Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Amarillo are influenced by a borrower’s credit score and debt-to-income ratio.
• Lenders look to the prime rate to help set rates as well.
• Comparing rates from several lenders is the best way to find the most favorable terms.
• Home equity loans tend to have fixed rates which mean monthly payments don’t change.
• The interest on home equity loans could be tax-deductible if funds are used for qualifying purposes.
Home equity loans are a common means for homeowners to tap into the value of their property, providing a lump sum of cash that is repaid at a fixed interest rate. In this article, we’ll delve into home equity loan rates in Amarillo, TX, and how they’re impacted by economic and personal variables. We’ll walk you through how to prepare for the application process so that you can secure favorable rates and leverage your home equity wisely.
As you learn what a home equity loan is, it’s important to understand that it’s a second mortgage (assuming you’re still paying off your first home loan). Because your home serves as collateral, you’ll likely be able to access funds at a lower rate than you would with an unsecured personal loan. However, your property could be at risk if you stop making payments.
If you borrow with a home equity loan, the funds come as a lump sum and you’ll repay the loan in equal monthly installments over a period of five to 30 years. You begin the repayment process immediately. To qualify, you generally need at least 20% equity in your home. For example, if your home is valued at $500,000 and your mortgage is $350,000, you have $150,000 in equity. Many lenders offer loans of up to 85% of equity, which would be $127,500 in this example. A home equity loan calculator can help you figure out how much you might be able to borrow.
Recommended: HELOC Monthly Payment Calculator
Interest rates for different types of home equity loans are influenced by a variety of economic and borrower factors. Lenders typically base their home equity loan rates on the prime rate, which in turn is influenced by the Federal Reserve’s monetary policy. But each borrower’s personal credit score and debt-to-income ratio also play a role in the interest rate they are offered.
It’s important to understand how interest rates can tip the scales when it comes to the affordability of a home equity loan. What might seem like a small interest rate variance can result in a hefty payment over time. Take a look at the chart below, which shows you how different loan terms and rates affect monthly payments for varying loan amounts. It’s clear that nabbing the best home equity loan rates is a smart move.
| 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 |
As you think about applying for a home equity loan, you may find yourself beginning to watch the ups and downs of the prime rate. A glance at its history shows that in 2020, it was a mere 3.25%, but by 2023, it had soared to 8.50%. These significant shifts are a reflection of the ever-changing economic landscape and have a direct impact on the rates you might encounter in Amarillo. If you can apply for a home equity loan during a drop in the prime rate, you’ll be lucky. But if you can’t wait for that, focus on improving your own financial stats to present the best possible profile to a potential lender.
| Date | Prime 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 | 5.50% |
| 9/27/2018 | 5.25% |
To snag the most attractive home equity loan rate, you’ll want to focus first on your credit score and DTI ratio. These are your to-dos:
To be eligible for a home equity loan, it’s essential to maintain at least 20% equity in your home. Calculating your equity percentage is straightforward: Simply subtract your outstanding mortgage balance from your estimated home value, then divide the result by the home value to arrive at a percentage. If your equity doesn’t quite hit 20%, you’ll want to make more mortgage payments to push it over the threshold.
To land the most sought-after home equity loan rate, a robust credit score is needed. Lenders are often looking for a score of 680 or higher, with many requiring a score over 700. A higher credit score is a sign of financial savvy and can open the door to more favorable loan terms. By focusing on timely payments, reducing credit card balances, and steering clear of new debt, you can boost your chances of qualifying for a home equity loan with a lower interest rate.
Your DTI ratio is a big factor when it comes to qualifying for a home equity loan and getting a good rate. Lenders typically want to see a DTI ratio of 50% or less, and 36% or lower will help you qualify for the lowest interest rates. To manage your DTI effectively, you can pay down your existing debt, increase your income, or do a combination of both.
Property insurance is a must-have from a lender’s perspective. It’s a safety net for you and the lender, guarding against financial loss if your property is damaged. Make sure your coverage aligns with the lender’s needs to sidestep any hiccups in the loan application process.
These calculators can help you make an informed decision about borrowing. You’ll type in just a few figures and get useful results almost instantly.
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.
Just like your first mortgage, home equity loans have closing costs. They typically range from 2% to 5% of the loan amount. Some of the things they cover might sound familiar as you probably paid for them when you purchased your home initially: There will be an appraisal fee, a credit report charge, and a loan origination fee. While no-closing-cost loans exist, they often come with higher rates. It’s a good idea to compare these costs across different lenders to find the most affordable option.
The interest on home equity loans can be tax-deductible if the funds are used to buy, build, or significantly improve your home. In 2025, if you’re married and filing jointly, you can deduct interest on up to $750,000 of qualified home equity loans, and if you’re a single filer, the loan limit is $375,000. To claim this deduction, you’ll need to itemize your deductions on your tax return. A quick chat with a tax advisor can help you see how home equity loan rates and the tax deductibility of interest can play out in your financial situation.
Home equity loans are a popular choice, but they aren’t the only way to get equity out of your home. Here are two other options you should consider:
A home equity line of credit (HELOC) is similar to a credit card, but with a lower interest rate. You can borrow up to a certain credit line and during the loan’s “draw” period, which is typically a decade, you’ll only make payments based on the amount you borrow. A HELOC interest-only calculator is useful during this time.
After the draw period you’ll begin repaying all that you owe, with interest. The interest rate is variable and can go up or down over time, so when you compare a HELOC vs. a home equity loan, you’ll see that monthly payments aren’t as predictable with a HELOC. To qualify, you typically need a credit score of 680 or higher, although some lenders require a credit score of 700. Most lenders will also want to see that your debt-to-income (DTI) ratio is below 50%, although a DTI below 36% will give you the best interest rate options.
A cash-out refinance is a special kind of mortgage refinance. You take out a new mortgage that’s larger than your existing one, and pocket the difference in cash. The amount you can receive is determined by your home equity, with most lenders allowing you to borrow up to 80%. To qualify, you’re typically looking at a minimum credit score of 620 and a DTI ratio of 43% or less. You can choose between fixed or variable interest rates, with variable rates sometimes offering access to more equity.
Unlike a home equity loan, a cash-out refinance streamlines your payments into one, which many find easier to manage. Be sure to compare rates and terms to find the best fit for you, and to make sure that refinancing makes sense. The chart below sums up a cash-out refinance vs. a home equity line of credit and a home equity loan.
| Home Equity Loan | HELOC | Cash-Out Refinance | |
|---|---|---|---|
| Borrowing Limit | Up to 85% of borrower’s equity | Up to 90% of borrower’s equity | 80% of borrower’s equity for most loans |
| Interest Rate | Fixed | Generally variable | May be fixed or variable |
| Type of Credit | Installment loan: Borrowers get a specific amount of money all at once that they then immediately begin repaying, with interest, in regular installments. | Revolving credit: Borrowers receive a line of credit. They have a draw period (5-10 years) during which they borrow and can only pay interest (a HELOC interest-only calculator is useful then). Then there is a repayment period (10-20 years) to repay the principal plus interest. | Installment loan: Borrowers receive a lump sum payment from the excess funds of their new mortgage, which has a new rate and repayment terms. |
| Repayment Term | Generally 5-30 years | A draw period of 5-10 years, followed by a repayment period of 10-20 years | Generally 15-30 years |
| Fees | Closing costs (typically 2-5% of the loan amount) | Closing costs (typically 2%-5% of the loan amount), plus other possible costs, depending on the lender (annual fees, transaction fees, inactivity fees, early termination fees) | Closing costs (typically 2-5% of the loan amount) |
When you’re ready to explore a home equity loan, remember that a strong credit score is your best friend. Also keep an eye on your DTI ratio, and make sure your property insurance is up to snuff. These factors can tip the scales in your favor when it comes to loan rates and terms. It’s a good idea to at least consider a HELOC and perhaps a cash-out refinance before you make your borrowing decision. It’s all about finding the best fit for your financial situation. Shopping around and comparing offers from different lenders can help you make a smart decision.
SoFi now offers home equity loans. Access up to 85%, or $350,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.
Unlock your home’s value with a home equity loan from SoFi.
Home equity loans are a versatile financial tool that you can use to pay for a large purchase, fund home improvements, or to consolidate higher-interest debt. Their flexibility makes them an attractive option for significant expenses.
There are a few things that might prevent you from getting a home equity loan, such as not having enough equity in your home, having a low credit score, or having a high debt-to-income (DTI) ratio. Most lenders will want you to have at least 20% equity in your home, and a credit score of 680 or higher. A DTI ratio over 50% can also make it hard to get a loan. Additionally, not having enough property insurance or having a history of missed credit or loan payments can be a red flag for lenders.
The payment on a $30,000 home equity loan is determined by the interest rate and loan term. For a 20-year fixed-rate loan at 8.00%, for example, the monthly payment would be approximately $251. If you had an interest rate of 9.50%, your monthly payment would rise to $280.
The beauty of a home equity line of credit (HELOC) is its flexibility. During the draw period, which can last 5, 10, or even 20 years, you may only need to pay interest on what you borrow, 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.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
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*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.
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