Mortgage rates projected to drop, but not enough to justify refinancing. How homeowners can tap equity for added cash

According to Zillow, the average 30-year fixed refinancing rate as of Jan. 8 was 6.54%, and 5.65% for a 15-year term (1). Fannie Mae’s latest housing forecast projected the average 30-year fixed mortgage rates would be 6.2% in the first quarter of 2026 and decline to 5.9% by year-end (2).

Despite these projected improvements, interest rates are still higher than those seen in 2020 and 2021. The average 30-year fixed mortgage rate climbed above 6% in 2022, and it has not fallen below 6% since, per the Federal Bank of St. Louis (3).

Home prices have been on the rise. The average value of a home at the beginning of 2020 was $246,326; as of November 2025, it has risen to $359,241, according to Zillow (4). However, the aforementioned rates aren’t good news for Americans looking to refinance — and access their home’s equity — but who locked in their mortgages at lower rates.

According to Realtor.com, more than half of U.S. mortgage holders have rates of 4% or lower, while 80% have rates under 6% (5). So, the current rates aren’t an attractive prospect for the majority of American homeowners, especially considering that refinancing would also mean paying closing costs. And 15-year terms, though they have much lower rates, mean bigger monthly payments.

For homeowners who need to tap the equity in their homes, whether to pay for renovations, a child’s schooling or other needs, there are other options other than a cash-out refinance, though they all still have their own pros and cons.

Here are some of the ways you can tap your home’s equity without locking into a new, higher-interest mortgage, or borrow money at a lower interest rate than most personal loans.

A home equity loan (HEL) is a loan that uses your home as collateral. HELs have lower interest rates than other types of loans and products because it’s a secured debt, whereas personal loans and credit cards have higher interest rates because they are unsecured. This means if you’re unable to make payments on this type of loan, your home can be foreclosed on.

These loans typically have a fixed interest rate, with lenders letting you to borrow up to 80% of your home’s equity — the value of your home minus the balance left on your mortgage.

A home equity line of credit (HELOC) is another way to borrow using the equity in your home, and functions similarly to a credit card. These loans are also secured by your home, and, like HELs, if you are unable to make payments, your house can be taken as collateral.

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HELOCs typically have variable interest rates, which can become an issue when interest rates go up. There’s also an initial “draw period,” where you can take out any amount up to your limit and may only have to pay the interest on the amount borrowed. This is followed by a “repayment period,” during which you must start paying down the principal and can no longer withdraw funds. Both periods last a number of years. Beware, once the draw period ends, if you only paid the interest, payments can skyrocket.

Reverse mortgages are only available to homeowners aged 62 and older. The amount of money you can access is based on your equity, but keep in mind reverse mortgages are still a form of debt. Often lenders will pay homeowners in the form of a lump sum or monthly payments, while regularly adding interest, so your overall balance increases and your equity decreases.

Typically, the debt must be paid back upon a borrower’s death or the sale of the home. Reverse mortgages can be risky, because they may limit your ability to downsize your home or move to a care facility. And there may be no equity left if you intend to leave your home to any heirs.

Loaning to friends and family can be a way for people without strong credit to borrow money, and can mean lower interest rates than traditional lenders. However, these types of loans can lead to complications. Borrowing money from family and friends runs the risk of damaging relationships, especially if you are unable to repay the loan on time or at all.

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Zillow (1, 4); Fannie Mae (2); Federal Reserve Bank of St. Louis (3); Realtor.com (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.