DES MOINES HELOC RATES TODAY
Current HELOC rates in
Des Moines, IA.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Key Points
• Interest rates for a home equity line of credit in Des Moines are typically tied to the prime rate and your creditworthiness.
• HELOCs offer a revolving line of credit and typically are less costly than a personal loan.
• You’re only charged interest on the amount of the credit line that you actually use.
• You can use a HELOC for a variety of reasons, such as home improvements or consolidating debt.
• Variable interest rates can mean your monthly payment amount will change from time to time.
Introduction to HELOC Rates
This guide is designed to help you understand home equity line of credit (HELOC) rates in Des Moines, Iowa, so you can make an informed decision if you decide to apply. We’ll cover the factors that affect HELOC rates, the benefits and drawbacks of using a HELOC, and how to compare different options. Whether you’re thinking about funding a home renovation, paying off debt, or covering other large expenses, this guide will help you understand how to secure the best available deal.
What Exactly Is a HELOC?
A HELOC, or home equity line of credit, is a revolving credit line that’s secured by your home’s equity (the value of your home minus the balance of your mortgage). Typically, you’ll need at least 15% equity in your home to qualify, and you can often borrow up to 90% of that equity. Bear in mind, though, that using your home as collateral means that if you fail to make timely payments on your HELOC, a lender could foreclose. HELOCs have two main phases: a draw period and a repayment period:
The Draw Period
During the HELOC’s draw period (usually 10 years) you can use funds from the credit line in increments, as needed. You’ll have to pay interest on what you borrow, but most lenders won’t require you to pay down the principal — although you can do so if you wish to draw on the credit line again. A HELOC interest-only calculator will show you what these payments might look like.
The Repayment Period
After the draw period ends, the repayment period of between 10 and 20 years begins. Monthly payments will increase as you begin to repay the principal plus interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. You can use a HELOC monthly payment calculator to calculate what you might owe.
The Origin of HELOC Interest Rates
HELOC interest rates are tied to the prime rate, which is affected by the Federal Reserve’s actions. Each lender then adds a margin to the prime rate to determine its HELOC rate. From there, lenders take into account individual borrower factors such as credit score, debt-to-income (DTI) ratio, income, and the amount of equity in the home. Understanding these factors can help you anticipate rate fluctuations and choose the best time to apply for a HELOC.
How Interest Rates Impact HELOC Affordability
You probably know from paying your home loan that interest rates determine how much you pay each month. This is true for HELOCs as well. And even a small rate change can affect your HELOC’s affordability. Let’s say you borrow $50,000 with a HELOC and have a 10-year repayment period. If you had an interest rate of 8.00%, you’d pay $607 per month and a total of $22,797 in interest. But if you were able to wrangle an interest rate of 7.00%, your monthly payments would shrink to $581 and you’d save more than $3,000 over the repayment term. Of course, HELOCs have variable interest rates so your actual results may differ somewhat.
Recommended: HELOC vs. Home Equity Loan
HELOC Interest Rate Trends
While there’s no crystal ball that can show the future of interest rates, you may start gazing at the prime rate more frequently when you are considering a HELOC. The rate hit a low of 3.25% in 2020 and a high of 8.50% in 2023. Knowing the history of the prime rate can help put today’s interest rates into perspective. You might not be able to wait to apply until HELOC rates hit a low like they did in 2020. But you can improve your financial profile so that you qualify for the best available rate. We’ve got how-tos for you below.
| 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
Variable vs. Fixed Interest Rates
A HELOC, as we’ve noted, tends to come with a variable (also called adjustable) interest rate. But what does this mean? Typically the HELOC agreement will put some restrictions around the variability, spelling out how often the rate can adjust and by how much, and articulating an overall rate cap. You can experiment with various interest rates in an online calculator to check your comfort level with the variations you might encounter.
Helpful Tools and Calculators
Before you take the leap, consider using our online tools to get a sense of what your monthly payments and interest costs might look like. Here are three calculators you’ll find useful as you explore borrowing based on your equity.
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
If you want to secure the most competitive HELOC rate, your credit score, debt-to-income (DTI) ratio, and home equity are critically important. Lenders look for you to have at least 15% equity — though more is better. Here are some ways to help ensure your finances are up to snuff before you apply:
Improve Your Credit Score
Keeping your credit score at 700 or above is key to unlocking the best HELOC rates (though you can probably qualify for a HELOC with a score of 640). You can nudge your number north by paying your bills on time and chipping away at balances. Also review your credit report for any inaccuracies. Disputing errors ensures your score truly reflects your financial responsibility.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is a simple calculation: Divide your total monthly debt payments by your gross monthly income. Most HELOC lenders want a DTI under 50%, but for the best HELOC interest rates in Des Moines, you’ll want to get below 36%. Paying down debt (or increasing earnings) will enhance your financial profile.
Application Process for a HELOC in Des Moines
Many lenders offer online prequalification for a HELOC, which can make the application process smoother. Prequalifying online will give you a good idea of the rate, fees, and terms a lender might offer you. If you proceed to the application phase, follow this guide:
Step 1: Run the Numbers
Before you take the plunge with a HELOC, it’s wise to take a good look at your financial landscape. Start by checking your credit scores from all three major credit bureaus and calculating your debt-to-income (DTI) ratio. Then consider your home equity, which grows as you make regular mortgage payments and as your home’s value increases over time. Subtract your outstanding mortgage balance from your home’s estimated value. Then divide the answer by your home value to arrive at a percentage. As noted above, you’ll need at least 15% equity to move forward.
Step 2: Compare Lenders
Roll up your sleeves and examine different lenders’ interest rates, qualification requirements, credit line minimums and maximums, fees, and the length of the draw and repayment periods. Because each lender has its own individual terms, it’s important to review multiple offers carefully. This will help ensure you get the most competitive deal possible.
Step 3: Submit Your Application
Gather all necessary documentation: a valid form of identification, recent pay stubs, W-2 forms, and your latest tax return. If you are self-employed, lenders may additionally request a detailed profit-and-loss statement and two years of tax returns. Have your homeowners insurance declaration page at hand, too. Submit your application online, by phone, or directly in person to formally start the process.
Step 4: Get an Appraisal
An appraisal is a professional, objective opinion of your home’s value based on a detailed analysis of your home’s size, age, condition, and recent sales of similar homes. The cost of the appraisal can vary, but it usually ranges from $300 to $600. If your appraisal value comes in higher than your mortgage balance, you may be able to access that equity in the form of a higher credit limit.
Step 5: Prepare for Closing
Once you’ve been approved, before you can access your HELOC funds, you’ll need to sign the HELOC agreement and pay any closing costs. Make sure you read everything carefully. You may be able to access your credit line in as little as three days.
Recommended: Different Types of Home Equity Lending
Closing Costs and Fees
The good news is that HELOC closing costs are generally more affordable than what you encounter with a home purchase or refinance. The appraisal fee is often the most significant expense. A title search, if required, can cost between $100 and $450. You may also encounter application, origination, and administrative fees, as well as annual maintenance fees. Some lenders charge transaction, inactivity, or early termination fees. Keep in mind that while many lenders offer to reduce or even waive closing costs, they may offer a higher HELOC rate to compensate.
Tax Benefits and Considerations
HELOCs come with some fees attached, but there’s also the potential for a tax break. You can deduct the interest you pay on your HELOC on your federal taxes if you’ve used the funds to significantly improve your primary residence. The current tax guidelines for this deduction are in force through 2025. To confirm your eligibility for these deductions and keep tabs on how rules change in the future, connect with a tax advisor.
Alternatives to HELOCs
There are other ways to get equity out of your home in addition to a HELOC, and a personal loan — which doesn’t involve your home equity — is also an option. If you’re on the fence about a HELOC or just want to cover all your bases, here’s the lowdown:
Home Equity Loan
A home equity loan provides you with a lump sum of cash upfront and sets you up with a fixed interest rate to pay it back. You can usually tap into up to 85% of your home’s equity with this type of loan and a home equity loan calculator can give you a preview of your borrowing power. Lenders will be looking for a credit score of around 680, but 700 and above is often the sweet spot. You’ll begin making monthly principal-plus-interest payments on this loan immediately.
Cash-Out Refinance
A cash-out mortgage refinance lets you refinance for more than you currently owe and pocket the difference. This option is handy for those who need a substantial sum upfront, provided current interest rates are more attractive than the rate on their existing loan. A credit score of 620 or higher and a debt-to-income ratio under 43% are needed. In the cash-out refinance vs. home equity line of credit comparison, note that with a refi, you can have a fixed or variable rate.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a period of two to seven years. The key perk here is that your home is not at risk of foreclosure. Most lenders look for a credit score of 610 or higher when considering a personal loan application. While the process of securing a personal loan is often swift, the interest rates may be higher than those for HELOCs or home equity loans.
The Takeaway
As you mull over a HELOC, consider its pros and cons. These lines of credit provide flexibility and potentially lower interest rates than personal loans, but remember, your home is on the line if you don’t make payments. Compare HELOC rates in Des Moines with rates and terms on other options like cash-out refinancing and personal loans to find what best suits your financial needs.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
FAQ
What’s the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 HELOC can vary greatly depending on the interest rate and the repayment period. During the draw period, you may only need to pay interest on the amount you’ve borrowed, which isn’t necessarily going to be the full $100,000. If you did use the entire credit line of $100,000, your interest rate for repayment would likely be a variable one. But at an average of 8.00% and a repayment term of 20 years, you would pay $836 per month.
What are the benefits of a HELOC?
HELOCs have some impressive perks. You can use the funds for just about anything, enjoy a revolving credit line during the draw period, and only pay interest on what you borrow during this time. The interest you pay may be tax-deductible as well.
Do you need an appraisal for a HELOC?
An appraisal is typically required for a HELOC. This step is crucial as it determines your home’s current market value, which in turn helps to calculate the amount of equity you can borrow against. Getting a professional appraisal according to your lender’s instruction is key to securing the best HELOC terms.
Will a HELOC affect my credit score?
Opening a HELOC can have an impact on your credit score. When you apply for a HELOC, the lender will perform a hard credit inquiry, which can cause a temporary dip in your score. After you open the HELOC, how you manage it will determine whether it helps or hurts your credit score. Making on-time payments can help your score, while missing payments can hurt it. The amount of your credit limit that you use (so-called credit utilization) is an important factor in your credit score as well. To help maintain a healthy credit score, keep your credit utilization low.
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SOHL-Q225-440
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