Taking money out of your home should always be done carefully, but especially now, as owners head into 2026.
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If you have some extra time this holiday season, whether on vacation or simply a day off, you may want to consider using it to reevaluate your financial health. The past year has been a mixed bag of stock market returns and economic frustration thanks to lingering inflation and unemployment concerns. But the right, strategic approach in the new year could get you back on track and, potentially, boost your financial health and independence at the same time.
For homeowners, this could mean leveraging their growing home equity in a strategic way. The average homeowner now has hundreds of thousands of dollars worth of equity to utilize and the cumulative home equity levels in the country reached a record high earlier this year. So there's plenty to borrow from, if needed. But with your home functioning as collateral in these exchanges, it's critical that you only use a home equity loan or home equity line of credit (HELOC) for appropriate expenses and needs.
So, what are the smart ways to leverage your home equity in 2026? Below, we'll detail three timely ones worth considering now, in the final weeks of the year.
Start by seeing how much home equity you'd be able to borrow here.
3 smart ways to leverage your home equity in 2026
A home equity loan or HELOC application doesn't often get approved overnight. It can take a few weeks from application through appraisal to disbursement to get started. So, you'll want to start this process now if you want to pay for certain items in the new year. But which ones, specifically, are actually worth paying for? Here are three to consider right now:
To finance specific home repair projects
Not all home projects, repairs and renovations will qualify for a home equity tax deduction. However, specific ones, like a kitchen renovation or new bathroom, may. And that means deducting the interest you paid on your home equity loan or HELOC when it comes time to file your taxes for the year in which you used the product.
Both come with the same tax advantages, giving you flexibility to choose either a loan or a line of credit. Because of this attractive feature, concerns over today's interest rate climate may be less pressing, too, if you know that the interest you pay will be deducted from your next tax bill. Just be sure to understand which projects qualify and which ones won't before getting started.
Learn more about your home equity loan and HELOC options now.
To consolidate high-rate credit card debt
The average credit card balance is worth thousands of dollars right now. And if that's not dangerous enough, the average credit card interest rate is over 20% currently, just under a record high. Interest on your balance, meanwhile, is likely compounding daily, largely negating any progress you thought you were achieving by making the minimum payment each month. Plus, even with the interest rate climate cooling now, it's unlikely to improve so significantly as to reduce your existing debt and interest in any meaningful way.
But a home equity loan or HELOC can help consolidate your balances into one product, often at a much lower interest rate. This will reduce your interest costs, streamline your payments, and with the right, consistent approach, reduce your high-rate credit card debt much more rapidly and efficiently.
To enhance your financial standing
Do you have a business opportunity that you need some capital to get started? Or do you want to purchase a second home to use as a rental? There are multiple ways in which you can utilize your existing home's equity, especially if the value has grown significantly, to enhance your broader financial standing.
Just remember that this money comes from what is likely your most important financial asset, and it isn't risk-free. But if you have an idea or business proposition that you just need some money to make successful, a home equity loan or HELOC could help get you there in 2026.
The bottom line
Both home equity loans and HELOCs can be smart, effective tools for homeowners in 2026. They just need to be used for select reasons only and not, for example, for ones unlikely to improve your financial health, like a vacation or vehicle purchase. By evaluating the use of these products via the above three approaches, however, homeowners can better understand the pros and cons. More importantly, they can decide on what role they can play in their broader, financial approach both next year and in the years that follow.
Edited by Angelica Leicht
