HELOC pros and cons to know this May

Like any financial product or service, there are better times of the year and better economic climates than others in which homeowners should look to borrow from their home equity. With the home in question functioning as collateral in these exchanges, it’s critical that the homeowner utilize their equity strategically and in a way in which they will improve their financial health, not worsen it. Fortunately, that’s relatively simple to do right now with a home equity line of credit (HELOC).

A HELOC works as a revolving line of credit, similar to a credit card, except the financing comes from your accumulated equity. And with the average homeowner in possession of around $300,000 worth of equity right now, there’s likely plenty of financing available for most homeowners. That noted, there are some timely pros and cons to using a HELOC that prospective borrowers should familiarize themselves with if pursuing this borrowing option this May. Below, we’ll examine four to consider before applying.

Start by seeing how low of a HELOC interest rate you’d be eligible for here.

HELOC pros and cons to know this May

Here are four major pros and cons to using a HELOC this May:

Pro: A lower interest rate

At an average interest rate of just 7.94% now, HELOCs are significantly less expensive than home equity loans (averaging as high as 8.51% for 10-year loans). But they’re also cheaper than personal loans, which average around 12% now, and credit cards, which are hovering just below a record 23%. HELOCs are one of the cheapest borrowing options available right now for homeowners. And that rate has been rapidly becoming more affordable in recent months, dropping more than two full percentage points from September 2024, making it a smart and cost-effective way to tap into your home equity now.

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Con: A market-responsive rate

HELOCs have variable interest rates that will adjust monthly for borrowers. That, for most of 2025, has been a pro, but it was also a bit of a negative when rates ticked up slightly in April in response to volatile market conditions. Should those conditions continue into May or potentially worsen based on any number of factors, HELOC rates may respond accordingly, making the line of credit more expensive for borrowers. So it’s important to be aware of this potential fluidity before securing (and using) the line of credit.

Pro: Tax advantages for home projects

Have you already started your spring and summer home renovation projects? Or do you intend to do so in the weeks ahead? A HELOC may be the smartest way to do so, thanks to the interest on the product qualifying for a tax deduction if used for eligible projects. A kitchen or bathroom remodel, landscaping, and more can all qualify when borrowers go to file their tax return in 2026. This could not only boost your tax refund, but, at the same time, make concerns over HELOC rates less of a concern by knowing that you’ll ultimately apply for the deduction next spring.

Con: Unpredictability during unpredictable times

If you’re looking for a secure and predictable borrowing option in an otherwise unpredictable economic climate, a HELOC isn’t it. Interest rates here change monthly and will do so in the months to come. It’s possible that they could continue to decline, as they have for much of the last year. But it’s equally as likely that they could rise or stay where they are now, making this borrowing option difficult to predict — and that’s not something some homeowners will be comfortable with knowing that their home is collateral in these exchanges. So, acclimate yourself to the reality that there will be unpredictability during an already unpredictable economic climate and, if that’s too risky, consider the alternative of a fixed-rate home equity loan instead.

The bottom line

A HELOC could be the cost-effective solution to your financing needs this May. But it doesn’t come risk-free, either. So homeowners should take the time to familiarize themselves with these timely pros and cons to determine if it makes sense for their financial circumstances both now and in the months and years to follow. By doing their research now, before applying, prospective borrowers can better determine if this unique home equity product is right for them or if they’d be better served by exploring home equity loans or, even, cash-out refinance options as alternatives.