MODESTO HELOC RATES TODAY
Current HELOC rates in
Modesto, CA.
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 are influenced by the prime rate and lender policies.
• Homeowners can access up to 90% of their home equity with a HELOC.
• HELOCs come with two main phases: a draw period and a repayment period.
• Variable rates mean your payments could change from month to month.
• HELOCs are great for large expenses or consolidating debt.
Introduction to HELOC Rates
Welcome to our comprehensive guide to home equity line of credit (HELOC) rates in Modesto, California. Our goal is to equip you, the homeowner, with the knowledge to not only understand the rates but to also qualify for the best terms. We’ll explore the benefits and potential pitfalls of HELOCs, and you’ll learn how to use tools to estimate your payments. Armed with this information, you can make informed financial decisions and manage your home equity with confidence.
What Is a HELOC?
A HELOC is a revolving credit line that uses your home as collateral. Your equity is the difference between your home’s value and your home loan balance. Most lenders require you to have at least 15% equity in your home. You can borrow up to 90% of that equity. HELOCs have two main phases: a draw period (typically 5 to 10 years) and a repayment period (typically 10 to 20 years). It’s important to understand the difference:
The Draw Period
The draw period is the time when you can borrow money in increments, up to your credit limit, repay what you’ve borrowed (or carry a balance), and borrow again. During these years, you may only have to make interest payments, so consider using a HELOC interest-only calculator.
The Repayment Period
Borrowing ends now and you must begin to pay back the principal plus interest. HELOCs have variable interest rates, with rates following the market, so the monthly payment amount can vary over the repayment term. A HELOC monthly payment calculator will be handy at this point.
Where Do HELOC Interest Rates Originate?
HELOC interest rates are primarily influenced by the prime rate, which is influenced by the actions of the Federal Reserve. Each lender then adds a margin to the prime rate to determine individual HELOC rates. Lenders also consider individual factors such as credit score, debt-to-income (DTI) ratio, income stability, and the amount of equity in your home. Once you understand all these variables, it becomes clear that getting rate quotes from multiple lenders is an important part of seeking out a HELOC. Each lender might make you a different offer, and they all have different terms and conditions.
How Interest Rates Impact HELOC Affordability
With HELOC interest rates, even a small percentage can make a big difference in what you pay. For example, if you entered the repayment phase owing $100,000 at an 8.00% interest rate, you would pay $1,213 each month. If you had an interest rate of 7.00%, however, you would pay $1,161. The difference may not seem so significant, but it adds up to roughly $6,000 in extra interest over a 10-year period. This is why it pays to seek out the lowest rate.
HELOC Interest Rate Trends
Keeping an eye on the prime rate can give you a sense of where HELOC rates in Modesto might be headed. And knowing a bit about the history of the rate can put the current rates you are seeing into perspective. The prime rate hit a low of 3.25% in 2020 and a recent high of 8.50% in 2023. There’s a good chance the rates you’ll see will be in this range. You may not be able to wait for a rate as low as 2020’s, but you can certainly prepare your financial profile to help you qualify for the best of the available rates.
| 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 often come with variable (also called adjustable) interest rates, which can change with the market. This can work in your favor if rates are forecast to drop, but it does add an element of unpredictability. Your HELOC rate wouldn’t be entirely unpredictable, however. The HELOC agreement would spell out how often the rate can change and by how much. There is usually a rate cap. You have to assess whether you’re comfortable with the range of rates that might result. One way to do this is to play with different rates in an online calculator.
Helpful Tools & Calculators
Before you apply for a HELOC, you can use online tools to estimate your monthly payments and interest costs. These are the few of the calculators you can use to assess the effect of HELOC rates on your budget and gauge your overall financial health.
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 obtain the best possible HELOC rate, it helps to exceed the minimum 15% home equity mark. Lenders will also be carefully examining your credit score and DTI ratio. Learn how to make them shine:
Improve Your Credit Score
A credit score of 700 or higher will help you get the best HELOC rates in Modesto, though you may be approved for a HELOC with a minimum score of 640. You can give your score a boost by paying on time and keeping credit card balances in check. Avoid closing old credit accounts or opening new ones in the months before your HELOC application. And before you apply for a HELOC, review your credit report, clear up any errors, and watch your score rise.
Calculate Your Debt-to-Income (DTI) Ratio
Your DTI ratio is a tally of your monthly debt payments divided by your gross monthly income. Most HELOC lenders prefer a DTI below 50%, but the lower, the better. A reduced DTI can work in your favor, potentially opening doors to a HELOC with more attractive terms.
Application Process for a HELOC in California
The process of applying for a HELOC in Modesto is made simpler by prequalifying online. You put in a little basic information and the lender will provide an estimated rate and the terms you may be eligible for. If you decide to move forward with a full application, you can follow these steps:
Step 1. Run the Numbers
Check that your equity level, credit score, and DTI ratio meet the minimums a lender will look for. That’s 15% equity, a credit score of at least 640, and a DTI of 50% or less. To compute your equity level, subtract what you owe on your mortgage from your home’s estimated value. Then divide the answer by the home value to get a percentage of equity. If it’s at least 15%, move to the next step.
Step 2. Compare Lenders
Compare different lenders to find the best HELOC rate you can get in Modesto. Don’t just look at interest rates. Narrow the field based on rates, but also examine qualification requirements, minimums and maximums, fees, and the length of the draw and repayment periods. Each lender has unique terms and conditions, so read the fine print to understand the full scope of what you’d be signing up for.
Step 3: Submit Your Application
You’ll need to gather your ID, proof of income (pay stubs, W-2, tax documents), and insurance policy information for the property you’re using as collateral. If you’re self-employed, a lender might ask for a profit-and-loss statement and a couple years’ worth of tax returns. Once you’ve got everything together, you can apply online, over the phone, or in person. Doublecheck the accuracy of the info you provide to keep the process moving along smoothly.
Step 4: Get an Appraisal
After you submit an application and solidify your choice of lender, you’ll likely need an appraisal. Work with the lender to ensure you get the appraisal and documentation the lender requires. If your home is appraised for more than what you owe — to the point that you hit that 15% equity target — you’ll have cleared a bar necessary for a HELOC.
Step 5: Prepare for Closing
If you’re approved for a HELOC, you’ll need to sign the HELOC documents and take care of any associated fees. Most lenders will make the funds available within three business days of the HELOC closing. Before you sign on the dotted line, 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
HELOC closing costs are generally more affordable than those for a standard home purchase or refinance. The priciest item is often the appraisal fee, which can range from $300 to $600. You might also encounter a title search fee ($100 to $450), application fee, and origination fee. Some lenders may offer to reduce or even waive these closing expenses, but be sure to consider the trade-off: Often, it means a higher HELOC rate.
Tax Benefits and Considerations
Homeowners can deduct the interest on a HELOC if the loan is used to substantially improve the taxpayer’s primary residence. These tax rules apply through 2025; a tax pro can help you navigate any changes that come in 2026 and beyond. You’ll have to itemize on your return in order to capture this deduction.
Recommended: Different Types of Home Equity Lending
Alternatives to HELOCs
Other ways to get equity out of your home include home equity loans and cash-out refinancing. If you are at all iffy on a HELOC, you could consider one of these, or explore a personal loan. Here’s the lowdown:
Home Equity Loan
A home equity loan is often confused for a HELOC, but they are different. With a home equity loan, you get a fixed sum of money and begin repaying it, with interest, immediately. Because the interest rate is fixed, your monthly payment will be consistent. You can usually borrow up to 85% of your home’s value, minus what you owe, and you’ll need a credit score of at least 680 and a DTI ratio under 50%. Home equity loans are a good option when you need a large sum all at once. A home equity loan calculator can tell you how much you might be able to borrow.
Cash-Out Refinance
A cash-out mortgage refinance lets you refinance your mortgage for more than you currently owe. You then pocket the difference. This is a great option if you need a large amount of money at once, as long as the current interest rates are an improvement on your original rate. Typically, you’ll need a credit score of 620 or higher and a debt-to-income ratio under 43% for this option. When comparing a cash-out refinance vs. a home equity line of credit, note that the former allows you to choose between fixed or variable rates.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a period of two to seven years. The key advantage here is the safety of your home; because your property doesn’t serve as collateral, your home isn’t on the line if you can’t make your payments. Lenders usually look for a credit score of 610 or higher for this type of loan. While the interest rates may be a bit higher than HELOCs or home equity loans, the approval process is often more swift.
The Takeaway
If you’re considering a HELOC, take the time to weigh the benefits and risks. HELOCs offer a flexible line of credit with potentially lower interest rates compared to personal loans, which can make them a good choice for large, ongoing expenses. But remember, if you default, you could lose your home. Always assess your financial situation and compare offers from different lenders to find the one that’s the best fit for you.
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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 $50,000 HELOC?
Your monthly payment on a $50,000 HELOC will vary based on three factors: how much of the $50,000 credit line have you actually used; what is your interest rate; and whether you are in the draw or repayment period. In the former you pay interest only and in the latter you will pay down the principal plus interest. For this reason, it’s best to use an online calculator to compute your specific payment amount.
Do you need an appraisal for a HELOC?
An appraisal is required for a HELOC in most cases. This step is important 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.
How hard is it to secure a HELOC?
Gaining approval for a HELOC is within reach if you meet the lender’s criteria. Lender requirements vary, but the basic prerequisites are a credit score of at least 640, a debt-to-income ratio below 50%, and a home equity level of 15%. The best interest rates go to those with a credit score of at least 700 and a DTI ratio under 36%. The application process includes submitting financial records and arranging for a home appraisal.
Will a HELOC impact your credit score?
The mere act of opening a HELOC can cause a slight dip in your credit score due to the necessary hard credit inquiry by a prospective lender. But use your HELOC responsibly — make timely payments and keep balances in check — and you may actually see an improvement in your score. On the flip side, missing payments or maxing out your HELOC can be detrimental.
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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