Why a HELOC makes sense for homeowners this September

A HELOC could be a cost-effective way for homeowners to borrow money this September. Getty Images/iStockphoto

Borrowing home equity should always be done with care and precision. Failure to repay what's been borrowed, after all, can easily result in the home in question being foreclosed on, leaving homeowners in a worse financial position than they started in. It's critical, then, to not only calculate your potential payments in advance, but it's equally important to choose the right product, as home equity loans and home equity lines of credit (HELOC) operate in similar but not identical ways.

It's also important to time your application carefully. Ideally, you'll want to secure the funds when rates are low and the funding source, in this case, your home equity, is plentiful. Going into this September, then, homeowners in need of extra financing may find it an opportune time to apply for a HELOC. But those aren't the only two reasons to borrow with this unique product right now. 

Below, we'll dissect three primary ones prospective HELOC borrowers should consider heading into the new month.

Start by seeing how low a HELOC rate you could qualify for here.

Why a HELOC makes sense for homeowners this September

Here are three timely reasons why a HELOC could make sense for homeowners this September:

It's one of the cheapest ways to borrow money now

Not only is a HELOC noticeably cheaper than a home equity loan now (with an average 8.12% rate versus in the 8.24% to 8.38% range for home equity loans), it's one of the cheapest ways to borrow money overall. Average HELOC rates are lower than personal loans (around 12% now) and credit cards (just under a record 23%). And unlike personal loans and credit cards, the interest paid on a HELOC may be tax-deductible if used for eligible home projects. That makes concerns over an interest rate paid today even less of an issue if homeowners know that they'll be able to reduce their tax bill at the end of the year.

Get started with a HELOC online now.

It could become even cheaper later in September

HELOCs have variable interest rates subject to decline based on market conditions. And market conditions look favorable for September, with a Fed rate cut listed at a near 90% likelihood in the month, according to the CME Group's FedWatch tool. A cut there, then, will inevitably reduce HELOC rates, perhaps even before the cut is made official. That said, HELOC rates can rise as easily as they can decline, so borrowers will need to monitor market conditions closely over time if they ultimately choose this unique home equity borrowing product.

There's more than usual to borrow

Home equity levels are continuing to rise in many parts of the country, with the average amount recently hitting a new record high. So, if you need to borrow a large, six-figure amount of money and don't want to spend a lot on interest in the process, a HELOC could be the smart way to do so this September. That said, avoid the temptation to overborrow, too. While interest-only payments will be required during the HELOC draw period, it's always wise to withdraw an amount you can afford to repay with ease.

The bottom line

If you're a homeowner in need of extra financing going into the fall, there's a compelling case to be made for choosing a HELOC. With rates here lower than most alternatives, a variable rate well-positioned to decline further in the month and an unusually high funding source to utilize, a HELOC may be the best way for homeowners to borrow this September – and in the months to follow.