ARIZONA HELOC RATES TODAY
Current HELOC rates in
Arizona.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
Turn your home equity into cash. Call us for a complimentary consultation or get prequalified online.
Compare HELOC rates in Arizona.
Key Points
• When comparing HELOC rates in Arizona, also consider the lender’s fees, terms, closing costs, and customer reviews.
• Understanding the prime rate and economic factors can help anticipate fluctuations in Arizona HELOC rates.
• Arizona HELOC rates are influenced by borrower factors such as home equity, credit score, income, and combined loan-to-value ratio.
• A HELOC has two phases, draw and repayment, and variable interest rates that can impact affordability.
• Maintaining a strong credit score, steady income, and healthy debt-to-income ratio is essential for securing the best Arizona HELOC rates.
• The HELOC application process involves evaluating financial data, comparing lenders, and preparing required documentation to secure favorable terms.
Introduction to HELOC Rates
Use this guide to get a comprehensive overview of Arizona HELOC interest rates. We’ll help you understand your options for how to get equity out of your home. Learn how to run the numbers to determine your equity position, maximum loan amount, and expected monthly payment. And of course, you’ll find out about all the factors that influence interest rates and how you can snag the best available deal.
To begin, what is a home equity line of credit, anyway?
What Is a HELOC?
A HELOC is a revolving credit line (similar to a credit card) secured by your home equity. That means interest rates are generally lower than unsecured personal loans because the home serves as collateral. You can borrow up to 85% of your home’s value, minus your mortgage balance. One notable characteristic of HELOCs is its variable interest rate, which can rise and fall with the market.
A HELOC has two phases: draw and repayment.
The Draw Period
During the HELOC draw period, which usually lasts 10 years, you are able to access funds up to the credit limit you’ve been approved for, make payments, and borrow again (thus the “revolving” part). Interest payments are usually required during this period, while principal payments can be deferred. This flexibility offers you the ability to manage your financial affairs in a way that aligns with your needs.
The Repayment Period
During the repayment period, which typically lasts 10 to 20 years, borrowing ends, and you pay back the principal with interest. You pay interest only on the amount borrowed. However, variable interest rates can fluctuate, making repayment unpredictable and potentially more expensive over time.
Because many people seem confused about the differences between HELOCs vs. home equity loans, here’s a comparison chart that boils it down quickly.
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment. |
| Disbursement | Charge only the amount you need. | Lump sum. |
Where Do HELOC Interest Rates Come From?
HELOC interest rates are tied to the prime rate, which is the benchmark rate that banks charge their most creditworthy customers, and influenced by economic and housing market factors. Federal Reserve policy decisions also impact HELOC rates. Understanding these factors can help you anticipate rate fluctuations and make informed decisions about the best time for a HELOC.
How Interest Rates Impact HELOC Affordability
Interest rates can have a profound impact on the affordability of HELOCs. We know that a 1% increase in interest rate will result in a higher monthly payment. But what’s really staggering is the total interest you’ll pay over the life of the loan: For a $100,000 HELOC with a 20-year repayment term, the difference between a 7.00% and 8.00% rate means paying an additional $14,674. This underlines the importance of securing the most favorable rate possible.
HELOC Interest Rate Trends
HELOC rates closely track the prime interest rate trends. Shifts and fluctuations in the prime rate serve as reliable indicators of the trajectory of HELOC rates. By monitoring these trends, homeowners can formulate their own financial strategy and secure HELOC terms that align with their long-term objectives. For homeowners in Arizona, you can ensure you are getting the most competitive offers available in your region.
Historical Prime Interest Rate
Since 2018, the prime rate has experienced notable fluctuations, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Below the table, the chart shows a longer view of the prime rate over the last few years. As you can see, the prime rate has rarely dropped below 4.00% or risen above 10.00%.
| Date | U.S. Rate |
|---|---|
| 9/19/2024 | 8.00% |
| 7/27/2023 | 8.50% |
| 5/4/2023 | 8.25% |
| 3/23/2023 | 8.00% |
| 2/2/2023 | 7.75% |
| 12/15/2022 | 7.50% |
| 11/3/2022 | 7.00% |
| 9/22/2022 | 6.25% |
| 7/28/2022 | 5.50% |
| 6/16/2022 | 4.75% |
| 5/5/2022 | 4.00% |
| 3/17/2022 | 3.50% |
| 3/16/2020 | 3.25% |
| 3/4/2020 | 4.25% |
| 10/31/2019 | 4.75% |
| 9/19/2019 | 5.00% |
| 8/1/2019 | 5.25% |
| 12/20/2018 | 5.5% |
| 9/27/2018 | 5.25% |
Source: U.S. Federal Reserve
Historical U.S. Prime Rates
Factors Influencing HELOC Rates
Since 2018, the prime rate has experienced notable fluctuations, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Below the table, the chart shows a longer view of the prime rate over the last few years. As you can see, the prime rate has rarely dropped below 4.00% or risen above 10.00%.
Home Equity
Home equity is the amount of your home that you actually own. Subtract your mortgage balance from the market value of your property, and that’s your equity position. Typically, homeowners need to have a minimum of 15% equity in their property to be eligible for a HELOC. Having a significant amount of equity in your home improves your financial standing in the eyes of lenders, potentially resulting in lower interest rates.
Credit Score
To get approved for a HELOCm you’ll need to maintain a credit score of 680 or higher. And some lenders prefer a credit score over 700. It is a well-known fact that a higher credit score can unlock access to a broader range of financial products and services, potentially leading to improved overall financial well-being.
Stable Income
Lenders assess your income to determine your ability to repay the HELOC. We’re not just talking about the dollar amount of your salary. A stable income indicates a lower risk of default. That means consistent employment in the same job over the years can be just as important as how much you make. Income stability is a key component in the lender’s evaluation process.
Loan-to-Value Ratio
Most lenders require your combined loan-to-value ratio (your mortgage balance plus desired HELOC, divided by your appraised home value) to be 85% or less, although some will allow you to borrow 100% of your home’s value. The ratio is a key metric in determining your credit limit.
If your home value is $500,000, your mortgage balance is $300,000, and your HELOC balance is $100,000, then your CLTV ratio is 80%. Understanding your loan-to-value ratio is essential for planning your HELOC application.
Variable vs Fixed Interest Rates
As we’ve mentioned already, HELOCs are characterized by variable interest rates, which are subject to change over the course of the loan period. These rates initially are lower than traditional fixed rates but are susceptible to adjustments based on market conditions. Understanding the distinction between variable and fixed interest rates is crucial in making an informed decision regarding your HELOC.
Tools & Calculators
Valuable online tools can assist in approximating your payments and the total interest you’ll pay on your HELOC. Here are three of our favorites, including a HELOC interest-only calculator, for determining payments during the draw period, and a HELOC repayment calculator, to calculate the higher monthly costs during your repayment period.
Run the numbers on your HELOC.
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Home Equity Loan Calculator
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment Calculator
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only Calculator
Use SoFI’s HELOC interest calculator to estimate how much monthly interest you’ll pay .
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
How to Qualify for a Competitive HELOC Rate
This is your checklist for getting a competitive HELOC rate. These factors are scrutinized by lenders when determining your eligibility and the interest rate offered. Improving your financial standing can significantly enhance your chances of securing different types of home equity loans and lines of credit.
Cultivate Your Credit Score
When you applied for your home loan, your credit score did most of the talking. A HELOC is a similar situation. To build your credit score over time, always pay your bills on time and reduce your credit card balances. Regularly reviewing your credit report and addressing any errors can also help your score.
Assess Your Home Equity
Regular mortgage payments help in building home equity. Renovations that boost the property’s value also enhance your equity. If your home equity is still in the single digits or teens, you may have trouble getting approved for a HELOC.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is how much you owe in monthly debt payments (student loans, car loan, personal loan) divided by your gross monthly income. Home equity lenders generally look for a DTI that’s below 36%, but some will allow up to 50%. Calculating your DTI ratio is an important step in determining your eligibility for a HELOC and securing favorable terms.
Application Process for a HELOC in Arizona
The HELOC application process in Arizona consists of several key steps. A clear understanding of this process encourages a smooth and successful HELOC application journey.
Step 1. Run the numbers.
Check your credit scores, calculate your DTI, and get a good estimate of your home equity before you apply for a HELOC. Some lenders allow borrowers to prequalify for a HELOC online, streamlining the application process.
Step 2. Compare lenders.
Compare interest rates from multiple lenders, but also compare their qualification requirements, loan minimums and maximums, fees, and the length of the draw and repayment periods they’re offering.
Step 3: Gather your documents.
Gathering the necessary paperwork (even if it’s digital) is a crucial step in the HELOC application process. Typically, you will need to provide proof of income, such as pay stubs or tax returns, as well as documentation of your home’s value and your current mortgage balance. Additionally, lenders may require a copy of your homeowner’s insurance policy and a list of your current debts and assets.
If you’re self-employed, lenders may ask for a profit-and-loss statement and two years’ tax returns. Having all these documents ready can streamline the application process and increase your chances of securing a competitive HELOC rate.
Step 4: Submit your application.
Submitting your HELOC application can take place online, by phone, or in person. Many lenders offer online application portals, making the process convenient and efficient. Alternatively, you can submit your application by phone or in person at a local branch.
Step 5: Get an appraisal.
After you submit your application, the lender will schedule a home appraisal to determine the current value of your property. If your home appraises for more than your outstanding mortgage balance, the lender may approve you for a line of credit. The appraisal process typically takes a few weeks.
Step 6: Prepare for closing.
Before accessing your HELOC funds, you must sign loan documents and pay necessary fees. Some lenders make funds available within three days following closing. Make sure you understand all the terms and conditions of the loan before signing.
Tax Benefits and Considerations
Homeowners may deduct HELOC interest if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the HELOC principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor is recommended to navigate the specific tax implications and confirm eligibility for deductions.How Much Does a HELOC Cost?
HELOC closing costs are lower than those for buying a home or mortgage refinance. The appraisal fee, ranging from $150 to $500, is usually the highest expense. Other costs may include an application, loan origination, and administrative fees. Some lenders charge annual maintenance, transaction, inactivity, or early termination fees. Be aware that reduced or waived closing costs may come with a higher interest rate.
Alternatives to HELOCs
Other financing options besides HELOCs include home equity loans, cash-out refinancing, and personal loans. Each option has its own advantages and considerations. It’s important to have at least a loose understanding of each of these options in order to make the best decision for your situation.
Home Equity Loan
Above, we talked a little about what is a home equity loan?. Unlike HELOCs, home equity loans provide a lump sum amount and are paid back at a fixed interest rate. Borrowers can usually access up to 85% of the equity built in their home through a home equity loan. This option is suitable for those who need a specific amount of money for a one-time expense, such as a home renovation or debt consolidation.
Cash-Out Refinance
A cash-out refinance allows homeowners to tap into their home equity by refinancing their existing mortgage for more than they owe and taking the difference in cash. Accessing up to 85% of a home’s value is common. For more information, check out our cash-out refinance vs a home equity line of credit comparison article.
Personal Loan
A personal loan is an unsecured loan that you pay back in regular monthly payments over a term of 2-7 years. They do not require collateral, making them a suitable option for those who do not want to risk their home equity or don’t have that much equity build up. The downside is that personal loan interest rates are significantly higher than home equity rates.
Credit Cards
Credit cards and HELOCs are both forms of revolving debt. Instead of receiving a lump sum, you get access to a credit line that you tap and repay as needed. Credit cards typically come with higher interest rates than HELOCs, which can make them much more expensive if you carry a large balance from month to month. While credit cards offer convenience and rewards, they are generally not recommended for large, long-term expenses.
The Takeaway
When seeking the best Arizona HELOC rates, consider both online and local institutions and get prequalified with multiple lenders to compare offers. You’ll need to get your financial house in order and run the numbers before applying: Cultivate your credit score, pay down your credit cards, and check your credit report for errors (and fix them). If you do your homework, you should be able to leverage your hard-won home equity into a financial tool that helps you achieve your long-term goals.
SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.
FAQ
What is the monthly payment on a $50,000 HELOC?
The monthly payment for a $50,000 home equity line of credit hinges on the interest rate and repayment term. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $1,213. With a 7.00% rate and a 15-year term, your payment is $899 — but you’ll pay more in interest over the life of the loan, even with the lower rate.
Is a HELOC a good idea right now?
A home equity line of credit, or HELOC, can be a sensible financial move if you require extra funds for home improvement projects, debt consolidation, or other unforeseen expenses. However, homeowners should thoroughly evaluate their financial situation and the current interest rate environment before making a decision.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 home equity line of credit, also known as a HELOC, varies based on several factors, including the interest rate and repayment period. But assuming you draw the full amount, secure a 7.00% interest rate, and choose a 20-year repayment term, your monthly payment should be about $836.
What are the benefits of a HELOC?
HELOCs offer several noteworthy advantages, including the flexibility to access funds as needed, potential tax benefits, and generally lower interest rates compared to other types of loans. They can be used for a wide range of purposes, such as home renovations, college expenses, and debt consolidation.
Do you need an appraisal for a HELOC?
Absolutely, a home appraisal is a requirement when applying for a HELOC. The appraisal serves the important purpose of determining the value of your home, which directly impacts the maximum loan amount you are eligible to borrow. However, the appraisal can be done through a licensed professional or an automated valuation model (AMV), which uses algorithms to determine a property’s value.
What disqualifies you from getting a home equity loan?
A poor credit history, insufficient home equity, or an unstable income source can disqualify you from obtaining a home equity line of credit (HELOC).
How difficult is it to get a HELOC?
The level of difficulty associated with obtaining a HELOC is directly influenced by your financial circumstances. Lenders evaluate various factors, including your credit score, the amount of equity you have in your home, and your income level. By implementing strategies to improve these metrics, you can significantly enhance your chances of qualifying for a HELOC.
Does HELOC affect credit score?
A HELOC can have an impact on your credit score. When you apply for a HELOC, it triggers a hard inquiry, which can cause a temporary decrease in your score. Furthermore, the manner in which you manage your HELOC payments over time can also influence your credit score. This is because your payment history and credit utilization ratio are both important factors in determining your credit score.
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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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More HELOC resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare