Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• A HELOC, or home equity line of credit, lets you borrow against the equity in your home.
• HELOC rates are often lower than those of unsecured loans but have variable rates that can fluctuate with the prime rate.
• The draw period is usually 10 years, with a subsequent repayment phase of up to 20 years.
• Interest is only paid on the amount you borrow.
• Missed payments could lead to foreclosure.
Welcome to our guide to home equity line of credit (HELOC) rates in Orange County, California. We’re here to help residents of Anaheim, Costa Mesa, Huntington Beach, and other OC towns understand the ins and outs of interest rates and how you can secure the best terms. Whether you’re dreaming of a home renovation, looking to consolidate debt, or have other significant expenses on the horizon, we want to empower you to make informed financial decisions and maximize your home equity.
A HELOC is a financial tool that leverages your home equity as collateral. Equity is the difference between your home’s value and the balance you still owe on your home loan. To qualify, homeowners typically need to have 15% equity, though having more equity will help you qualify for a better interest rate. You can borrow up to 90% of your equity. A HELOC has two phases, each with different parameters:
During the HELOC’s draw period (usually 10 years) you can use funds from the credit line in increments, as needed. You’ll have 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 may be useful at this time.
After the draw period ends, the repayment period of between 10 and 20 years begins. Monthly payments will increase as you begin to repay the principal plus interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. This is when a HELOC monthly payment calculator may come in handy.
HELOC interest rates are closely tied to the prime rate, which is affected by the Federal Reserve’s actions. Each lender then adds their own margin to this rate, leading to a variety of HELOC rates in the marketplace. This is why you should seek out rate quotes from multiple lenders before deciding where to apply. When you apply for a HELOC, the lender will take into account your credit score, debt-to-income (DTI) ratio, income stability, and the amount of equity in your home when it determines your credit limit and rate.
It’s worth shopping around for the best available interest rate on your HELOC. Even a small change in the rate can make a noticeable difference in the amount of interest you’ll pay over the life of the credit line. Let’s say you arrived at the repayment phase of your HELOC owing $100,000. If you had an interest rate of 7.00% and a repayment term of 20 years, you would pay $775 per month and shell out $86,072 in interest, total. But if your interest rate was instead 8.00%, you would pay $836 per month. You might not feel that’s such a big deal, but over the life of the HELOC it would amount to more than $14,000 in additional interest. (Of course your exact numbers would vary due to HELOCs’ variable interest rates. But the principle is the same: lower rate, lower payments.)
As you’re thinking about how to get equity out of your home in Orange County, keeping an eye on the prime rate can give you a sense of what to expect with HELOC rates. And knowing the history of the rate can help put the interest rates you’re seeing in the current marketplace into perspective. The prime rate hit a low of 3.25% in 2020 and a high of 8.50% in 2023. You may not be able to wait for a super-low prime rate to borrow. But you can work on your credit score and other qualifications to help ensure that you qualify for the lowest rate available.
| 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% |
If a HELOC is appealing to you, it’s worth digging into what the variable (also called adjustable) interest rate is all about. Variable means the rate can go up or down based on market conditions, taking your monthly payment amount with it. But it’s not entirely the Wild West. Your HELOC agreement will spell out how often the rate can change, how much it can change in a given period, and how high it can go overall. If you can get comfortable with that, you can probably handle a HELOC.
Recommended: Different Types of Home Equity Lending
Before you leap into a HELOC, you can use online calculators to get a sense of your potential monthly payments and interest costs. These simple tools will help you envision how a HELOC will affect your finances.
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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.
To snag a great HELOC rate, you’ll want ample equity in your home, of course. But you’ll also want to take measures to make sure your credit score and debt levels are to a lender’s liking.
Keeping your credit score at 700 or above is a smart move if you’re aiming for the best HELOC rates, though you can qualify with a score of 640. By making payments on time and reducing your credit card balances, you can give your credit score a lift. It’s always a good idea to check your credit report for errors and dispute any you find — this can help improve your score. And remember, keeping those old credit accounts open and using them responsibly can help you maintain a healthy credit history, which will only work in your favor when it comes to securing a competitive HELOC rate.
Your DTI ratio is a simple math: your total monthly debt payments divided by your gross monthly income. HELOC lenders generally prefer a DTI below 50%, but the lower, the merrier. To boost your chances, consider paying down credit card balances, and steering clear of new debt until your HELOC is in hand. It won’t hurt to increase your income either, if that’s doable.
You can kick off the process of applying for a HELOC in Orange County by prequalifying online. This step lets you peek at potential HELOC rates from different lenders. Prequalification requires that you share some basic financial info. If you decide to proceed to the full application, here’s your game plan:
In addition to checking your credit score and DTI ratio, you’ll want to take a look at your home equity to make sure you have at least 15%. Look up your estimated home value on a real estate site. Subtract whatever you owe on your mortgage from the home value, then divide the result by your home value to arrive at a percentage of equity. If you haven’t hit 15% yet, you might want to delay applying for a HELOC.
Determine what interest rates you might qualify, but also compare lenders’ qualification requirements, minimums and maximums, fees, and the length of the draw and repayment periods they’re offering. Different lenders serving Orange County have different HELOC rates and terms, so it’s essential to compare them.
Gather recent pay stubs, W-2 forms, and tax returns before you start the application process. If you’re self-employed, a lender might ask for a couple years’ worth of tax returns and a profit-and-loss statement for your business. Also have your homeowners insurance documents handy. Doublecheck every fact and then submit your application. You can apply online, over the phone, or in person, depending on the lender.
An appraisal will establish your home’s value. It typically costs between $300 and $600. A prospective lender will tell you what kind of appraisal is required, so wait for instruction after filing your application.
Before you can access your HELOC funds, you’ll need to sign the HELOC agreement and pay fees. Some lenders can make the funds available as soon as three days after the HELOC is closed. In the meantime, get ready for the closing by giving all the documents a thorough review and making sure you’re clear on the terms and conditions. Have the necessary funds ready to cover the closing costs.
When it comes to closing costs, you’ll be pleased to know that HELOCs are generally more affordable than those associated with buying or refinancing a home. The appraisal fee is often the most significant expense, though you may see charges for a title search, application, origination, and administrative fees. Some lenders may even have annual maintenance fees of up to $250, along with potential transaction or inactivity fees.
Here’s some good news to offset all that talk of fees: You can deduct the interest on your HELOC if you use the funds to make significant improvements to your primary residence. This tax benefit is in place for 2025. A tax advisor can help you itemize your return and also verify that you are eligible for this deduction now and in future years as tax policies change.
Recommended: HELOC vs. Home Equity Loan
There are other ways besides a HELOC to tap into your home equity, as well as personal loans for those who don’t feel comfortable putting their home on the line. Here are the details of your other options:
A home equity loan is a lump-sum loan with a fixed interest rate. Borrowers can often borrow up to 85% of their equity with this type of loan. Like a HELOC, it uses your home as collateral. A home equity loan calculator can help you figure out how much you might borrow. Lenders generally look for a credit score of 680 or higher, but for the best rates you’ll need 700 or above. Note that a home equity loan typically has a consistent monthly payment amount over the entire term.
A cash-out refinance is a mortgage refinance that lets homeowners get a new home loan for more than they owe on their original one. They then receive the difference in cash. For a cash-out refi, you’ll need a credit score of 620 or more and a DTI ratio under 43%. One cash-out refinance vs. home equity line of credit point of difference: A refi leaves you with a single monthly payment instead of two. Because it’s an entirely new mortgage, you can choose the loan term and decide between a fixed or variable rate.
Your home wouldn’t be in jeopardy if you can’t make payments on an unsecured personal loan. This type of lump-sum loan is repaid in regular, fixed installments over two to seven years, a shorter time horizon than most HELOCs and home equity loans. Many lenders want to see a credit score of 610 or higher on a personal loan application. While the process is often swift, personal loans may carry higher interest rates than HELOCs or home equity loans.
As you consider a HELOC, it’s crucial to consider both the perks and the possible pitfalls. These lines of credit often start with attractive interest rates and offer the flexibility to borrow as needed, which can be a great fit for ongoing expenses like a home renovation or unexpected medical costs. Keep in mind, though, that the rates are variable and could rise, impacting your monthly payments. Before you move forward, be sure to have a solid plan for repayment and shop around for a lender who will give you the best available rate.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
A HELOC can be a smart way to cover many expenses, from home improvements to debt consolidation. A key advantage of a HELOC is that you only pay interest on the amount of the credit line you’ve actually used. And for the first decade of a HELOC, you often don’t have to repay anything — you just make interest payments.
Your monthly payment on a $50,000 HELOC will vary based on the rate and terms of your loan. During the draw period, you might only need to pay interest, which can be quite manageable. For instance, at a 7.00% interest rate, your monthly interest-only payment would be approximately $292. But keep in mind, once the repayment period kicks in, you’ll be paying both principal and interest, so your monthly expense will increase.
You will typically need a home appraisal when applying for a HELOC. This appraisal determines the value of your property and establishes the amount of equity you possess. This helps lenders calculate your credit limit, which is usually up to 90% of your equity. This step ensures that the lender is offering a fair and accurate HELOC credit line based on your home’s current market value.
The process of securing a HELOC is quite manageable, provided you meet the lender’s criteria. The main considerations are having a home equity of at least 15%, a solid credit score of at least 640, and a debt-to-income (DTI) ratio that doesn’t exceed 50%. The application journey involves exploring various lenders, gathering the necessary paperwork, filing an application, and having your home appraised. While HELOCs are generally more accessible than other loan types, it’s wise to be discerning and compare offers to land the most favorable terms and rates.
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