KANSAS CITY HELOC RATES TODAY
Current HELOC rates in
Kansas City, MO.
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 rates in Kansas City are determined based on the prime rate, your credit score, debt-to-income ratio, and the amount of equity in your home.
• HELOCs offer a revolving line of credit, with interest charged only on the amount borrowed.
• Online calculators can help borrowers estimate monthly payments and total interest costs before applying.
• You may be able to deduct the interest you pay on a HELOC.
• To get a HELOC, your lender will require a home appraisal.
Introduction to HELOC Rates
Welcome to your comprehensive guide to home equity line of credit (HELOC) rates in Kansas City, Missouri. If you’ve been paying down your home loan month by month and built up some equity in your home, you may be considering borrowing with a HELOC to spruce up your living space, invest in education, or consolidate higher-interest debt. This guide will provide you with the tools to make well-informed decisions. We’ll delve into the factors that sway HELOC rates, the advantages and potential pitfalls of these financial tools, and how to find the most favorable terms.
What Exactly is a HELOC?
A HELOC is a revolving credit line that allows you to tap into the equity you’ve built in your home. Because it is a credit line, you can borrow what you need in increments, as you need it, up to whatever ceiling your lender sets. To qualify, you’ll typically need to have at least 15% equity. You can borrow up to 90% of your equity. It’s important that you have a plan to repay a HELOC, because if you miss payments you could risk foreclosure.
A HELOC has two phases:
The Draw Period
In the HELOC’s initial 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. A HELOC interest-only calculator can help you compute what you might owe during this phase.
The Repayment Period
Once the draw period ends, a repayment period of 10 to 20 years begins. Monthly payments will increase because you’ll be paying both the principal and interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. A HELOC monthly payment calculator is useful during this phase in the HELOC process.
How Are HELOC Interest Rates Determined?
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. Lenders add a margin to the prime rate to determine the interest rate they will offer. They also consider your credit score, debt-to-income (DTI) ratio, income, and the amount of equity in your home. This is why rates can vary from lender to lender, and thus why it makes sense to get quotes from multiple lenders before settling on a lender and signing a HELOC agreement.
How Interest Rates Impact HELOC Affordability
Even a seemingly small difference in HELOC rates can make a noticeable difference in the cost of your HELOC over the long haul. For instance, on a $50,000 HELOC with a 20-year term, a one-percentage-point rate increase from 7.00% to 8.00% can bump your monthly payment up by $30 and increase the total interest paid over the life of the HELOC by almost $7,000. The larger the amount you borrow with a HELOC, the greater the effect of even a slight increase or decrease in interest.
HELOC Interest Rate Trends
Keeping an eye on the prime interest rate can clue you in on the direction HELOC rates might be heading. 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. Understanding these historical patterns can give you some perspective on the rates you are seeing in the marketplace. Some borrowers try to time their application for a HELOC to a dip in rates. But it’s not always possible to do so. It pays to focus on getting the best available 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
Variable vs. Fixed Interest Rates
HELOCs tend to come with variable rates, also called adjustable rates, meaning the amount of interest you pay can change with the market. These rates go up or down over time based on market conditions, at intervals and according to caps that are spelled out in the HELOC agreement. Being aware of the possible change in your interest rate is critical before you sign on to a HELOC. If you need a steady, predictable monthly payment, a home equity loan might be a better fit for you — we’ll explain how those work below.
Helpful Tools & Calculators
Before you take the leap and obtain a HELOC, you can use online tools to estimate costs. Here are a few tools that will be useful when you’re borrowing against your home 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
To snag the most competitive HELOC rate, your credit score, debt-to-income (DTI) ratio, and home equity are critically important. Lenders generally look for you to have at least 15% equity in your home — 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. The good news is, you can nudge your number north by paying your bills on time and chipping away at credit card balances. Also review your credit report for any inaccuracies. Disputing errors can ensure 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 Kansas City, you’ll want to get below 36%. Paying down debt (or increasing earnings) will enhance your financial profile.
Application Process for a HELOC in Kansas City
Prequalifying online will give you a quick snapshot of the HELOC rates available in Kansas City and an estimate of the amount you might qualify for. Once you’ve sleuthed out the various lenders and rates available to you, you can move on to the full application, which will require more detailed financial information and specific property details.
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.
To find the best HELOC lenders in Kansas City, you’ll want to compare them and see which ones offer the best rates and terms. Look at the interest rates, qualification requirements, minimum and maximum amounts you can borrow, fees and the length of the draw and repayment periods. Because the terms can vary from lender to lender, it’s important to shop around and read the fine print before you commit to a HELOC.
Step 3: Submit your application.
First, gather your paperwork. You’ll need government-issued identification, recent pay stubs, W-2 forms, and copies of your last tax return. If you’re self-employed, a lender may ask for a profit-and-loss statement in addition to two years’ worth of tax returns. Property documentation includes a homeowners insurance declaration page. Submit your HELOC application online, over the phone, or in person to get the ball rolling.
Step 4: Get an appraisal.
A home appraisal is a professional and objective analysis conducted to determine your home’s value. The cost for a home appraisal typically ranges from $300 to $610. If your home appraises for more than your existing mortgage balance, the lender is much more likely to approve you for a HELOC. This step is important in determining the amount of equity you can potentially access and the specific terms of your HELOC agreement. A prospective lender will tell you what kind of appraisal is required, so wait for instructions.
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. Some lenders make the funds available to you right after the closing; others may take a few days. You may have to pay for an appraisal, title search, origination fee, and other fees. Some lenders charge an annual fee. Be sure you know all the costs involved with the HELOC.
Closing Costs and Fees
HELOCs typically come with lower closing costs compared to a home mortgage loan or a cash-out refinance. The most significant expense is usually the appraisal fee. Other costs you may encounter are fees for a title search, an application fee, origination fee, and administrative fees. Some lenders may also charge an annual maintenance fee, which could be up to $250 per year. Keep in mind that while some lenders may offer to reduce or waive closing costs, this could mean a higher interest rate for you.
Recommended: HELOC vs. Home Equity Loan
Tax Benefits and Considerations
Right now, homeowners have the option to deduct HELOC interest if the borrowed funds are used for making significant improvements to their primary residence. In the future, this policy may change, so keep in touch with a tax advisor about your specific circumstances.
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, which also include a personal loan.
Home Equity Loan
Home equity loans provide borrowers with a lump-sum loan at a fixed interest rate. You can typically borrow up to 85% of your home’s equity. Lenders usually look for a credit score of 680 or more, with many favoring 700 and above. This option is great if you have a specific need for a defined amount of money and prefer the predictability of fixed monthly payments.
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
A personal loan is typically unsecured, so you don’t risk foreclosure if you find yourself unable to make payments. It’s typically repaid in regular, fixed installments over a period of two to seven years. Many lenders look for a credit score of 610 or higher for these loans. While they’re relatively speedy to secure, personal loans’ interest rates may be higher than those of HELOCs.
The Takeaway
When considering a HELOC, it’s important to weigh both the benefits and the potential risks involved. HELOCs are a very flexible way to borrow funds and it’s nice to pay interest only on the portion of the credit line that you use. But they also come with the inherent risk of variable interest rates, and even potential foreclosure if payments are not managed carefully. In Kansas City, it pays to explore current HELOC rates and terms with multiple lenders before making a decision.
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’s the monthly payment on a $50,000 HELOC?
Your monthly payment on a $50,000 HELOC will depend on the interest rate and the repayment terms. During the draw period, if you used the full $50,000 but just made interest payments, your monthly bill at 8.00% would be $333. Once you enter the repayment term of 20 years, the monthly cost would rise to $607. Remember, these are only estimates because HELOCs have variable interest rates.
Is a HELOC a smart move?
Whether a HELOC is a good idea right now depends on your financial situation and the current HELOC rates in Kansas City. If you need a flexible line of credit for significant expenses and can manage somewhat unpredictable monthly payments, a HELOC might be a smart choice.
What could stop you from getting a home equity loan?
There are a few things that could stand in the way of you obtaining a home equity loan or a home equity line of credit. You need to have at least 15% equity in your home, for one thing, and some lenders require 20% equity. You’ll also need to meet a lender’s credit-score requirements and have a healthy debt-to-income ratio.
How does 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 actually improve your score by showing that you are a reliable borrower. On the other hand, maxing out your line of credit or missing payments can have a negative impact on your score. This is why it’s important to manage your HELOC wisely.
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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