Evaluating the Risk of HELOCs in Today's Interest Rate Climate: Expert Opinions

As we navigate financial constraints in 2025, many homeowners are discovering a hidden asset—the equity within their homes. Utilizing a Home Equity Line of Credit (HELOC) has emerged as an appealing option to unlock this potential. HELOCs offer lower interest rates than typical credit cards, yet retain a similar level of flexibility. This makes them a potential bargain, especially as interest rates show signs of possible decline.

However, while HELOCs present attractive opportunities, they are not without risks. Are they perilous in our current economic climate? We consulted with three home equity specialists to uncover when HELOCs represent a sound choice, when they may pose risks, and what alternatives are presently available.

Expert Opinions on HELOCs: Risk vs. Reward

Karen Mayfield, the national head of originations at Multiply Mortgage, believes that the current prime rate of 7.5% and the appreciation of home values across the country suggest that HELOCs are not excessively risky at present.

According to Debbie Calixto, a sales manager at mortgage lender loanDepot, HELOCs serve as a viable substitute for costly credit card debt, especially given the upward climb of household expenses. She reinforces the notion that the pressure on household finances is palpable.

Identifying Risks and Alternatives

Steven Glick, the director of mortgage sales at HomeAbroad, presents a more nuanced perspective. He emphasizes that while HELOCs are not inherently dangerous, their risks are contingent upon individual financial situations. He warns that fluctuating economic conditions could affect these loans, as home equity loan interest rates hover below 9%.

Experts advise considering a HELOC under certain conditions, but suggest alternative solutions if a HELOC isn't suitable at this time.

When to Consider a HELOC and Other Financial Options

HELOCs provide the flexibility to tap into your home's value, ideally with a specific objective, steady financial standing, and a strategy to handle variable payments. Calixto suggests exercising caution, borrowing only what’s necessary, and evaluating how home values might shift. With strategic planning, a HELOC could effectively support your finances rather than becoming a liability.

Matt Richardson, the senior managing editor for CBS News' 'Managing Your Money' section, provides insights and edits content on various personal finance topics ranging from savings and investing to insurance.