Property market updates: worry over potential capital gains tax on home transactions and arguments for purchasing a new construction dwelling
Lower HELOC and Home Equity Loan Rates Offer Favorable Borrowing Conditions
In a positive development for homeowners, the trends in Home Equity Line of Credit (HELOC) and home equity loan rates have been improving over the past few months. The current scenario shows a gradual decline in HELOC rates, while home equity loan rates have remained relatively steady but somewhat higher.
According to recent reports, HELOC rates have dropped to as low as 7.00% APR, with some competitive offers even around 6.88% to 6.99% for certain loan amounts like $50,000 or $150,000 [1][2][3]. The average rate on a $30,000 HELOC has also fallen, reaching 8.13% in early August, marking the lowest level since May 2025 [4].
Home equity loan rates, on the other hand, have been steadier, holding around an average of 8.25% nationally. Some lenders offer fixed-rate home equity loans as low as 6% to 7% for shorter terms (5-10 years) [1][3][5].
This downward trend in HELOC rates and relative stability in home equity loan rates can be attributed to increased lender competition and Federal Reserve policies impacting variable rate products like HELOCs [4].
The 30-year fixed-rate mortgage has also seen a decrease, falling to 6.63 percent, a level not seen since mid-October 2024. This, combined with the lower HELOC and home equity loan rates, presents sweet financing deals for borrowers.
When considering tapping into home equity for big home improvements, paying off debt, or handling unexpected bills, home equity loans and HELOCs can be a lifesaver when savings or insurance don't cover the bill. However, it's essential to weigh the risks before borrowing against home equity, as there are potential drawbacks to consider.
The decline in HELOC rates and relative stability in home equity loan rates reflect a favorable borrowing environment compared to the higher rates seen in 2024. This trend suggests that borrowing against home equity could be more accessible and affordable for homeowners in 2025 [1][2][3][4][5].
Sources:
[1] Bankrate.com [2] CNBC [3] Forbes [4] The Wall Street Journal [5] Zillow
New Construction Homes Offer Sweet Financing Deals
Aside from lower HELOC and home equity loan rates, there are also sweet financing deals available for buying new-construction homes. While newly built homes might seem pricey, they are more affordable than they might seem, especially in the South and West.
In addition, some formerly hot real estate markets, like Texas and Florida, are seeing slight price declines, making them even more attractive for buyers.
Capital Gains Taxes and Bankruptcy
For longtime homeowners in high-cost real estate markets, it's important to be aware of potential capital gains taxes if they decide to sell their homes. Similarly, filing for bankruptcy does not give a free pass for HELOCs; the terms may still apply, especially if you want to keep your home.
Mortgage Denials and Emergency Repairs
With mortgage denials increasing due to high home prices and strict automated underwriting systems, borrowing against home equity with a HELOC or home equity loan can help cover costly emergency repairs.
Weighing the Risks
Before making a decision to borrow against home equity, it's crucial to carefully consider the risks involved. While lower rates and sweet financing deals make borrowing more accessible, it's essential to understand the potential drawbacks and ensure that you can manage the repayment terms.
Sources
[1] Bankrate.com [2] CNBC [3] Forbes [4] The Wall Street Journal [5] Zillow
- Investing in new-construction homes can offer favorable financing conditions, with undervalued prices in the South and West markets further adding sweet deals.
- The current financial landscape provides opportunities for homeowners to tap into home equity, as the decline in HELOC rates and relative stability in home equity loan rates make borrowing more accessible and affordable for many.
