Best financial moves to make: Home equity

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With the Fed standing pat on short-term rates, what are the smart moves for you to make?

Home equity loans:
Home equity loan rates tend to follow the prime rate, though rates on longer-term loans (those with terms of 10 years or 15 years, for instance) behave more like long-term, fixed-rate mortgage rates.

In’s weekly rate survey, home equity loans had an average rate of 7.30 percent Sept. 10, up slightly from the 7.23 percent average rate recorded the day after the Fed’s last meeting on Aug. 12. That day, the Fed kept short-term rates steady.

Best move now:
You should always comparison-shop for loans, and that’s the case now. Members of the Fed’s rate-setting committee have hinted that they won’t raise rates for several months. Don’t time your home equity loan based on guesswork about what the Fed might do. If you need to get a home equity loan, go ahead.

Bankrate’s home equity loan search engine to find the best rates in your area. You’ll find the lowest rates on the shortest-term loans (say, three to five years).

Home equity lines of credit:
Most equity lines of credit feature variable rates and payments tied to the prime rate, which moves up and down with Fed rate actions. Rates for equity lines of credit averaged 4.55 percent Sept. 10.
Search for the best HELOC rate in your area.

Best move now:
Rates for home equity lines of credit won’t rise for months. If you want to tap your home’s equity periodically — to pay for a series of home improvements, or for college tuition — a HELOC is a fine choice.

Search for the best HELOC rate in your area.