LOS ANGELES HELOC RATES TODAY
Current HELOC rates in
Los Angeles, CA.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Compare HELOC rates in Los Angeles.
Key Points
• Interest rates for a home equity line of credit in Los Angeles are influenced by the prime rate and borrower factors.
• HELOCs come with a draw period for borrowing, followed by a repayment period.
• Variable interest rates can mean monthly payments fluctuate.
• Keep your credit score at 700 or above for the best rates.
• Home equity is the difference between your home’s value and your mortgage balance.
Introduction to HELOC Rates
This article will give you a good understanding of home equity line of credit (HELOC) rates in Los Angeles. You’ll learn how HELOC rates are determined and how to compare different lenders. You’ll also discover the benefits and risks associated with HELOCs, and the best way to go about finding the way to get equity out of your home that best suits your needs.
What Is a HELOC?
A HELOC is a revolving credit line that leverages your home equity (the current value of your home minus your mortgage balance). Typically, you’ll need to have at least 15% equity in your home to qualify. To determine if you meet this threshold, subtract your current home loan balance from your home’s estimated value, then divide the answer by your home value and you’ll have a percentage of equity. With a HELOC, you can borrow up to 90% of your home’s equity. Most lenders will require an appraisal to determine your home’s value. It’s important to understand that if you don’t make payments toward your HELOC as your lender requires, your home could be at risk of foreclosure. A HELOC has two phases:
The Draw Period
During the draw period, you can borrow money in increments, up to your credit limit, repay what you’ve borrowed (or not), and borrow again. During this time, you may only have to make interest payments, so you may find it helpful to bookmark a HELOC interest-only calculator.
The Repayment Period
In the repayment period, you can no longer borrow and must pay back the principal plus interest. HELOCs have variable interest rates so the monthly payment amount can vary over the 10 or 20 years of the repayment term. This is when a HELOC monthly payment calculator is handy.
Recommended: Different Types of Home Equity Loans
Where Do HELOC Interest Rates Originate?
Lenders peg their HELOC rates to the prime rate, which is swayed by the Federal Reserve’s economic maneuvers. Each lender then tacks on a margin, which is why you’ll find a range of rates out there. Lenders also take into account your financial profile, including your credit score and the amount of equity in your home. All this means that you’ll want to explore offers from multiple lenders on your way to a HELOC agreement; doing so will help ensure you get the best available rate.
How Interest Rates Impact HELOC Affordability
The interest rate on your HELOC is an important factor in its affordability. Even a small difference in rates can translate to a significant amount of extra interest. HELOCs’ variable interest rates make it hard to pinpoint the exact amount the HELOC will cost, but if you borrowed $50,000 with a HELOC that had a 20-year repayment term, you would have the following monthly payment amounts at 7.00%, 8.00%, and 9.00% interest: $388, $418, and $450, respectively, and total interest paid of $43,036, $50,373, and $57,967, respectively.
HELOC Interest Rate Trends
Keeping an eye on the prime interest rate can help give you a sense of where HELOC interest rates might be headed in Los Angeles. Having a sense of the history of the prime rate can also help you understand if current rates are high or low, relatively speaking. The prime rate dropped to an unusually low 3.25% in 2020, and then rose to 8.50% by 2023.
| 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 typically have variable (also called adjustable) interest rates, which may move up or down over time based on market conditions. The HELOC agreement will spell out how extensive the rate change can be, how frequently the rate will change, and will also articulate a rate cap. If you are comfortable with these parameters and with the fact that your monthly payment can change over time, then you can probably handle a HELOC.
Recommended: HELOC vs. Home Equity Loan
Helpful Tools & Calculators
Before you apply for a HELOC, use HELOC calculators to get a better understanding of what your monthly payments and interest costs could be. Here are a few calculators you will find useful.
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 be eligible for the most competitive HELOC rates, you’ll want to keep your credit score at 700 or higher, maintain at least 15% equity in your home (and ideally more), and ensure that your debt-to-income (DTI) ratio is low. Use these tips to prepare for an application:
Improve Your Credit Score
You can get a HELOC with a credit score of 640, but keeping your score at 700 or higher will help you get the best interest rate. To get there, make sure you’re paying your bills on time and chipping away at credit card balances. Don’t forget to give your credit report a once-over for any slip-ups that need disputing. Avoid closing old credit accounts or opening new ones in the months leading up to your HELOC application.
Calculate Your Debt-to-Income (DTI) Ratio
Your DTI ratio is a key figure lenders will be looking at. Find it by dividing your total monthly debt payments by your gross monthly income. For a HELOC, most lenders prefer to see a DTI under 50%, but for the most favorable rate, aim for 36% or less. To lower your DTI ratio, pay down debt, increase your income, or both.
Application Process for a HELOC in California
Streamline your application process by prequalifying for a HELOC online. This initial step gives you a sneak peek at the interest rate and potential credit line amount you could qualify for. After prequalifying, you can move on to the full application, where you’ll provide comprehensive financial information and details about the property.
Step 1. Run the Numbers
First things first, check your credit score and DTI ratio. Then, assess your home equity: Subtract your outstanding mortgage balance from your home’s estimated value. Divide the answer by your home value to arrive at a percentage. Making regular mortgage payments helps build equity. Home improvements that boost the property’s value can increase equity, too. You’ll need a minimum of 15% equity, as noted above, to qualify.
Step 2. Compare Lenders
Take a look at the rates in Los Angeles. But also compare qualification requirements, credit minimums and maximums, fees, and the length of draw and repayment periods. When you find a lender that offers competitive rates and flexible terms and that also has positive customer reviews, it’s time to apply.
Step 3: Submit Your Application
Gather your proof of identification, income verification, and property information. For income verification, you’ll need to provide your most recent pay stubs, W-2 forms, and tax returns. If you’re self-employed, you may also need to provide a profit-and-loss statement and your tax returns from the past two years. Additionally, you’ll need to provide a homeowners insurance declaration page as part of the property documentation. Once you have everything you need, you can submit your application.
Step 4: Get an Appraisal
After you submit an application, you’ll likely need an appraisal. Work with the lender to ensure you get the documentation the lender requires.The typical cost of having an expert weigh in on the value of your home is usually between $300 and $600. If your home is appraised for more than what you owe, you’ll have cleared a bar necessary for a HELOC.
Step 5: Prepare for Closing
Once you’re approved for a HELOC and decide to move forward, you’ll need to sign the HELOC documents and take care of any fees. Most lenders will make the funds available within three business days. Before you sign, be sure you understand all the terms and conditions. This is an important step to avoid any surprises and to make sure you’re prepared to use your HELOC.
Closing Costs and Fees
The good news is that the closing costs for HELOCs are generally lower than those for a traditional home purchase or a cash-out refinance. The appraisal fee is often the most significant expense. Other costs may include a title search fee (ranging from $100 to $450), an application fee, origination fee, and administrative fees. Some lenders may also charge a maintenance fee, which could be up to $250 annually, as well as transaction fees for withdrawals.
Tax Benefits and Considerations
Homeowners can potentially deduct HELOC interest if the funds are used for significantly improving their primary residence. This tax benefit is valid through 2025, and interest costs may also be deductible in future years. Consult a qualified tax advisor to navigate the tax implications and confirm your eligibility for any deductions related to HELOCs.
Alternatives to HELOCs
There are other financing options to consider in addition to a HELOC, so if a variable interest rate doesn’t feel like a great fit, or another aspect of a HELOC doesn’t work for your lifestyle, consider these alternatives:
Home Equity Loan
With a home equity loan, you get a one-time lump-sum loan and a fixed interest rate. You can usually borrow up to 85% of your home equity. Lenders often look for a credit score of 680 or higher, with many leaning toward 700, in order for borrowers to qualify. If you’re someone who likes a fixed interest rate and a predictable payment amount, this might be a good fit for you. You can use a home equity loan calculator to see how much you might be able to borrow.
Cash-Out Refinance
A cash-out mortgage refinance lets you refinance for more than you already owe and take the difference in cash. It can be a wise move if the interest rate on a new mortgage would be better than your current rate. Things to consider with a cash-out refinance vs. a home equity line of credit: With a refinance you’d need a credit score of 620 or higher and a DTI ratio under 43%. A refinance also allows you to choose between fixed or variable interest rates.
Personal Loan
A personal loan is typically an unsecured loan that you repay in regular, fixed installments over two to seven years. The key benefit here is that your home is not at risk of foreclosure should you be unable to make your loan payments. Most lenders look for a credit score of 610 or higher when considering a personal loan application. While these loans are relatively quick to secure, the interest rates may be higher compared to HELOCs or home equity loans.
The Takeaway
If you’re considering a HELOC, it’s important to weigh the benefits and risks. A HELOC can offer flexibility and potentially lower interest rates than a personal loan, making it a good option for large expenses or debt consolidation. However, it’s important to remember that if you’re unable to make payments, you could lose your home. In Los Angeles, HELOC rates can vary, so it’s important to shop around and compare offers from multiple lenders to find the best terms and rates for you.
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, which can last 5, 10, or even 20 years, 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.
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.
What are the benefits of a HELOC?
There are several benefits of a HELOC. You can use the funds for just about anything. You’ll enjoy a revolving credit line during the draw period, and you’ll only pay interest on the amount of the credit line that you use. During the draw period, you won’t have to repay the principal at all. A HELOC may also offer tax benefits if the funds you borrow are used for home improvements (check with your tax advisor).
How hard is it to get a HELOC?
A HELOC is quite attainable if you meet the lender’s criteria. They typically look for a minimum credit score of 640, a debt-to-income ratio under 50%, and at least 15% equity in your home. The application process involves a few steps, such as checking your credit score, comparing lenders, submitting documents, getting a home appraisal, and preparing for the closing.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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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