Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Anchorage are influenced by economic and personal factors.
• Home equity loans have fixed interest rates, which means monthly payments are predictable.
• The better your credit score, debt-to-income ratio, and equity level, the lower your rate could be.
• Calculators can help homeowners estimate monthly loan payments.
• Some borrowers are able to deduct home equity loan interest for tax purposes.
• A home equity line of credit or a cash-out refinance are other borrowing options, each with its own perks.
Home equity loans are a powerful financial resource for homeowners seeking to leverage the equity they’ve built in their homes by making consistent home loan payments. In this guide, we will take a deep dive into home equity loan rates in Anchorage, Alaska, and explain how these rates are shaped by both economic forces and each borrower’s personal characteristics. We’ll also explore the advantages and potential pitfalls of home equity loans, and provide guidance on how to secure the most favorable rates.
Whether you’re gearing up for a home renovation or have your sights set on other major expenses, a grasp of home equity loan rates can empower you to get equity out of your home in the most cost-efficient way.
The first step toward being a wise borrower is to understand what a home equity loan is, exactly. Technically, a home equity loan is a second mortgage. Your home serves as collateral and your lender gives you a lump sum. You then immediately begin to repay that loan in monthly installments over a period that can range from five to 30 years.
Because your home secures the loan, the interest rates are usually more favorable than those of unsecured personal loans. But of course, securing a loan with your home means that if you don’t make payments, the lender could foreclose.
Many lenders will let you borrow up to 85% of your equity. Home equity loans tend to have fixed interest rates, which means monthly payments remain the same for the life of the loan. A home equity loan calculator can help you determine what you might be able to borrow and what your monthly payments might be.
Recommended: What Is a Home Equity Line of Credit?
Home equity loan interest rates are the result of a complex interplay of economic and personal factors. The Federal Reserve’s monetary policy has a major impact on the broader lending market. Lenders typically set their base interest rates by adding a margin to the prime rate, which moves in tandem with the Fed’s decisions.
Your financial profile, including your credit score and debt-to-income (DTI) ratio, also plays a crucial role in determining the home equity loan rates you’ll be offered. Additionally, the loan amount and repayment term can affect rates, as can competition between lenders in some local markets.
Interest rates are a big deal when it comes to how much it will cost to pay back your home equity loan. Even a fraction of a percentage point can make a significant difference in the long run. Imagine you’re taking out a $100,000 home equity loan with a 15-year repayment term. At an 8.50% interest rate, your monthly payment would be around $985, with a total interest paid of $77,253. But if the rate was instead 9.50%, your monthly payment would jump to $1,044, and the total interest paid would be $87,960. That’s roughly $10,700 you’d be shelling out in extra interest. The loan term and rate together can influence what you’ll pay each month, as this chart shows:
| 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 |
The rise and fall of interest rates can be a bit like a rollercoaster ride, but by taking a look at recent history, you can gain some valuable perspective. The prime rate in 2020 was as low as 3.25%, but by 2023 it had climbed to 8.50%. These changes can make a big difference in the rates you’re offered, so it’s wise to keep an eye on the market and explore your options to secure the best rates for your home equity loan.
| 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% |
You may not be able to do anything to control the prime rate, but you can have an impact on the interest rate you’re offered by taking a few crucial steps before submitting your home equity loan application. Here’s what to do:
To be eligible for a home equity loan, you need at least 20% equity in your home. Calculating your equity is easy: Subtract your current mortgage balance from your home’s estimated value (find the value on a real estate site). The result is your home equity. Next step: Divide your equity number by the estimated value to get a percentage of equity. By keeping a healthy cushion of equity, you’re setting yourself up for the most favorable home equity loan rates.
Lenders typically favor credit scores of 680 or higher for home equity loans, with many looking for 700 or above. A robust credit score is a testament to your financial acumen and can positively impact the rates you’re eligible for in Anchorage. To bolster your credit score, ensure you’re paying bills promptly and maintain low credit card balances. Refrain from opening new credit accounts in the months leading up to your loan application. Regularly review your credit report for inaccuracies and address them.
Your DTI ratio is a key driver where interest rates are concerned. To learn your DTI ratio, add up your monthly debts and divide by your gross monthly income. The DTI requirement for a home equity loan is typically below 50%, but the real magic number is 36% or lower. A low DTI ratio tells lenders you’re a pro at managing monthly payments, and that can lead to more attractive home equity loan rates. To reduce your DTI, think about paying down those lingering debts, finding ways to increase your income — or even better, both.
Property insurance protects your investment in your home. It also safeguards your lender’s investment when you have a home equity loan. Having good coverage can positively impact the rates you’re offered, as well-insured properties are seen as lower risk by lenders. If you’re not sure how much coverage is needed, ask a lender what would meet its requirements.
Recommended: Different Types of Home Equity Loans
Tools and calculators are your friends when it comes to making sound decisions about home equity loans. A home equity loan calculator can help you estimate monthly payments, and there are calculators that help homeowners with a home equity line of credit (HELOC), too.
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.
The typical range for closing costs on home equity loans is 2% to 5% of the loan amount. The list of fees often includes the appraisal, credit report, document preparation, origination, notary, title search, and title insurance. While no-closing-cost home equity loans are an option, they typically come with higher home equity loan rates. By comparing these costs across multiple lenders, you can find the most cost-effective option for your situation.
The interest on home equity loans could be tax-deductible if you’re using the funds for significant home improvements. Couples filing jointly can deduct interest on up to $750,000 of qualified home equity loans; for single filers, it’s loans of up to $375,000. To claim this deduction, you’ll need to itemize your deductions on your tax return so you may need to work with a tax advisor.
While home equity loans are very popular, there are two other options to consider: a home equity line of credit (HELOC) and a cash-out refinance. HELOCs offer more flexibility by allowing you to draw funds as needed up to a set limit. A cash-out refinance replaces your existing mortgage entirely. Let’s take a closer look:
A home equity loan gives you a lump sum in one payment. A HELOC, on the other hand, is more like a credit card. It gives you a credit limit, and you can borrow as much as you need (up to that limit) whenever you need it. You only pay interest on the amount you actually borrow, and during the loan’s initial draw period (often 10 years), you usually don’t have to repay the principal. (A HELOC interest-only calculator can help you see what you might owe depending on how much of the credit line you use.) After the draw period, a repayment period begins. You’ll repay what you owe plus interest. (This is when a HELOC repayment calculator is useful.)
HELOCs usually have variable interest rates. To qualify, you’ll typically need a credit score of 680 or higher (700 is better) and a DTI of 50% or less (below 36% is the ideal). HELOCs are a good choice if you’re not sure how much you’ll need to borrow. Many lenders let you borrow up to 90% of your home’s equity.
Here’s a quick look at a HELOC vs. a home equity loan:
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow plus interest; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment |
| Disbursement | Charge only the amount you need | Lump sum |
Imagine doing a mortgage refinance, borrowing more than you currently owe, and walking away with the difference between your old loan and your new one in cash. That’s a cash-out refinance, and it’s another way to access a lump sum based on your home equity. Borrowers can typically get a loan for up to 80% of their equity, so long as they have a minimum credit score of 620 and a debt-to-income ratio below 43%.
Because you’re getting a new loan, you can choose a fixed or variable interest rate. But you’ll want to make sure current rates are an improvement on the rate you had with your original home loan, so that you aren’t spending unnecessarily on the loan. One plus of a cash-out refinance vs, a home equity line of credit or home equity loan is that after a refi, you’ll only have one monthly payment to make.
While you’re mulling over a home equity loan, remember to shore up your credit score, keep your DTI ratio in check, and ensure your property insurance is up to snuff. These are the factors that can sway the rates you’re offered and bolster your financial standing. Crunch the numbers with online tools to get a handle on your potential monthly payments and closing costs, and make sure you have a plan in place to cover those monthly bills. Shop around, compare lenders’ offers, and you’re sure to get the best possible rate for your home equity loan.
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 very versatile. The money you borrow can be used for home improvements, educational expenses, medical bills, or debt consolidation. These loans provide a lump sum of money with fixed-rate interest, which can make budgeting for repayment easier. If you use your loan to improve your home, save your receipts as the interest payments may be tax deductible.
If you repaid a $100,000 home equity loan over 20 years at an 8.00% interest rate, the payment would be $836 per month. If your interest rate was 7.00%, the payment would be $775. To compute the specific payment amount based on your loan amount, interest rate, and term, use a mortgage payment calculator.
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.
There are several perks to home equity loans. For one, you get fixed interest rates and predictable monthly payments, which makes budgeting and financial planning simple. These loans also tend to have lower interest rates than unsecured loans, which can save you a pretty penny over time. And you can use a home equity loan for all sorts of big expenses, from home improvements to debt consolidation or major purchases. If you improve your home using your loan, the interest payments may be tax-deductible.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
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.
