FRANKLIN HELOC RATES TODAY
Current HELOC rates in
Franklin, TN.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Key Points
• Home equity line of credit interest rates in Franklin are influenced by the prime rate and the borrower’s financial profile.
• HELOCs offer a revolving line of credit, with interest charged only on the amount borrowed.
• HELOCs can be used for home renovations, debt consolidation, and major purchases.
• You may be able to deduct the interest from your HELOC on your federal taxes if you use it for eligible expenses.
• Compare offers from multiple lenders to find terms that work for you.
Introduction to HELOC Rates
This article will give you a comprehensive understanding of HELOC rates in Franklin, Tennessee. We’ll cover how to compare rates from different lenders, as well as how to make sure you’re getting a competitive deal. You’ll also learn about the different factors that can influence your HELOC rate. Finally, we’ll cover some of the advantages and potential risks of taking out a HELOC, and discuss some alternative financing options that might be available to you.
What Is a HELOC?
In order to make decisions about borrowing, it’s helpful to understand what a home equity line of credit is in the first place. A HELOC is a credit line that leverages your home equity (the value of your home less the amount you still owe on your home loan) as collateral. Your equity is the difference between your home’s current value and the outstanding mortgage balance. Once you qualify with at least 15% equity, you can borrow up to 90% of that equity. HELOCs typically have a draw period followed by a repayment period:
The Draw Period
During the HELOC draw period (usually 10 years), you can access funds in increments, as needed. During this time, you’ll need 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. Use a HELOC interest-only calculator to help you compute what you might owe during this phase.
The Repayment Period
When the draw period is over, a repayment period of 10 to 20 years begins. Monthly payments will increase because you’ll be paying back both the principal and interest. HELOC interest rates are usually variable, which means the amount you pay each month can fluctuate as rates change. You can refer to a HELOC monthly payment calculator during this phase in the HELOC process.
Recommended: Different Types of Home Equity Lending
Where Do HELOC Interest Rates Come From?
HELOC interest rates and those for different types of home equity loans are typically set based on the prime rate, which is greatly influenced by Federal Reserve policies. Each lender then adds its own margin to the prime rate, creating the variety of HELOC rates you see. Your personal financial factors, such as credit score, income, and the amount of equity in your home, will also factor into the rate you’re offered. Understanding these factors can help you anticipate rate fluctuations and figure out when to apply for a HELOC.
How Interest Rates Impact HELOC Affordability
The interest rate on your HELOC is a critical factor in determining affordability. For instance, let’s say you have a $50,000 HELOC with a 15-year repayment period at 8.50%. During the repayment phase, your monthly payment is approximately $492, with a total interest cost of $38,626. For that same scenario at 9.50%, the monthly payment increases to $522, with a total interest cost of $43,980. You can see a higher interest rate can incur quite a bit of additional interest over time.
Variable vs. Fixed Interest Rates
HELOCs often come with variable interest rates, which can change with the market. These rates usually begin lower than fixed rates, which can be appealing. But it’s important to know that your monthly payments will fluctuate. If the prime rate goes up, your HELOC rate will follow, and you can end up paying more. Of course, if the prime rate goes down, the lack of a fixed rate could work in your favor.
HELOC Interest Rate Trends
Keeping an eye on the prime interest rate can give a better sense of where HELOC rates are headed in Franklin. Since 2018, the prime rate has seen its ups and downs, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023. By reviewing this historical data, you can better anticipate potential HELOC rate changes, empowering you to devise a borrowing strategy that suits your needs.
| 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
Helpful Tools & Calculators
Before you apply for a HELOC, use our online tools to help estimate your monthly payments and interest costs. A HELOC payment calculator and HELOC interest-only calculator can help you get a better sense of what you might expect to pay. You can also use a home equity loan calculator to compare different loan options. These tools can help you understand the impact of interest rates on your budget.
Run the numbers on your HELOC.
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Home Equity Loan
CalculatorEnter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment
CalculatorPunch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only
CalculatorUse 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 land a stellar HELOC rate, you’ve got to check a few boxes. Lenders typically look for at least 15% equity in your home, and more is better. Here are two more ways to help set yourself up for more favorable terms and rates.
Improve Your Credit Score
To land a competitive rate, many lenders look for a 700 or higher credit score. If you’re not quite at that level, you can improve your credit score by making timely payments and reducing overall credit card balances. Look closely at your credit report and check for errors. If you spot any, dispute them right away.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is a simple calculation where you divide your monthly debt payments by your gross monthly income. To boost your chances of landing a competitive rate, most HELOC lenders favor a DTI below 36%, and the lower, the better. To improve your DTI, consider paying off some debts or finding ways to increase your income.
Application Process for a HELOC in Franklin
The application process for a HELOC in Franklin is straightforward, especially if you prequalify. This preliminary step lets you view the rate you might qualify for. If you decide to move forward with the full application, gather your necessary paperwork and follow this process:
Step 1: Run the Numbers
Check your credit scores and calculate your DTI. Then take a look at your home equity by subtracting your outstanding mortgage balance from your home’s current market value. This is the amount of your home that you own, and it grows as you make regular mortgage payments and as your home’s value appreciates. Also, improvements that increase your home value can boost your home equity.
Step 2: Compare Lenders
Look for competitive rates by comparing lenders, and take a close look at the requirements for each offer. Pay attention to loan minimums and maximums, fees, and the length of the draw and repayment periods. Other factors to consider include lender fees and prepayment penalties.
Step 3: Submit Your Application
At this point, you’ll need to round up your ID, proof of income, and property details. For income verification, it’s usually your latest pay stubs, W-2s, and tax returns. If you’re self-employed, grab your latest profit-and-loss statements and a few years’ worth of tax returns. Property details usually mean a homeowners insurance declaration page. Then you can submit your application online, over the phone, or in person at a local branch.
Step 4: Get an Appraisal
An appraisal is an unbiased evaluation of your home’s worth. The typical cost is between $300 and $600. If the appraised value is higher than your mortgage balance, you may be eligible for a HELOC. A precise appraisal is key to understanding the maximum amount you can borrow and the loan terms so look for a respected appraiser.
Step 5: Prepare for Closing
Before you can access your HELOC funds, you’ll need to sign your loan documents and pay your closing costs and any associated fees. Some lenders will make your funds available within three business days of the closing of your HELOC. Closing costs can include an appraisal fee, title search fee, loan origination fee, and administrative fees. Review all of your documents carefully to make sure there are no surprises and that the terms of your HELOC are in line with your financial goals.
Closing Costs and Fees
The good news is that HELOC closing costs are generally lower than those associated with a home purchase or a cash-out refinance. Appraisal fees are typically the largest expense. You may also be responsible for application, origination, and administrative fees, as well as an annual maintenance fee, which can be up to $250.
Recommended: HELOC vs. Home Equity Loan
Tax Benefits and Considerations
You may be able to deduct HELOC interest from your federal taxes if the borrowed funds are used for significantly improving your primary residence. It’s a good idea to consult a qualified tax advisor to help you navigate the tax implications for your situation and to confirm your eligibility for any deductions related to HELOCs.
Alternatives to HELOCs
There are other ways to get equity out of your home besides a HELOC, including home equity loans and cash-out refinancing. Before you commit to a HELOC, it’s worth considering your options.
Home Equity Loan
With a home equity loan, you receive a lump sum and pay it back at a fixed interest rate over a set period of time. Most people are able to borrow up to 85% of the appraised value of their home, minus what they owe on their mortgage. Lenders often look for a credit score of at least 680, with many favoring 700 and higher. This type of loan is designed for those who know the exact amount they need for a major purchase or project.
Cash-Out Refinance
A cash-out mortgage refinance lets you borrow more than you currently owe on your mortgage and collect the extra funds in cash. If you have a credit score of 620 or more, and your DTI ratio is under 43%, this option is open to you, with a fixed or variable rate. A cash-out refinance vs. home equity line of credit differentiator? The former leaves you with just one monthly payment.
Personal Loan
Personal loans offer flexibility and security. They’re unsecured, with fixed payments spread over two to seven years. The main benefit is that your home stays out of the equation, even during financial bumps, so you’re safe from foreclosure. Most lenders look for a credit score of at least 610 or higher. While a personal loan may be relatively quick to secure, their interest rates can be higher than those of HELOCs or home equity loans.
The Takeaway
When you’re considering a HELOC, it’s important to review all of the advantages and potential pitfalls. The flexibility and potentially lower interest rates are appealing, but remember, your home is on the line if you miss payments. Shop around and compare offers to make sure you’re getting the best available deal.
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.
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FAQ
What can a HELOC be used for?
Whether it’s helping you tackle home improvements, cover personal expenses, or consolidate debt, a HELOC can be a versatile tool. During the draw period, you may need to pay only interest on the amount you’ve borrowed. This flexibility makes a HELOC a preferred method to manage significant expenses.
Do I need an appraisal for a HELOC?
Yes, an appraisal is an essential part of the HELOC process. It helps determine the current market value of your home, which is important for calculating the amount of equity available. Lenders use this information to set your credit limit, usually up to 85% of your equity.
How does opening a HELOC affect your credit score?
When you open a HELOC, you may see a slight dip in your credit score due to the lender’s hard inquiry. However, by using your HELOC responsibly and making timely payments, you can improve your credit score by showing that you are a reliable borrower. Maxing out your line of credit or missing payments can have a negative impact on your score so be sure to manage your HELOC wisely.
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