American homeowners are collectively sitting on the largest pile of wealth in history—an estimated $36 trillion in home equity, according to Federal Reserve data. Yet for the past two years, sky-high borrowing costs have kept most of that value locked away, tantalizingly visible on paper but inaccessible in practice.

That's beginning to change. Following the Federal Reserve's rate cuts in late 2025, home equity line of credit (HELOC) rates have dropped to an average of 7.44%—still elevated by historical standards, but meaningfully below the 9%+ peaks seen earlier. For homeowners weighing whether to tap their equity, the improving rate environment has reopened a conversation that many had shelved.

The Current Rate Landscape

Understanding today's home equity borrowing options requires distinguishing between two products:

HELOCs (Home Equity Lines of Credit)

These variable-rate products carry an average rate of approximately 7.44%, according to Curinos data. Rates are typically tied to the prime rate (currently 6.75%) plus a margin that varies by lender and borrower creditworthiness. The best-qualified borrowers may find rates near 6%, while those with lower credit scores could pay 10% or more.

Home Equity Loans

These fixed-rate installment loans average approximately 7.59% currently. The fixed rate provides payment predictability but typically starts slightly higher than HELOC rates.

Both products have seen rates decline roughly 0.75 percentage points from their 2024 highs, tracking the Fed's rate cuts. If the Fed continues easing as expected, further declines are possible—though the pace will be gradual.

Who Should Consider Tapping Equity Now

Home equity borrowing makes sense in specific circumstances:

Home Improvements With ROI

Using equity to fund renovations that increase your home's value can be financially sound. Kitchen and bathroom updates, energy efficiency improvements, and structural repairs often return more than their cost at sale. The interest may also be tax-deductible if the funds are used for home improvements.

Debt Consolidation

If you're carrying high-interest credit card debt at 20%+ APR, consolidating into a 7-8% home equity product generates immediate cash flow savings. However, this strategy converts unsecured debt into secured debt backed by your home—a serious consideration if your income is uncertain.

Major Expenses With Clear Returns

Funding education, starting a business, or covering medical expenses may justify equity borrowing if the alternatives (high-interest personal loans or depleting retirement savings) are worse.

Who Should Wait or Avoid

Home equity borrowing isn't right for everyone:

Consumption Spending

Tapping equity for vacations, vehicles, or lifestyle upgrades is generally inadvisable. You're converting a long-term asset into short-term consumption and putting your home at risk.

Uncertain Income

If your job situation is unstable or your income is variable, adding a home-secured debt obligation increases financial fragility. The consequences of missing payments are severe.

Near-Term Move Plans

If you're likely to sell your home within a few years, the closing costs and complexity of equity products may not be worthwhile. The loan balance will need to be paid at closing.

Rate Optimists

If you believe rates will fall significantly further, waiting for a HELOC might make sense. Variable-rate HELOCs will automatically benefit from additional Fed cuts, while locked home equity loan rates won't.

How to Get the Best Rate

Home equity rates vary significantly by lender—you might see offers ranging from under 6% to over 10% depending on where you look. Maximizing your outcome requires effort:

Shop Multiple Lenders

Get quotes from at least three to five lenders, including your current mortgage servicer, a local credit union, and major banks. The variation can easily save you a percentage point or more.

Optimize Your Credit Score

Home equity rates are highly credit-sensitive. A few months spent paying down credit cards and correcting errors on your credit report can translate into meaningfully lower rates.

Consider Combined Loan-to-Value

Lenders care about your combined loan-to-value ratio (CLTV)—the sum of your mortgage balance and home equity borrowing divided by your home's value. Staying below 80% CLTV typically gets the best rates.

Negotiate Fees

Closing costs, annual fees, and early termination penalties vary widely. Some lenders waive fees entirely; others charge thousands. Don't focus solely on rate.

The Strategic Picture

For homeowners who locked in ultra-low mortgage rates during 2020-2021, their primary residence has become an unusual asset. They can't afford to refinance (current rates would roughly double their payments), but they're sitting on substantial equity they can't easily access at reasonable cost.

The improving home equity rate environment offers a partial solution. A 7.44% HELOC isn't cheap, but it's far more attractive than a personal loan at 12%+ or credit card debt at 24%+. And for those with clear, value-creating uses for the funds, it unlocks capital that would otherwise remain trapped.

What Comes Next

The Federal Reserve's rate path will determine where home equity rates go from here. If the Fed delivers another 50-75 basis points of cuts in 2026 as many expect, HELOC rates could fall toward 6.5% by year-end. Home equity loan rates might follow a similar trajectory with a lag.

That creates an interesting timing question. Lock in a fixed rate now and forgo potential future declines? Or take a variable-rate HELOC and let rate cuts flow through automatically? For most borrowers, the HELOC's flexibility and automatic rate adjustment make it the better choice in a declining rate environment—but your risk tolerance and specific circumstances matter.

One thing is clear: the $36 trillion in home equity isn't going anywhere, and the cost of accessing it is finally becoming reasonable again. For homeowners with sound financial reasons to tap their biggest asset, 2026 may be the year to act.