How to borrow home equity while waiting for refinancing rates to fall

There are two primary ways for homeowners to borrow equity now while they wait for refinance rates to decline. sakchai vongsasiripat/Getty Images

Mortgage interest rates have declined for much of 2025 and continued to fall this summer and September, giving homebuyers reason for optimism – and mortgage purchase applications have soared in response. 

Existing homeowners hoping to refinance, however, may need to wait a bit longer for relief.

While the average mortgage interest rate on a 30-year mortgage term declined to 6.35% last week, according to FreddieMac, the lowest in nearly a year, refinance rates remain relatively high. The average rate on a 30-year refinance is 6.72% now, meaning that homeowners would have to condense their loan term in a 15-year one to get a rate of 6% now. And that would cause mortgage payments to rise, even with a lower rate, thanks to the expedited payoff timeline.

In other words, for many existing homeowners, refinancing is not quite financially feasible now. And a cash-out refinance, which would require owners to exchange their current rate for what is likely to be a higher one to get equity out of their home, may also be cost-prohibitive right now.

Fortunately, there are two primary alternative ways in which homeowners can borrow equity while waiting for the refinancing rate climate to change. Below, we'll detail the options to know now.

Start by seeing how much home equity you'd be eligible to withdraw here.

How to borrow home equity while waiting for refinancing rates to fall

Just because mortgage refinance rates are high doesn't mean that homeowners looking to borrow equity are out of options. They can explore either of the following two alternatives that will allow them to maintain their existing mortgage interest rate:

A home equity line of credit (HELOC) 

A HELOC functions as a revolving line of credit similar to a credit card, with the funding source in this circumstance being the home's equity. You can borrow as needed during the draw period, in which interest-only payments will be required, before eventually repaying the full amount in the repayment period (typically after 10 years). HELOC interest rates are in the low 8% range now and have been largely declining over the last year as rate cuts were issued. 

As a variable-rate product in which rates change monthly for borrowers, this unique home equity borrowing tool is well-positioned to take advantage of lower interest rates to come. And, if you use a HELOC for qualifying home repair projects, you may be eligible to deduct the interest paid from your taxes for the years in which you used the line of credit. 

Learn more about your current HELOC offers now.

A home equity loan

A home equity loan works similarly but not identically to a HELOC. Here, the homeowner receives a lump sum of money directly from their accumulated home equity. Repayments will need to be made immediately, unlike a HELOC. And rates on home equity loans are fixed, injecting some predictability and ease of budgeting that a HELOC cannot provide. 

Still, with rate cuts looming, this product may not be best suited to exploit those adjustments once locked in. That noted, home equity loans also come with the same tax benefits that HELOCs do, and they can be refinanced should rates fall materially lower in the future.

The bottom line

Waiting for the mortgage rate climate to cool took multiple years, and it's still not where many buyers would prefer, so waiting for mortgage refinance rates to drop low enough to justify borrowing equity that way may not make sense. But with home equity loans and HELOCs, homeowners have cost-effective ways to borrow equity currently without having to refinance. Just be careful to only withdraw an amount of equity that you can easily afford to repay, as failure to make payments on either product could ultimately lead to foreclosure.