CALIFORNIA HELOC RATES TODAY
Current HELOC rates in
California.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Compare HELOC rates in California.
Key Points
• Comparing offers from various lenders is crucial to finding the best home equity line of credit (HELOC) rates in California.
• Factors such as home equity, credit score, and income stability influence HELOC rates offered in California.
• HELOCs have two phases: draw and repayment, with variable interest rates.
• Understanding the prime rate and economic factors may help borrowers anticipate fluctuations in California HELOC rates.
• Maintaining a high credit score and low debt-to-income ratio improves eligibility.
Introduction to HELOC Rates
Congratulations. If you’re looking at rates for a home equity line of credit (HELOC) in California, then chances are you’ve been making your home loan payments and building up equity in your home. Now it’s time to see what rate and terms you might qualify for.
But first: Use this guide to understand the underlying factors that influence HELOC rates and choose the best offer for your personal financial needs. You’ll come away knowing what drives rates in California and how to put your best foot forward with a prospective lender. We’ll even take you step by step through the application process. And because a HELOC is just one way to get equity out of your home, we’ll also explain alternatives to HELOCs.
Ready to maximize your borrowing potential and achieve your financial objectives? Let’s start at the very beginning.
What Is a HELOC?
A HELOC is a revolving credit line with your home as collateral. The amount of your credit line will depend on your home’s value and your mortgage balance. Qualified borrowers are often able to borrow as much as 90% of their equity with a HELOC. You can borrow, repay, and borrow again against the credit line.
HELOCs have two phases: draw and repayment. It’s important to understand them both.
The Draw Period
During the draw period of a HELOC, usually lasting 10 years, you can access funds up to your credit limit. Payments during this period are typically interest-only, with principal payments being optional. If you do pay down the principal, you can borrow against the full credit line again. Using a HELOC monthly payment calculator can help you manage your finances effectively during this phase.
The Repayment Period
The repayment period of a HELOC typically lasts 10 to 20 years, during which borrowing ends and the principal is paid back with interest. Interest rates are usually variable, making monthly repayment amounts somewhat unpredictable. A HELOC repayment calculator can show you what your monthly payments would be at various interest rates.
Where Do HELOC Interest Rates Come From?
HELOC interest rates are variable and can change over the life of the credit line. But they are influenced by the prime rate, which is the rate banks and other lenders charge customers deemed to be at lowest risk of default. Lenders look to Federal Reserve rates when setting the prime rate.
How Interest Rates Impact HELOC Affordability
As you might imagine, interest rates can have a significant impact on the affordability of a HELOC. When the time comes to repay a $60,000 HELOC, having an interest rate of 6.00% over a 20-year term would mean a monthly payment of $430. An interest rate of 7.00% would equal a payment of $465. And over the entire term, the customer with the 7.00% rate would pay an additional $8,477 in interest. The more you borrow and the higher the interest rate, the larger these numbers become.
HELOC Interest Rate Trends
As we’ve seen, HELOC rates are tied to the prime interest rate set by banks and other lenders. Getting to know the history of the average prime rate (shown in the chart and graphic below) can help you understand where current HELOC rates in California fall on the spectrum.
Since 2018, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023. These fluctuations can have a direct and significant impact on HELOC vs. home equity loan considerations, in part because while HELOC rates are variable, home equity loan rates are usually fixed (more on that below).
Historical Prime Interest Rate
| 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
The prime rate is important, but it’s not the only thing influencing HELOC interest rates in California. Several key factors specific to the individual borrower come into play, and understanding them can help you improve your chances of securing the most favorable rates for your loan or line of credit.
Home Equity
Having a significant amount of equity in your residential property makes you a less risky prospect for lenders, potentially resulting in reduced interest rates. Homeowners typically need a minimum of 15% to 20% equity to qualify for a HELOC.
Credit Score
When it comes to securing a favorable interest rate for a HELOC, maintaining a credit score of 680 or higher is paramount. In fact, many lenders prefer a credit score of 700 or above.
Stable Income
Lenders scrutinize your income to evaluate your ability to repay the HELOC, so stability is important.
Loan-to-Value Ratio
Most lenders require your combined loan-to-value ratio (CLTV) to be 90% or less. To compute your CLTV, add your existing mortgage balance to the desired amount of your HELOC and divide by your appraised home value. Here’s an example:
A homeowner’s property is worth $500,000. They owe $300,000 on their mortgage and they want a $120,000 HELOC.
$300,000 + $120,000 = $420,000
$420,000 / $500,000 = .84 (which is 84% CLTV)
Variable vs Fixed Interest Rates
As noted above, HELOCs are characterized by variable interest rates, which are subject to change over the course of the loan’s duration. Initially, variable interest rates are lower compared to fixed rates, but they can increase or decrease in accordance with prevailing market conditions. Consequently, these fluctuations have an impact on your HELOC rates within the state of California.
Tools & Calculators
Online calculators can be useful as you prepare to borrow against your home’s equity, helping you get a handle on how much you might be able to borrow and what monthly payments might look like. You can even plug in different interest rates to see how having a variable-rate loan might change your monthly bills. Here are three of our favorite calculators:
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
To be eligible for competitive HELOC rates in California, it is imperative to focus on improving your credit score, maintaining a steady source of income, and ensuring that your loan-to-value ratio remains low. These factors play a pivotal role in determining your eligibility for more favorable HELOC offers, as they provide lenders with a comprehensive assessment of your financial situation and creditworthiness.
Take Good Care of Your Credit Score
By maintaining timely payments and reducing credit card balances, you can significantly enhance your credit score, which is important to securing more favorable HELOC rates in the state of California. A higher credit score substantially increases your chances of qualifying for more advantageous HELOC options, providing you with greater financial flexibility and opportunities.
Assess Your Home Equity
The initial action for a HELOC application is to assess your home equity. Regular mortgage payments help in building home equity over time. Home equity can be enhanced through renovations that boost the property’s value. Increased home equity can lead to better terms and higher amounts when applying for a home equity line of credit.
Calculate Your Debt-to-Income Ratio (DTI)
Your debt-to-income (DTI) ratio, calculated by dividing your monthly debt payments by your gross monthly income, serves as a good indicator in home equity lending. Typically, home equity lenders prefer a DTI below 50%, but an even lower DTI is generally more favorable.
Application Process for a HELOC in California
The application process for a HELOC in California involves a series of steps to demonstrate your financial fortitude. Do them correctly and you have the best chance of obtaining your optimal HELOC rate.
The process of applying for a HELOC, from application through closing, can take 30 to 60 days:
Step 1. Run the numbers.
Check your credit score, calculate your DTI ratio, and use an online estimate of your home’s value to make sure you have at least 15% home equity before applying for a HELOC.
Step 2. Compare lenders.
Visit lender sites or check in with your bank’s mortgage officer to compare loan qualification requirements, minimums and maximums, fees, the length of the draw and repayment periods. Some lenders offer more competitive rates and benefits like discounts for automatic payments or remote closing. This ensures an informed decision.
Step 3: Gather your documents.
You’ll need to have a government-issued I.D. and proof of income (recent pay stubs, W-2 forms, and a recent tax return) at hand for the application process. If you’re self-employed, lenders may ask for a profit-and-loss statement and two years’ tax returns. Lenders also typically require a homeowners insurance declaration page as part of the property documentation so make sure your insurance on your home is up to date. Having these documents ready can expedite the application process and help you secure the best HELOC rates in California.
Step 4: Submit your application.
Submitting your HELOC application online or in person is the next step. Submitting a complete and accurate application increases your chances of approval and helps you secure competitive HELOC rates in California.
Step 5: Get an appraisal.
After you submit your application, a home appraisal is typically required. This might be an in-person appraisal, or a lender may use an automated valuation model (AVM) appraisal, where an algorithm uses existing data to compute a home’s estimated value. The appraisal helps determine the amount of equity you have in your home, which affects the HELOC rate you’ll qualify for. A higher appraisal value can lead to a larger line of credit.
Step 6: Prepare for closing.
Once you find a HELOC offer at a comfortable interest rate and with terms you consider favorable, you’re ready to close on the loan agreement. Before accessing your HELOC funds, you’ll sign loan documents and pay necessary fees. Lenders can make funds available as quickly as three days following the closing of the HELOC. Ensuring all paperwork is in order and fees are paid promptly helps you access your funds quickly and efficiently.
Tax Benefits and Considerations
Homeowners can deduct interest paid on a HELOC if the borrowed funds are used for buying, building, or significantly improving their primary residence. Deductions are limited to interest on the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). To take this deduction, you’ll need to itemize deductions on your tax return; consult a tax advisor for help.
Closing Costs and Fees
HELOC closing costs are lower than home-buying or cash-out refinance costs. An appraisal fee, ranging from $300 to $600, is often the highest expense. Other costs include application, loan origination, and administrative fees. Some lenders charge annual maintenance fees, transaction fees, inactivity fees, or early termination fees.
Alternatives to HELOCs
HELOCs aren’t the only way to take advantage of your hard-earned home equity. By understanding the types of home equity loans and California HELOC and home equity loan rates, individuals can make smart decisions and be prepared for any potential fluctuations in the market.
Home equity loans, cash-out refinancing (a special type of mortgage refinance), and personal loans are other financing options. Let’s take a closer look:
Home Equity Loan
It’s important to understand both what is a HELOC and what is a home equity loan when you’re thinking about borrowing. Home equity loans offer a lump-sum loan at a fixed interest rate. Borrowers can typically access up to 85% of their home’s equity (minus any existing loan balance). Home equity loans are well suited to large, one-time expenses, such as a renovation or debt consolidation. As with a HELOC, you can use a calculator to determine your borrowing capacity. Comparing both options highlights their differences and benefits. Here’s a quick look at the two:
| 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. |
Cash-Out Refinance
A cash-out refinance lets homeowners borrow against their home equity by refinancing for more than they owe. They can pay off their initial loan and are then left with a lump sum to use as they wish. As you compare a cash-out refinance vs a home equity line of credit or home equity loan, remember that a refi gets you an entirely new mortgage — and a new interest rate. If you have a sweet rate on your current mortgage, refinancing might not be the best bet. Do the math to compare costs before you decide what suits your overall home loan strategy.
Personal Loan
Personal loans, like home equity loans, can be used to cover a wide range of expenses. However the repayment term tends to be shorter: 2 to 7 years. Personal loan interest rates are also often higher than interest rates for HELOCs or home equity loans. The upside is that personal loans are unsecured — your home is not used as collateral. Because of that a personal loan won’t require a home appraisal, and the loan approval process may be quicker as a result.
Credit Cards
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. When considering types of home equity loans, it’s important to note that a home equity loan or HELOC can offer a lower rate and more flexible repayment terms compared to credit cards.
The Takeaway
When researching HELOCs, it’s essential to compare HELOC rates in California to find the option that delivers the lowest interest rate and lowest overall costs. There are alternatives to a HELOC, but for many borrowers, HELOCs offer unparalleled flexibility, since you can borrow (and pay interest on) only the amount you need at any given time.
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?
To determine the monthly payment on a $50,000 HELOC, you can utilize a HELOC monthly payment calculator which will take into consideration your interest rate and loan term. For example, if you borrow the max on a $50,000 credit line at an interest rate of 7.5% and a term of 20 years, your monthly payment would be $403.
Is a HELOC a good idea right now?
Deciding if a home equity line of credit (HELOC) is a sound financial move hinges on your specific financial circumstances. A HELOC is a very flexible way to borrow because you only borrow what you need at any given moment, up to your approved credit line. This means you don’t pay interest on the portion of the credit line you aren’t using. However HELOCs typically have a variable interest rate. So if you crave a steady monthly payment amount a home equity loan might be more your speed.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 HELOC will depend on how much of the credit line you have used to date. If you have used only $30,000 of your $100,000 limit, the payment might be just a few hundred dollars. On the other hand, if you have used the entire $100,000 credit line and are paying 8.00% interest over 20 years, your monthly payment would be $836.
What are the benefits of a HELOC?
A home equity line of credit is a very flexible way to borrow. You only withdraw the amount of the credit line that you need at any given time. (So you only pay interest on the amount you have borrowed.) Because they are secured by your property, HELOCs also typically have a lower interest rate than a personal loan or credit card. You can use the funds borrowed via a HELOC for just about anything. And for many borrowers, having an open credit loan is a financial security blanket in the event of unexpected expenses, such as a costly home repair.
Do you need an appraisal for a HELOC?
Yes, an appraisal is customarily required for a home equity line of credit. It accurately determines the value of your home which in turn determines your eligibility to borrow and your maximum loan amount.
What disqualifies you from getting a home equity loan?
A poor credit history, insufficient home equity, and a high debt-to-income ratio can all make you ineligible for a home equity loan.
How difficult is it to get a HELOC?
Assuming you have your financial life in order and can easily amass all the necessary documents (tax returns, pay stub, etc) and that you meet the qualifications of a lender, it shouldn’t be hard to get a HELOC. The entire process can take anywhere from one to two months and will move more quickly if you are organized, swiftly arrange access for the appraiser (if a home visit is required), and efficiently make a decision about which lender to utilize.
Does HELOC affect credit score?
Yes, obtaining a home equity line of credit can have an impact on your credit score. Applying for a HELOC entails a hard inquiry, which may cause a temporary reduction in your score. Furthermore, your credit score is influenced by how you manage your debts, including making consistent and punctual payments. If you are good about making your payments, you shouldn’t have anything to worry about.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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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