Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• The rates you’ll be offered for a home equity line of credit are influenced by your home equity, credit score, and debt-to-income ratio.
• HELOCs are used a bit like a credit card, but the interest you pay on a HELOC may be tax deductible.
• HELOCS have variable rates that can change with the market, which might impact your monthly payments and the total interest you pay.
• Online calculators will help you estimate payments.
• You can use a HELOC for a variety of reasons, such as home improvements, personal expenses, and consolidating debt.
If you’re a homeowner looking to borrow some money, this article will guide you through the process of securing a good home equity line of credit (HELOC) rate in Williamsville, Missouri. This comprehensive guide is designed to help you, the homeowner, understand the factors that influence these rates and how to qualify for the best terms. You’ll learn about the benefits and risks of HELOCs, how to compare different lenders, and the tools available to estimate your costs. By the end, you’ll be better equipped to decide if a HELOC is the right financial tool for you and to navigate the application process.
A HELOC is a revolving credit line that uses your home’s equity (the difference between your home value and your home loan balance) as collateral. To qualify, most lenders will require you to have at least 15% equity in your home. You can typically borrow up to 90% of your equity. Remember that when your home is used as collateral, a lender can foreclose if you fail to make payments on schedule. HELOCs have two main phases: a draw period and a repayment period:
During the draw period (often 10 years), you can withdraw funds as needed. At this time, you’ll have to pay interest on what you borrow, but most lenders won’t require you to make payments on the principal — although you can do so if you want to utilize the full credit line again. A HELOC interest-only calculator can help you find out how much you owe in interest.
After the draw period concludes, the repayment period begins. It might be 10 or 20 years. Monthly payments will increase as you begin to pay down the principal as well as the 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 at this stage.
HELOC interest rates are tied to the prime rate, which is influenced by the Federal Reserve’s actions. Each lender adds a margin to the prime rate, which is why HELOC rates can differ. Lenders also consider individual factors such as credit score, debt-to-income (DTI) ratio, income, and the amount of equity in your home. Understanding these factors can help you anticipate rate fluctuations and make informed decisions about the best time to apply for a HELOC.
The interest rate on your HELOC can make a big difference in how much you pay over the life of the loan. Even a small increase in the interest rate can increase your monthly payments and the amount of interest you will pay over the life of the loan. For example, let’s say you borrow $50,000 with a HELOC and have a 10-year repayment term. If your interest rate was 8.00%, your monthly payment would be $607 and total interest paid would be $22,797. But if you instead had a 7.50% rate, your monthly payment would be $581 and total interest $19,665. The lower rate saves you more than $3,000 in interest!
Recommended: HELOCs vs. Home Equity Loans
As you are thinking about how to get equity out of your home, the prime rate may give you a sense of where interest rates are headed. It’s also helpful to understand the history of the rate: It has gone from a low of 3.25% in 2020 to a high of 8.50% in 2023. This can help put current interest rates in Williamsville into perspective. You may not be able to wait for a rate as low as 2020’s rock-bottom one, but there are things any HELOC applicant can do to get the best available rate. We’ll dig into that below.
| 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% |
Whatever interest rate you might initially capture for your HELOC, you likely won’t have it for the duration of the line of credit. HELOCs usually have variable (also called adjustable) interest rates, which rise or fall with the market. How often they can change and how high or low they can go will be spelled out in your HELOC agreement. Understanding this and reading the fine print on rate changes is important if you’re obtaining a HELOC.
Before you apply for a HELOC, use our online tools to estimate your monthly payments and interest costs. It’s an easy way to see if a HELOC fits with your budget and financial goals.
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.
Meeting the requirements for a competitive HELOC rate is within your grasp if you can spend some time cultivating a strong financial profile before you file your application. Verify that you have at least 15% equity in your home by subtracting your mortgage balance from your home’s estimated market value, then dividing the result by your home value. Then, work on your credit score and DTI ratio:
To ensure you’re in the best position to secure a favorable HELOC rate in Williamsville, aim for a credit score of 700 or higher. Making timely payments and reducing your credit card balances will help your number rise. Setting up automatic payments can help you avoid late payments. Also check your credit report regularly for any inaccuracies, and avoid closing old credit cards or opening new ones in the months leading up to your HELOC application.
Your DTI ratio is a simple equation: Divide your total monthly debt payments by your gross monthly income. Most HELOC lenders prefer a DTI ratio below 50%, but below 36% will get you the best rates. To spruce up your DTI number, reduce your debts, increase your income, or do both.
Streamline your application for a HELOC in Williamsville by prequalifying online. This lets you see potential HELOC rates and get a better idea of the terms you might qualify for before you start the full application. When you’re ready to apply, follow these steps:
Make sure your equity level is 15%, your credit score is at least 640 (and ideally 700), and your DTI ratio is below 50% (hopefully well below) using the instructions above.
Take a look at the rates available to you in Williamsville. Carefully compare qualification requirements, credit minimums and maximums, any associated fees, and the length of both the draw and repayment periods. Keep an eye out for lenders that offer competitive rates and flexible terms. Reading customer reviews and thoroughly checking lender reputations can also help you make a more informed decision.
Gather your proof of identification, income verification documents, and property insurance information. For income verification, you’ll need to provide your most recent pay stubs, W-2 forms, and complete tax returns from the previous year. 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 online, over the phone, or in person.
An appraisal is an objective, professional analysis that determines the value of your home. This in turn helps establish whether you can qualify for a HELOC and how much you might be able to borrow, in addition to influencing the rate you are offered. The typical cost for an appraisal is between $300 and $600. An accurate appraisal is key to unlocking the equity in your home.
Before you can access the funds from your HELOC, you will need to sign all of the necessary documents and pay any fees. Many lenders will make the funds available to you by the third business day after the closing. Before you sign, be sure you understand the terms of the HELOC and have a repayment strategy in place.
The good news is that HELOC closing costs are generally more affordable than those associated with a new home purchase or a refinance. The most significant expense is usually the appraisal fee. There may also be a title search fee (typically $100 to $450), an application fee, loan origination fee, and administrative fees. Some lenders may also charge a maintenance fee of up to $250 annually, as well as transaction fees for each withdrawal. Keep in mind that while some lenders may offer to reduce or waive certain closing costs, this could mean a higher interest rate for you.
Homeowners have the opportunity to deduct HELOC interest on their 2025 taxes, but only if the borrowed funds are specifically used for the purpose of significantly improving their primary residence. Consult with a qualified tax advisor to confirm your individual eligibility for any deduction related to the HELOC, and to see how the IRS might look at HELOC interest in years to come.
Recommended: Different Types of Home Equity Lending
While HELOCs are a popular choice for tapping into your home’s equity, there are other options to consider, including a home equity loan. If there’s any reason you’re unsure about a HELOC, or you just want to have all your options on the table, consider this list of alternatives:
With a home equity loan, funds come all at once and you begin paying them back, with interest, immediately. The repayment term might be from 10 to 30 years and the interest rate will be fixed, so monthly payments will be nicely predictable. Usually, you can tap into 85% of your home equity. Lenders look for a credit score of 680 or more, but a score of 700+ could bring better rates. A home equity loan calculator can show you what size loan you might qualify for.
A cash-out mortgage refinance replaces your existing mortgage with a new, larger one; you take the difference in cash. This might be the right option for you if you can score an interest rate that is an improvement on your current one (remember to factor in closing costs). To qualify, you need a 620 credit score and a DTI ratio under 43%. When comparing a cash-out refinance vs. a home equity line of credit, note that a refinance will leave you with a single monthly payment.
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a term of two to seven years. The key advantage here is that your home is not on the line should you face financial challenges. Many lenders look for a credit score of 610 or more for a personal loan. While they are relatively quick to secure, do note that these loans often come with higher interest rates than either a HELOC or a home equity loan.
When you’re pondering a HELOC, it’s wise to consider the benefits and potential pitfalls. A HELOC does often have a lower interest rate than a credit card or personal loan, and unlike a home equity loan, it provides the convenience of borrowing as you go. But remember, your home will be on the line if you fall behind on payments, just as it would be with a mortgage or home equity loan. Always take a moment to check in with your financial health and goals before making a decision. And if you opt for a HELOC, seek out rates from multiple lenders before locking in your choice.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
Whether a HELOC is a good fit for you at this moment depends on your personal finances. A HELOC is one of the more affordable ways to borrow money, and if you have ongoing expenses that are somewhat unpredictable, it might be the best solution for you, provided you have a clear understanding of the costs of a HELOC during both the draw and repayment period, and a plan in place to repay what you borrow.
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 620, 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 680 and a DTI ratio of 36%. The application process includes submitting financial records and arranging for a home appraisal.
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.
An appraisal will be key when applying for a HELOC. It helps your lender establish the current market value of your home, which in turn determines the amount of equity you can tap into. Most lenders set your HELOC limit at up to 85% of your equity. The lender will provide you with information about the appraisal process.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
