ILLINOIS HELOC RATES TODAY
Current HELOC rates in
Illinois.
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 Illinois.
Key Points
• When looking for the best home equity line of credit (HELOC) rates in Illinois, it’s important to compare offers from different lenders.
• To secure the best HELOC rates in Illinois, borrowers should review their financial health, including credit score, home equity level, and debt-to-income ratio.
• HELOCs can be used for various purposes, including home improvements and debt consolidation.
• Understanding the application process and lender requirements is crucial for a successful HELOC application in Illinois.
• Illinois HELOC rates are influenced by economic and housing market factors, including the prime rate and Federal Reserve policy decisions.
Introduction to HELOC Rates
When looking for the best home equity line of credit (HELOC) rates in Illinois, it’s important to understand what factors go into determining the rate you are offered. After all, if you’ve been diligently paying off your home loan and building equity in your home, you’ll want to get the best interest rate possible when you borrow against it.
This article will help you master the ins and outs of HELOC rates in Illinois. You’ll learn what to do before applying for a HELOC so that you put your best financial foot forward. We’ll guide you through the steps of the application, and even help you consider all the different types of home equity loans available to you. We’re going to start by reviewing the basics:
What Is a HELOC?
A HELOC is like a credit card with a spending limit that’s based on your home’s value (minus whatever you still owe on your mortgage). HELOCs allow you to get equity out of your home that you can use for various purposes, including home improvements and debt consolidation. You can take the money in increments, and you only pay interest on what you have drawn at any given time.
A HELOC has draw and repayment phases. Here’s how they differ.
The Draw Period
During the HELOC’s draw period, which is usually a decade, you can access funds up to your credit limit. While interest payments are typically mandatory, principal payments may be optional. But if you pay down the principal during the draw period, you can borrow money again, up to the credit line.
HELOCs tend to have a variable interest rate. The initial rate may be lower than you would get with a home equity loan or a personal loan, but over time it will change with market rates, so it’s important to know that before you dive in. To better understand what your financial obligations might look like at different interest rates, you can use a HELOC repayment calculator.
The Repayment Period
During the repayment period (typically 10 to 20 years), borrowing ends, and the principal is paid back with interest. Here again, the interest rate may change from time to time according to the prearranged rules of your loan, so your monthly payments may be unpredictable.
Where Do HELOC Interest Rates Come From?
Federal Reserve interest rate decisions influence prime rates, which are lenders’ interest rates for their most creditworthy customers. The prime rate, in turn, affects what rate you might be offered for a HELOC. Lenders adjust their prime rate for individual borrowers based on an applicant’s personal financial profile.
How Interest Rates Impact HELOC Affordability
It’s worth spending a little time keeping tabs on the Fed’s movements and average prime rates, because fluctuations in interest rates can have a significant impact on the affordability of a HELOC. Over the course of a 20-year term, even a seemingly small 1% difference in interest rate can result in a noticeable increase in the monthly payment and a substantial difference in total interest paid.
HELOC Interest Rate Trends
To quickly gain perspective about what might be a “good” interest rate for a HELOC, you can examine the movement of the average prime rate in recent years, as shown in the chart below. The average prime rate reached a low of 3.25% in 2020 and a high of 8.50% in 2023. The graphic below shows the rate over more than half a century. As you can see, there have been ups and downs but very low rates, below 4.00%, haven’t come often.
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 isn’t the only thing that will affect the HELOC interest rate you might be offered. There are several key factors that are specific to each individual borrower, and you’ll want to pay close attention to these.
Home Equity
Possessing substantial home equity lessens your risk profile in the eyes of lenders, and that could mean a favorable interest rate. Customarily, homeowners need a minimum of 15% to 20% in order to qualify a HELOC. But having more equity is better.
Credit Score
Having a credit score of 680 or higher is a necessity when it comes to home equity borrowing. Some lenders even require a score exceeding 700. Again, higher is better because it is a reliable indicator of lower risk for the lender.
Stable Income
Lenders not only look at how much you are earning, but at how consistent your income is when evaluating you for a HELOC. They equate a steady income with a reduced likelihood of default, and that can mean more favorable HELOC rates.
Loan-to-Value Ratio
Most lenders require your combined loan-to-value ratio to be 90% or less. To figure out your CLTV ratio, add what you owe on your mortgage to the amount of credit line you’d like to have with a HELOC. Then divide by your home’s value.
Variable vs Fixed Interest Rates
As noted above, HELOCs feature variable interest rates, which are subject to change over the life of the loan. While variable interest rates typically start lower than fixed rates, they can fluctuate up or down in accordance with market conditions.
Tools & Calculators
Online calculators can help you understand what your monthly payments might look like at varying interest rates, so they are especially helpful if you’re considering a HELOC. Here are three useful ones:
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
There are several steps you can take to better your chances of qualifying for a favorable HELOC rate in Illinois. Study this list before you file your first application.
Strengthen to Your Credit Score
Making timely payments and reducing your credit card balances can help your credit score, so pay extra attention to your credit usage in the months leading up to your HELOC application. Regularly reviewing your credit report to ensure accuracy is another crucial step to take.
Assess Your Home Equity
Your mortgage payments have helped you build equity, but do you have enough equity (at least 15%)? Verify that before you file a HELOC application. You can use a real estate web site to get an estimate of your property value. Subtract from it what you owe on your mortgage and then divide by the property value to learn your equity percentage.
Calculate Your Debt-to-Income Ratio (DTI)
Your debt-to-income (DTI) ratio is determined by dividing your total monthly debt payments (such as your car payment and student loan payment) by your gross monthly income. Some lenders allow a DTI below 50%, while others like it to be still lower — under 36%. A lower DTI can increase your chances of securing favorable terms and rates for a HELOC.
Application Process for a HELOC in Illinois
Step 1. Run the Numbers
Check your credit score, determine your DTI ratio, and figure out roughly how much home equity you have before submitting your first HELOC application. Sometimes you can prequalify for a HELOC online, which speeds the application process.
Step 2. Compare Lenders
Look at lender web sites to see what interest rates they have posted. But don’t just examine interest rates — compare fees, qualification requirements, and other factors. Do they have a minimum and maximum loan amount posted, for example?
Step 3: Gather Your Documents
To apply for a HELOC, you will need personal identification, income verification (pay stubs, W-2 forms) and at least one tax return. If you’re self-employed, lenders may ask for two years’ tax returns. You may also be asked to provide a homeowners insurance declaration page indicating you have adequate coverage.
Step 4: Submit Your Application
Submitting your HELOC application can take place online, by phone, or in person, depending on the lender. Carefully confirm that all of the information provided is accurate and complete, as any mistakes could slow the processing of your application.
Step 5: Get an Appraisal
After submitting your application, a home appraisal will be conducted to determine the current market value of your property. If an in-person visit is required, scheduling it quickly will help move along the application process.
Step 6: Prepare for Closing
Before using your HELOC, you’ll need to sign loan documents and pay fees. Some lenders make funds available within three days following this closing process. Be sure that you completely understand all terms and conditions before you finalize the agreement.
Tax Benefits and Considerations
Homeowners can deduct HELOC interest 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). Consult a tax advisor to confirm eligibility for deductions related to a HELOC.
Closing Costs and Fees
HELOC closing costs are usually lower than typical home-buying or refinancing costs. An appraisal fee of $300 to $600 is often the highest expense. Other costs may include an application fee, loan origination fee, and administrative fees. Some lenders charge annual maintenance fees, transaction fees, inactivity fees, or early termination fees.
Alternatives to HELOCs
Other financing options besides HELOCs can allow you to take advantage of the equity you’ve built in your home. Don’t sign on to a HELOC unless you have carefully considered all your options.
Home Equity Loan
You may be wondering about what is a home equity loan and how it’s different from a HELOC. Home equity loans offer a fixed lump sum (vs. a line of credit like a HELOC) and are repaid at a fixed interest rate (in contrast to a HELOC’s variable rate). In the HELOC vs. home equity loan comparison, it’s worth noting that homeowners can typically access up to 85% of their equity with a home equity loan. With a HELOC, some lenders allow up to 90%.
Cash-Out Refinance
Homeowners can use this special type of mortgage refinance to access home equity by refinancing for more than they owe, paying off their first mortgage, and taking the difference in cash. As you consider a cash-out refinance vs. a home equity line of credit, one major difference is that a refinance gets you a whole new loan, with a new interest rate. If your interest rate on your original mortgage is lower than current rates, you’ll want to look carefully at whether it makes sense to refinance. Another difference? With a refi you have one monthly payment, while with a HELOC or home equity loan, you’ll have two.
Personal Loan
A personal loan is repaid in regular, fixed payments over a set term that can range anywhere from two to seven years. It usually has a higher interest rate than a HELOC because it is unsecured, but some borrowers prefer not using their home as collateral.
Credit Cards
Credit cards typically come with higher interest rates than HELOCs, which can mean it’s quite expensive to carry a large balance from month to month. While credit cards offer flexibility for smaller purchases, a HELOC is often more suitable for larger expenses such as home improvements or debt consolidation.
The Takeaway
A home equity line of credit can provide a versatile source of funding for home projects, debt consolidation, and other big expenses. But you’ll want to thoroughly examine not only the interest rates, but also the fees and repayment terms lenders offer before choosing your path. Taking a few smart steps before and during the application process can help ensure you get the best available interest rate in Illinois.
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?
If you owed $50,000 on a HELOC and had a 20-year repayment term at a 7.00% interest rate, your monthly payment would be $388. If you had a 6.00% interest rate, your monthly payment would fall to $358. As you can see, the interest rate is an important factor, as is the term.
Is a HELOC a good idea right now?
Whether a home equity line of credit (HELOC) is a sound financial decision hinges on your specific financial circumstances and long-term goals. You can use a HELOC repayment calculator and plug in low and high interest rates. A HELOC has a variable interest rate. So if you feel you can handle the payments at the low end as well as if they rise to a high level, and if you want a flexible borrowing strategy (as opposed to a lump sum loan), then a HELOC may be the right idea for you.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 HELOC depends on how much of the credit line you have actually used, as well as on your interest rate and repayment term. But if you used the entire $100,000 and needed to pay it back at 7.50% interest over 20 years, your monthly payment would be $806.
What are the benefits of a HELOC?
HELOCs present multiple advantages. An important one: You only need to pay interest on the portion of the credit line that you actually use. Another: You may be able to deduct some or all of the interest you pay on your HELOC. And if you borrow against your HELOC and repay the principal during the draw period, you can borrow the money again should you need another large sum.
Do you need an appraisal for a HELOC?
Yes, you will likely need an appraisal for a home equity line of credit. It helps establish how much equity you have in your home and sets the maximum loan amount you can secure.
What disqualifies you from getting a home equity loan?
Several factors can disqualify you from securing a home equity loan, including an unfavorable credit history, inadequate home equity, and a high debt-to-income ratio.
How difficult is it to get a HELOC?
How hard it is to get a HELOC is based upon your financial standing. Do you have a credit score of at least 680? Are your monthly debts less than 50% of your gross monthly income? Do you own at least 20% of your home’s value outright? These are some of the criteria you’ll need to meet in order to obtain approval for a home equity line of credit.
Does HELOC affect credit score?
Yes, having a HELOC can have an impact on your credit score. Applying for a HELOC may result in a hard inquiry on your credit report, which can cause a temporary decrease in your score. And whether or not you make your payments punctually can influence your credit score positively or negatively over the long term.
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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