HOUSTON HELOC RATES TODAY
Current HELOC rates in
Houston, TX.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Key Points
• A home equity line of credit, which lenders and borrowers often refer to as a HELOC, is a revolving line of credit secured by the holder’s home equity.
• HELOC interest rates are tied to the prime rate, as well as the individual borrower’s financial profile and property details.
• You can use a HELOC to effectively manage large and ongoing expenses, such as a home remodel, education tuition costs, or paying off higher-interest debt.
• HELOCs almost always come with variable interest rates, and that means your monthly payment may fluctuate as the term progresses.
• It’s important that you carefully consider your financial situation before taking out a HELOC, since if you default it can lead to foreclosure on your home.
Introduction to HELOC Rates
This guide to HELOC interest rates in Houston, Texas, is packed with information that can help you make informed decisions about how to draw equity from your home. Whether you are considering pulling equity for a full home renovation or long-awaited improvements, or for another significant expense, this comprehensive overview can help you understand factors that influence HELOC interest rates and the benefits and risks of opening a HELOC with a Houston lender. Read on for the knowledge you need to understand current market conditions, and to know what you need to do to qualify for a great rate.
What’s a HELOC?
Before you begin making any borrowing decisions, it will be helpful to understand what a home equity line of credit is and how you can use it to your advantage. A HELOC is a line of credit you can borrow against, in whatever amounts you need, up to a certain limit set by your lender. That limit is based on your level of home equity, among other things. Your home serves as the collateral, which means you’ll need to repay what you borrow or you could face foreclosure.
Your home equity level is easy enough to calculate — it’s the difference between your home’s value and the current balance on your home loan. To find it, simply subtract your current mortgage balance from the estimated value of your home, then divide the answer by that home value figure. The number you’ll arrive at will be your percentage of accrued home equity.
To qualify for a HELOC, you’ll typically need at least 15% equity. You can usually borrow up to 90% of the equity you’ve accrued in your home. HELOC interest rates are often lower than the rates you’ll find on unsecured loans, as you look for options on how to get equity out of your home, making them a popular choice. But before you make the leap, you’ll want all the facts.
A HELOC has two main periods:
The Draw Period
During a HELOC’s initial draw period, generally lasting for 10 years, a borrower can access funds in increments, as they are needed. During this time, you’ll need to pay interest, but only on what you borrow. Most lenders won’t require you to pay down the principal — though you’ll be able to do so, if you want to pay off and draw on the credit line again. A HELOC interest-only calculator is a useful tool to help you figure out how much interest you’d pay during the draw period.
The Repayment Period
After the HELOC draw period ends, the repayment period — usually lasting 10 to 20 years — begins. As a HELOC borrower, your monthly payments will increase during this phase because you’ll begin to repay the principal along with interest. HELOC interest rates are usually variable, so the amount you pay each month may go up or down if rates fluctuate. And they often do. A HELOC monthly payment calculator can compute what your payment might be at any interest rate.
The Origin of HELOC Interest Rates
Lenders determine interest rates for HELOCs and different types of home equity loans using the prime rate as a baseline. This figure tends to move up or down depending on the Federal Reserve’s latest economic maneuvers. Lenders tack on their own margins to arrive at the rates they offer, which is why advertised numbers can vary.
Differences among lenders’ offerings are only one reason to seek out multiple rate quotes if you plan to apply for a HELOC. Your own financial overview, including your credit score, debt level, and the equity you have in your home, plays a role in the interest rate lenders will offer you, too. A high credit score and solid home equity can definitely work in your favor.
How Interest Rates Impact HELOC Affordability
You will need to put in time and energy looking for top HELOC interest rates, but the rate you agree to makes a difference. Even a small rate advantage can mean you’ll pay a lot less interest over the lifetime of the HELOC. If you use $50,000 from a HELOC during the 10-year draw period, for example, the difference in monthly interest based on an 8.50% versus a 9.50% interest rate would be $42 per month. Monthly payments would be $354 or $396, respectively.
Think that isn’t a big difference? Keep doing the math. Once you start paying off both the principal and interest on the same $50,000 credit line during a 20-year repayment period, your monthly payments would be $620 at the lower interest rate and $647 at the higher one. Over the whole repayment term, the higher interest rate would end up costing you an extra $3,000. Since HELOCs have variable interest rates, the real-world numbers will differ.
Check out this chart comparing HELOCs at different credit line amounts, terms, and rates:
| Repayment Amount | Term | Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|---|---|
| $100,000 | 20 years | 8.00% | $836 | $100,746 |
| 7.00% | $775 | $86,072 | ||
| 10 years | 8.00% | $1,213 | $45,593 | |
| 7.00% | $1,161 | $39,330 | ||
| $50,000 | 20 years | 8.00% | $418 | $50,373 |
| 7.00% | $388 | $43,036 | ||
| 10 years | 8.00% | $607 | $22,797 | |
| 7.00% | $581 | $19,665 | ||
| $25,000 | 20 years | 8.00% | $209 | $25,186 |
| 7.00% | $194 | $21,518 | ||
| 10 years | 8.00% | $303 | $11,398 | |
| 7.00% | $290 | $9,833 |
HELOC Interest Rate Trends
While it isn’t the only possible indicator for HELOC rates, the prime interest rate can be a helpful gauge. Since 2018, the prime rate has bounced up and down — it hit a low of 3.25% in 2020 and a high of 8.50% in 2023. Being aware of this history when you shop can give you a useful perspective on the current rates you may see in Houston.
| 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
Adjustable vs Fixed Interest Rates
Adjustable interest rates are the usual for HELOCs, though it can vary by lender. These adjustable rates tend to start lower than the fixed kind, but in time they can go up or down due to impact from the market. If you choose to move forward with a HELOC, examine offers from multiple lenders for the specifics; you want to know how often rates may change and if the lender will cap them at a certain point. This option might be a good one for you if you can handle financial ebb and flow.
Helpful Tools & Calculators
When you apply for a HELOC, you can look at online tools to help you estimate how much cash you’ll need to make your monthly payments, and what you might pay in interest. Using these will help you understand how a HELOC and its rate could sway your budget, so you can plan.
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
Your credit score, DTI ratio, and home equity level are critical if you want to land a top rate on a HELOC. Lenders look for a potential borrower to have at least 15% equity in their home — and more is better. Here are some ways to ensure your finances are in good shape before you work on the application.
Improve Your Credit Score
A credit score of 700 or higher is considered top-notch — and will be the key to unlocking the best HELOC rates. Good news is, you can nudge your number higher by paying bills on time and slowly but surely chipping away at any balances you’re carrying on credit cards. Read your credit report closely for inaccuracies and dispute any errors, so your score will truly reflect your financial responsibility.
Calculate Your Debt-to-Income (DTI) Ratio
Figuring out your DTI ratio is easy. Just add up the total debts you’re responsible for paying, and divide the sum by your gross monthly income. Most HELOC lenders are looking for borrowers with DTIs under 50%. To be eligible for an enviable HELOC interest rate in Houston, you’ll want to get yours down even further, below 36%. Paying off debt (or increasing earnings) will always enhance your financial profile.
Application Process for a HELOC in Houston
Initiating an application for a HELOC in Houston is straightforward, especially if you prequalify online first, which will also let you view the rate you might qualify for. If you move forward with the full application, you’ll need to gather the necessary paperwork and submit it with your forms via the web. Here’s a step-by-step:
Step 1: Run the Numbers
Before you get started, check your credit score and calculate your debt-to-income ratio. You should also assess your home equity, since you’ll need at least 15% if you’re going to qualify. To figure out your level of equity, subtract your current mortgage balance from your home’s estimated value, then divide the answer by that same home value to get a percentage. Need to keep building your equity? Paying your mortgage on time every month is a great way to do it.
Step 2: Compare Lenders
Research lenders to find out which ones are offering the top HELOC interest rates in Houston. Look at their advertised rates as well as qualification criteria, credit line minimums and maximums, fees, and the durations of their draw and repayment periods. Lenders can have unique terms and conditions. Read the fine print.
Step 3: Submit Your Application
You’ll need to gather your documents, including recent pay stubs, W-2 forms, and tax returns. If you’re self-employed, your potential lender may ask for a profit-and-loss statement, as well as two years’ worth of tax returns. You’ll want to have a copy of your homeowners insurance policy available, too. Once you’ve got everything together, and have double-checked all information for accuracy, you’re ready to apply. You can most likely do it online, over the phone, or in person.
Step 4: Get an Appraisal
Before issuing a HELOC, a lender will require an objective professional analysis of your home’s value. Once you’ve identified the most appealing offer for you, you’ll have to pay around $300 to $600 for an appraisal of your property. This important part of the HELOC application process will also confirm the amount of equity you have in your home.
Step 5: Prepare for Closing
Before you’ll be able to access your funds, you’ll need to pay the required fees and sign your HELOC agreement. Take the time to look over all of your documents carefully. Don’t be afraid to ask all your questions and make sure you thoroughly understand the terms of your HELOC. Some lenders will be able to have your funds ready within a few days of closing, while others may take a little longer to provide access to your new line of credit.
Closing Costs and Fees
HELOCs may come with lower closing costs than you’d pay for a home mortgage loan or a cash-out refi. Usually, the appraisal fee is the borrower’s most significant expense. Other costs you might encounter may be for a necessary title search, and application, origination, and administrative fees. Some lenders charge an annual maintenance fee of up to $250. Keep in mind: If a lender offers to reduce or waive closing costs, it could be in exchange for a higher interest rate.
Recommended: HELOC vs. Home Equity Loan
Tax Benefits and Considerations
Right now, homeowners can deduct the HELOC interest they pay if they use the funds borrowed to make significant improvements to their home. Be aware that this policy may change. Consult a tax advisor about your specific circumstances and remember to itemize your costs.
Alternatives to HELOCs
You can find other ways besides a HELOC to get equity out of your home. Examples include a home equity loan and a cash-out refinance, as well as a personal loan. It’s worth considering every option before committing to a HELOC.
Home Equity Loan
What is a home equity loan? It’s a choice that offers you a one-time lump-sum loan instead of a line of credit. It will likely carry a fixed interest rate and a maximum of 85% of your accrued home equity. (A home equity loan calculator can help you figure out how much you might be able to borrow.) Lenders will look for a 680 or higher credit score to qualify you. If you prefer a more predictable fixed interest rate and set payment schedule, this could be the best fit for you. Another common difference between HELOCs and home equity loans is that a home equity loan gives you the money all at once — and you must immediately begin repaying principal plus interest.
Cash-Out Refinance
A cash-out mortgage refinance lets you refinance for more than you owe on your mortgage right now and take the difference as a cash lump sum. This option is one to consider if the costs of the new mortgage look better than those on your current one.
Things to consider with a cash-out refinance vs. a home equity line of credit: A refinance will require you to have a credit score of 620 or higher and a DTI ratio under 43%. A refi is slightly easier to get and also lets you choose a fixed or variable interest rate for your new home loan. It also leaves you with one monthly payment, rather than two.
Personal Loan
This is an unsecured loan, and you’ll probably repay it in regular, fixed installments over two to seven years. A key benefit of this loan type is that if you encounter a financial issue and are unable to make payments, your home is not at risk of foreclosure. Most lenders look for a credit score of 610 or higher for this type of loan. They’re relatively quick to secure, but interest rates are often higher compared to home equity loans or HELOCs.
The Takeaway
If you are exploring the possibility of applying for a HELOC in Houston, weigh both the likely benefits and the potential risks you’ll be taking on. A HELOC offers financial flexibility by allowing you to borrow only the money you require, and when you need it. It can come with a more appealing interest rate than another option — that makes a HELOC a good borrowing choice if you want to use it to help you manage large, ongoing expenses. But a HELOC also comes with the risk of losing your home should you default. You should realistically assess your financial situation before you take out a line of credit. You’ll also want to look at multiple lenders’ rates, and know that you’ll likely need a credit score of 640 or higher to qualify.
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FAQ
Is a HELOC a wise move at this point?
If you feel comfortable signing up for a loan with a variable interest rate, a HELOC could be a good move — especially if a prime rate drop is forecast. It’s a reliable way to find the flexibility to access funds in whatever increments you need to fund large, longer-term expenses. But if fixed payments and their stability better suit you, a better choice may be a home equity loan.
What would the monthly payments on a $100,000 HELOC be?
Payments on any HELOC will depend on the interest rate, the repayment terms, and how much of the credit line you use upfront. For a $100,000 line of credit, a big factor will be whether you need to borrow the full $100,000. If you do, and your rate is 8.00%, you might pay around $667 per month in interest during the draw period. During the repayment phase, when you’d start paying down the principal, too, your payment would rise above $1,200 per month. Since HELOCs have variable interest rates, your payments may end up being higher or lower than these examples.
Do you need an appraisal to get a HELOC?
Yes, you will need to get a home appraisal if you want to be eligible for a home equity line of credit. It’s advisable to wait for instructions on this from your lender, though, so you can make sure the appraisal meets their terms. The appraiser’s report will help the lender determine your home’s current market value, and in turn the amount you’ll be approved to borrow.
Will a HELOC impact your credit score?
Yes, it will, temporarily. Opening a HELOC involves a hard inquiry on your credit report, which can cause a slight, temporary credit score drop. That said, if you manage a HELOC responsibly, it will also positively impact your credit score in the long run. (Just remember, missing payments will harm your creditworthiness.)
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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