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Both mortgage loans And home equity lines of credit (HELOCs) offer homeowners a cheap and effective way to borrow a large amount of money. That amount is particularly high in today’s unique economic climate, with the average homeowner having approximately $320,000 in home equity.
However, their use must be done judiciously and strategically. Because the money comes from your home, it will serve as collateral in these loan exchanges. And if you don’t make all your repayments as agreed, you risk losing your homeownership. So it is especially important to use your home equity funds wisely, especially in 2025 inflation still stubborn and at the pace of interest rate cuts still unclear.
Fortunately, there are some clear and valuable ways to improve your… equity this year – as well as some ways to avoid using it that homeowners should be aware of before formally applying for their money. Below we explain what we should now take into account.
Start by checking here how much equity you are eligible to borrow.
2 ways to use your home equity in 2025 (and 2 to avoid)
While every homeowner’s financial circumstances are different, most would benefit from using (and not using) their home equity in the following ways in 2025:
2 ways to use your surplus value in 2025
To finance home repair projects
Arguably the best way to use your home loan or HELOC financing home repair projects has several advantages. Completing select projects, such as bathroom and kitchen renovations or landscaping, can potentially increase the value of your home. This can give you more equity to use in the future and an easier path to reselling your home if you choose.
But perhaps even more importantly, you don’t have to worry as much about high interest rates in the current interest rate environment. That’s because interest is paid on it equity loans And HELOCs is tax deductible if used for qualifying repairs and renovations to your home. Be sure to keep your receipts and documents so you can use the deduction when preparing your next tax return in 2026.
Get started online with home equity or HELOC today.
To consolidate debts with high interest rates
The average credit card interest recently surpassed 23%, but mortgage loans and HELOCs are in the 8% range now for qualified borrowers. That makes them almost three times cheaper to use than swiping a credit card. So if you have high-interest credit card debt and don’t want to explore your debt relief options, it makes sense to do so use your home equity to consolidate your debts. This saves you monthly interest costs and streamlines your budget by making one payment each month instead of multiple payments to different credit card companies.
2 ways not to use your home equity in 2025
To pay for depreciated assets
If it makes sense to use your home equity to improve the value of an appreciating asset, such as your home, then conversely it also makes sense not to use it to pay for depreciated assets. That means items like cars or other large purchases that will lose value over time, perhaps quickly. This will inevitably lead to you owing more to your lender than the item you purchased is currently worth. And in today’s economy, with low unemployment but still persistent interest rates and inflation, this is a scenario that should be avoided above all else.
To finance a wedding or holiday
In the same way, particularly large expenses should also be avoided. While these can result in lasting memories, they are often not worth risking your home ownership for. Instead, skip paying for one wedding or vacation with your home equity and look for safer alternatives that don’t require you to put your home on the line. Or, ideally, postpone or limit these expenses to fit within your current budget. Just don’t use a mortgage loan or HELOC to pay for them.
The bottom line
While the above items are smart ways to use (and avoid) your home equity, the list is not exhaustive. There are plenty of other ways to use your mortgage loan and HELOC, and some are risky mistakes also worth avoiding. So be sure to research your options carefully and consider speaking to a financial advisor or lender before signing up so you can better ensure home equity lending success, both in 2025 and long-term.
Do you have more questions about borrowing equity? Read more about your options here.
