MICHIGAN HELOC RATES TODAY
Current HELOC rates in
Michigan.
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 Michigan.
Key Points
• Home equity line of credit (HELOC) rates in Michigan are influenced by borrower factors such as home equity, debts, and credit score.
• Comparing offers from various lenders is essential to find the best HELOC rates in Michigan.
• HELOCs in Michigan offer lower interest rates than some other types of loans because your home serves as collateral, but rates can fluctuate.
• Maintaining a credit score of 680 or higher and a low combined loan-to-value ratio can help secure better Michigan HELOC rates.
• Using calculators for HELOC repayment and interest can help manage payments and understand the impact of varying rates on your financial obligations.
Introduction to HELOC Rates
If you’re seeking the best Michigan HELOC rates, it’s worth a few minutes of your time to make sure you fully understand what is a home equity line of credit, and what benefits (and possible risks) you can expect if you choose this method of borrowing money. HELOCs in Michigan provide a very versatile financing option if you want to get equity out of your home. This guide will ensure you know all the HELOC basics — and that you have all the information you need to get the best available HELOC rate in Michigan.
What Is a HELOC?
A HELOC is a revolving line of credit. Using one is similar to using a credit card, but your debt is secured by your home’s equity, just as your home loan is. HELOCs tend to offer lower interest rates than other forms of credit because your home serves as collateral. Borrowers can generally access up to 90% of home equity with a HELOC.
A borrower is approved for a credit line but can then withdraw funds as they are needed, up to the credit limit, instead of receiving all the funds in a lump sum. This means the borrower pays interest only on the portion of the credit line that they are actively using.
A HELOC has two phases: the draw period and the repayment period. It’s important to understand how they differ when considering your financial options.
The Draw Period
During the HELOC’s draw period, which is usually 10 years, you can access funds up to the limit of your credit, make payments to diminish your outstanding balance (or just pay interest), and borrow again.
HELOCs have a variable interest rate, and at some point during the draw period your interest rate will begin to change with market conditions. When this will happen and any limitations on the minimum and maximum amount that your rate can shift will be in your HELOC agreement.
The Repayment Period
During the repayment period (typically 10 to 20 years), borrowing ends, and you pay back the principal with interest. Variable interest rates can continue to fluctuate. Using a HELOC repayment calculator can help borrowers plan their payments based on the current interest rate.
Where Do HELOC Interest Rates Come From?
The interest rate you obtain when you sign on to your HELOC is clearly important. But what determines the rate you’ll be offered? HELOC rates are tied to a lender’s prime rate, which is influenced by Federal Reserve policy decisions. The prime rate is what lenders offer the customers deemed least at risk of default. The rate is adjusted for borrowers depending on their personal qualifications, such as credit score and debt levels.
How Interest Rates Impact HELOC Affordability
The HELOC interest rate you obtain can have a significant impact on affordability over the 10-year draw and 20-year repayment period. Here’s a look at monthly payments and total interest paid for three different HELOC levels at differing interest levels and terms.
| Loan Amount | Loan Term | Interest Rate | Monthly Payment |
|---|---|---|---|
| $100,000 | 20 years | 8.00% | $836 |
| 7.00% | $775 | ||
| 10 years | 8.00% | $1,213 | |
| 7.00% | $1,161 | ||
| $50,000 | 20 years | 8.00% | $418 |
| 7.00% | $388 | ||
| 10 years | 8.00% | $607 | |
| 7.00% | $581 | ||
| $25,000 | 20 years | 8.00% | $209 |
| 7.00% | $194 | ||
| 10 years | 8.00% | $303 | |
| 7.00% | $290 |
HELOC Interest Rate Trends
HELOC rates in Michigan generally follow prime rate trends. So if you’ve never kept tabs on the prime rate before (or haven’t paid attention since you got your mortgage), here’s a refresher: Since 2018, the prime rate has hit a low of 3.25% in 2020 and a peak of 8.50% in 2023. As you can see from the graphic below, which shows more than 50 years of the average prime rate, it’s pretty unusual for the rate to dip below 4.00% or top 10.00%.
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 is out of your control, but there are various other factors that will influence the rate you’re offered and it’s smart to be aware of them. Take a closer look:
Home Equity
Possessing substantial home equity can significantly enhance your creditworthiness in the eyes of lenders. You’ll need a minimum of 15% to 20% equity to qualify for a HELOC, and the more equity, the better..
Credit Score
A credit score of 680 or higher is an important metric for borrowers, and some lenders prefer a score of 700+. A higher credit score indicates lower risk to the lender, which can lead to more favorable terms.
Stable Income
Lenders assess your overall income to determine your ability to repay the HELOC, but how stable your income is will also be a factor. If your income is erratic — maybe you are a freelancer or own a small business — you may be asked for extra documentation during the application process.
Loan-to-Value Ratio
Lenders consider the combined loan-to-value ratio (CLTV) when setting credit limits. Your CLTV is whatever you owe on your mortgage plus your desired HELOC amount divided by your home’s value. (You can use a home value estimate from a real estate site for this exercise.) You want the answer to be under 90%, and lower is better.
Variable vs Fixed Interest Rates
As we’ve seen, HELOCs feature variable interest rates, which are subject to change throughout the duration of the loan. These rates commence at a lower level compared to typical fixed rates, so a HELOC may start at a more favorable rate than a home equity loan and is likely to have a significantly lower rate than a personal loan. As the borrower, you have to decide if you are comfortable with the somewhat unpredictable nature of HELOC payments.
Tools & Calculators
Online tools can help you determine what your HELOC payments might look like at different interest levels and tell you how much interest you would pay over the life of a loan. A home equity loan calculator can even give you a rough sense of what your borrowing capacity might be. Here are three useful versions:
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 a few things you can do before applying for a HELOC in Michigan that may help you secure the most favorable HELOC rate available.
Cultivate Your Credit Score
Maintaining timely payments and reducing credit card balances can improve your credit score. Regularly review your credit report to make sure there are no inaccuracies (yes, they do happen). If you find anything amiss, request a correction and then follow up to make sure it happens.
Assess Your Home Equity
Regular mortgage payments have helped you build home equity over time. Given that lenders are looking for at least 15% to 20% equity, how do you stack up? To find out, subtract whatever you owe on your mortgage from your home’s estimated value (again, an online estimate is fine). Divide the answer by the home’s estimated value. You’ll get a percentage of equity. If it isn’t at least 15%, you may want to hold off on applying until you can build it more.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is how much you owe in monthly debt payments (car payment, student loan payment, etc.) divided by your gross monthly income. Home equity lenders generally look for a DTI ratio that’s below 50%, and many prefer you go below 36%.
Application Process for a HELOC in Michigan
Taking the HELOC application process step by step will help ensure you submit an application that is thorough and accurate — two things lenders love.
Step 1. Run the Numbers
Is your credit score at least 680? Your DTI ratio below 50%? Do you have a minimum of 15% equity in your home? Making sure you meet these minimums should save you headaches later.
Step 2. Compare Lenders
Have a look at the posted interest rates and terms for HELOCs among lenders in Michigan. Examine any publicly available qualification criteria, loan minimums, and loan limits. You might find out the draw and repayment periods a lender offers, for example. This should help you identify lenders that might suit your needs. If a lender offers an online prequalification process, you can go through it and consider the feedback.
Step 3: Gather Your Documents
It’s a hassle to get halfway through completing an application only to find you are missing important information. Pull together these items before you begin: proof of identification; proof of income (recent pay stubs, most recent W-2, most recent tax return); employment history, such as a resume; and home insurance coverage information. Have your most recent mortgage statement on hand as well. If your income is erratic, you’ll need at least two tax returns plus a profit and loss statement from your business if you are self-employed.
Step 4: Submit Your Application
Submit your HELOC application via the lender’s preferred channel. This may be accomplished online, over the phone, or during an in-person visit. Double-check everything for accuracy before you sign off. Mistakes can delay processing.
Step 5: Get an Appraisal
A home appraisal will likely be part of your HELOC process. It serves as a critical determinant in ascertaining the precise amount of equity that is available for you to borrow. Your lender will tell you what’s needed, but if an in-person appraisal is required, try to schedule it promptly.
Step 6: Prepare for Closing
Before you are able to access your HELOC funds, it is essential that you sign the HELOC documents and pay any required fees. Some lenders obligingly make funds available within three business days following the closing of the HELOC. Take time to ensure you understand all terms and conditions before finalizing your HELOC.
Tax Benefits and Considerations
Homeowners can deduct HELOC interest if the funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the interest paid on the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). You’ll need to itemize your return to capture this dedication, so you may want to consult a tax advisor for help. Save any receipts from your renovation wherever you keep your tax documents.
Closing Costs and Fees
HELOC closing costs are lower than typical home-buying or refinancing costs. The appraisal fee ($300 to $500) is usually the highest expense. Other costs include application, origination, and administrative fees. Some lenders charge a transaction fee for withdrawals, an inactivity fee, or an early termination fee. Make sure you understand all fees so there are no surprises.
Alternatives to HELOCs
Home equity loans, cash-out refinancing, and personal loans offer alternative borrowing options. Each type of home equity loan or unsecured loan has its pros and cons.
Home Equity Loan
Unlike HELOCs, home equity loans provide borrowers with a lump sum as opposed to a line of credit. Borrowers can usually access up to 85% of their equity (vs. 90% with a HELOC). Other HELOC vs. home equity loan differences: HELOCs, as you know by now, have a variable interest rate. Home equity loans typically have a fixed rate, and so may be more suitable for those who prefer predictable payments. The application process, including the need for an appraisal, is similar to that for a HELOC.
Cash-Out Refinance
Homeowners can get cash by refinancing their mortgage for more than they owe. This special type of mortgage refinance gives you money to pay off your first mortgage. You’ll then take the extra funds in cash to use as you wish. If you’re considering a cash-out refinance vs home equity line of credit, one big difference is that a refinance gets you an entirely new loan and new interest rate. If you have a sweet interest rate on your original mortgage, you’ll want to look carefully at whether it makes sense to refinance. Another difference that may matter to some homeowners: 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 a flexible, typically unsecured loan that you pay back in regular, fixed payments over a set term of 2 to 7 years. Personal loans can be used for various purposes and do not require collateral, but they tend to have higher interest rates than HELOCs.
Credit Cards
Credit cards also typically come with a higher interest rate than HELOCs. It can be costly to carry a large balance on a credit card, although they are useful for smaller purchases. (Buy a new microwave with a credit card, sure. Charge your entire kitchen renovation to one? Perhaps not.)
The Takeaway
HELOCs present a versatile means of tapping into the equity you’ve stored up in your property. Undertaking a thorough comparison of Michigan HELOC rates is paramount to securing the most favorable deal, but so is carefully preparing your application and looking closely at how a variable rate might affect your payments. The good news is that if you opt for a HELOC, you can use only the amount of the credit line that you need, which may help limit the amount of interest you pay.
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 snagged a 6.00% interest rate, your monthly payment would fall to $358. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. As you can see, the interest rate and term are important considerations.
Is a HELOC a good idea right now?
Whether a HELOC is a smart move right now depends in large part on your personal financial situation. Do you need to borrow a large sum for a project? Then a HELOC may be an efficient way to do that. Are you not quite sure how much you need to borrow? A HELOC may be preferable to a lump-sum loan. Are you already losing a little sleep over all your monthly payments? Then (you guessed it) this may not be the right time for a variable-rate loan (or any loan, unless it is one that helps you consolidate debt and obtain a lower interest rate).
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 rate and 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. If you secure a 7.00% interest rate, your payment would be reduced to $775.
What are the benefits of a HELOC?
HELOCs are versatile. You borrow the amount you need when you need it. Because they are secured by your home equity, they typically have nicely competitive interest rates when compared to other borrowing methods.
Do you need an appraisal for a HELOC?
Yes, an appraisal is typically required for HELOCs. The appraisal helps determine the value of your home, which directly correlates with the amount of money you can borrow.
What disqualifies you from getting a home equity loan?
Several factors, such as poor credit history, insufficient home equity, and a high debt-to-income ratio, can disqualify you from obtaining a home equity loan.
How difficult is it to get a HELOC?
The level of difficulty associated with securing a HELOC will depend on your unique financial situation. If you meet a lender’s minimum requirement for credit score, equity level, and debt-to-income ratio, it shouldn’t be hard. If your income is unstable, you may have to work harder to prove to the lender that you are a good risk, but you may still be approved depending on other factors.
Does HELOC affect credit score?
HELOCs can significantly impact your credit score, both positively and negatively. Consistently making your payments on time can lead to a notable improvement in your score, while neglecting to make payments can have an adverse effect. Additionally, opening a new line of credit may temporarily cause a slight decrease in your score, but this impact is usually short-lived.
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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