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Many homeowners are reassessing their borrowing options as market conditions continue to shift in the second half of 2025. While home values have climbed nationwide to a record high median of $396,000, elevated interest rates, rising inflation and uncertainty surrounding the Federal Reserve’s rate moves continue to complicate financing decisions.
And, if you’re a homeowner who’s looking to tap into your home equity, you may wonder: Is it better to get a home equity line of credit (HELOC) or a home equity loan right now? Given how much the rate environment has changed, it’s worth understanding how each option fits your circumstances. Below, mortgage professionals share what you should consider when deciding between these products in August.
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Is a HELOC or home equity loan the better choice this August? Here’s what experts say
“In August 2025, we’re recommending home equity loans more often than HELOCs for clients seeking predictability,” says Ryan Leahy, senior loan officer and regional production manager at Leahy Lending. “With interest rates still elevated and the Fed keeping markets on edge about future hikes, locking in a fixed rate with a home equity loan gives peace of mind.”
Steven Glick, director of mortgage sales at real estate investment fintech company HomeAbroad, is leaning toward recommending HELOCs.
“If the Fed follows through with one or two more cuts this year, HELOC rates could drop further, saving [you] money without needing to refinance,” Glick says.
Ultimately, though, both experts emphasize that the choice depends on your financial situation and how you plan to use the money.
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When a HELOC makes sense this August
“A HELOC makes sense when [you] need flexibility or anticipate multiple expenses over time,” Glick says. This approach shines for multi-phase renovations, medical bills or situations where you’re unsure how much you’ll need to borrow.
But before opening a HELOC this month, you should weigh the benefits and drawbacks:
Pros
- Flexible payments: “You only pay interest on the amount you borrow, which helps manage costs,” says Jeff Gennarelli, president of Forward Mortgage, a division of Mutual of Omaha Mortgage.
- Rate cut potential: “If the Fed lowers rates, your payment may decrease,” says Debbie Calixto, sales manager at mortgage lender loanDepot.
- Revolving access: With a HELOC, you can borrow, repay and borrow again. “Think of it like a credit card with much more favorable terms,” Calixto says.
Cons
- Payment uncertainty: “Your monthly payment could fluctuate with changes in the broader rate environment,” warns Gennarelli.
- Extra fees: According to Leahy, some lenders charge annual or inactivity fees that add to costs.
When a home equity loan makes sense this August
A home equity loan makes sense when you need all the money at once for a specific purpose. A good example would be “consolidating credit card debt or funding a major home repair,” says Glick.
If you’re considering a home equity loan, experts encourage weighing the trade-offs:
Pros
- Competitive rates: Home equity loans usually come with lower rates than unsecured personal loans or credit cards.
- Payment predictability: “Fixed monthly payments over the loan term can make financial planning easier,” Calixto explains.
- Rate protection: You can lock in today’s rates before potential increases due to Fed policy changes.
Cons
- Immediate costs: “You start paying interest on the full amount immediately, regardless of how you use it,” says Gennarelli.
- Higher payments: Principal and interest payments are higher than HELOC’s interest-only option during draw periods.
What to consider with HELOCs vs. home equity loans
Three factors should guide your decision between a HELOC and a home equity loan, experts say:
- Loan purpose: “If you need funds for ongoing or unpredictable expenses [such as] phased renovations or tuition, a HELOC’s flexibility is ideal,” Glick says. “For a one-time need [such as] debt consolidation or major repair, a home equity loan’s lump sum works better.”
- Risk tolerance: “Are you comfortable with a variable rate HELOC, or do you prefer the stability of a fixed rate home equity loan?” Calixto asks.
- Rate expectations: “If rates fall this year, a HELOC may be more favorable,” says Calixto. However, if inflation drives rates higher, fixed-rate protection becomes valuable.
Expert tips for securing the best home equity borrowing terms
“[Start by looking at] the annual percentage rate (APR),” Gennarelli says. This includes all fees, giving you a complete picture of what you’ll pay.
Beyond comparing APR, Glick recommends preparing your finances and shopping strategically:
- Check your financial health: A credit score of at least 680 and a debt-to-income ratio below 43% will get you the best rates.
- Compare at least three options: HELOC and home equity loan interest rates can vary by 1% to 2%. That rate gap can add up to notable savings throughout your repayment period.
- Ask about discounts: Some lenders offer rate reductions for auto-payments or meeting certain conditions.\
The bottom line
With mixed signals on Fed policy and inflation continuing into August, Calixto advises against trying to predict rate movements. Instead, choose the loan that fits your financial needs and what you can afford each month. For personalized guidance, speak with at least two to three reputable home lenders. They’ll help you compare terms and fees, and match the right product to your situation and long-term goals.
