC than you would with a personal loan (with an average rate over 12% now) or a credit card (with an average rate close to 23%). So, if you're looking for the cheapest home equity borrowing option right now, or simply one of the cheapest options overall, this is one of the better times to look for a HELOC.

The bottom line

The "right" time to use a HELOC in 2025 could be one or more of the above. Or it could be none. It really depends on the specific needs and financial health of each homeowner. So carefully consider where you fit in the home equity borrowing spectrum to determine if now is the right time for you to use a HELOC or if you'd better served with an alternative like a home equity loan instead.

Learn more about your HELOC and home equity loan options here.

Matt Richardson

Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.