Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by the borrower’s credit score and debt-to-income ratio.
• Compare offers from multiple lenders to find the best rates and terms.
• Fixed interest rates keep monthly payments steady.
• Borrowers need at least 20% equity in their home to qualify.
• The interest you pay may be tax-deductible if funds are used for home-related expenses.
When you’re a homeowner, the rates for home equity loans can be a big deal. This guide is your go-to for understanding home equity loan rates in Atlanta, GA. We’ll break down how these rates are determined, what factors can influence them, and what you can do to land the best rates. Whether you’re dreaming of a home makeover, want to streamline your debt, or have your eye on a big-ticket item, getting a handle on home equity loan rates is key to making a savvy financial move.
First things first: What is a home equity loan? A home equity loan is essentially a second mortgage, with your home serving as the collateral. You’ll receive a lump sum and repay it in fixed monthly installments over a period that can range from five to 30 years. Because they are backed by the borrower’s home’s equity, these loans typically come with lower interest rates than unsecured personal loans. The cherry on top? Interest rates are usually fixed, making your payments predictable.
To qualify, you’ll need at least 20% equity in your home. Equity is the difference between your mortgage balance and your home’s market value. Most lenders are willing to loan up to 85% of your equity. A home equity loan calculator can help you figure out how much you might be able to borrow.
Home equity loan rates are determined by the economy and your financial profile. Federal Reserve policy has a big impact on the lending market through its effect on the prime rate, which is the rate at which banks lend to their most creditworthy customers. Your credit score and debt-to-income ratio (DTI) will also play a big role in the rate you can get. Competition among lenders can also affect rates.
Whatever type of home equity loan you have, a seemingly small difference in interest rates can add up to significant savings (or cost you big time). Consider a $100,000 home equity loan with a 15-year repayment term. At 8.50% interest, your monthly payment would be $985, and your total interest $77,253. But at 9.50%, the payment jumps to $1,044, and your total interest is $87,960. That’s a $10,700 difference in interest over the life of the loan. So, it’s clear that securing a lower home equity loan rate can significantly reduce your borrowing costs.
Recommended: HELOC Monthly Payment Calculator
Interest rates are a bit like the weather — unpredictable, with many factors at play. Consider the prime rate: In 2020, it was a mere 3.25%, but by 2023, it had soared to 8.50%. These fluctuations directly affect home equity loan rates in Atlanta and across the nation. So, what’s a savvy homeowner to do? Stay informed about economic conditions and be ready to pounce during periods of lower prime rates to maximize your savings. But if you must borrow during a period of higher rates, focus on presenting the strongest possible application to a potential lender, and shop around among lenders to find the best available rate.
| 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 rates, you’ll want to focus on a few key areas before you submit your first application. Let’s take them one by one:
You need to keep at least 20% equity in your home to qualify for a home equity loan. To determine your equity percentage, subtract your mortgage balance from your estimated home value (find the latter on a real estate site). Then divide the sum by your estimated home value to arrive at a percentage. The more equity you have, the better your chances of scoring a loan with favorable terms, and the easier it is to handle your financial commitments.
You probably recall how important your credit score was when you obtained your first home loan. For home equity loans, lenders typically favor a credit score of 680 or above for home equity loans, with many leaning toward 700 or higher. A robust credit score is a testament to your financial acumen and can translate to more favorable home equity loan terms. To enhance your credit score, concentrate on being punctual with payments, maintaining low credit card balances, and steering clear of new debt. It’s also wise to review your credit report for any inaccuracies and challenge them if necessary. A higher credit score can make it simpler to secure the capital you need for significant purchases, home improvements, or consolidating debt.
Your DTI ratio is a critical piece of the puzzle when it comes to qualifying for a home equity loan and securing favorable rates. Lenders typically look for a DTI ratio below 50%, with 36% or lower being the sweet spot. To calculate your DTI ratio, divide your total monthly debt obligations by your gross monthly income. The lower the ratio, the better able you will likely be to handle monthly payments, which makes you a more attractive candidate. To improve your DTI ratio, consider paying down existing debts, increasing your income, or a combination of both.
Property insurance is often a must-have for home equity loans. Lenders want to be sure that the property securing the loan is covered. Before you apply for a home equity loan, check with your lender to understand the specific insurance requirements. This can include homeowner’s insurance, flood insurance, and other types of coverage.
Online tools and calculators can give you a good starting point for shopping for a home equity loan. Here are three you may find useful during the process.
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.
When it comes to home equity loans, closing costs typically fall between 2% and 5% of the loan amount. These costs encompass a variety of fees, such as those for appraisal, credit reports, document preparation, origination, notary, title search, and title insurance. Some lenders offer no-closing-cost loans, but they often come with higher rates. Compare fees from different lenders to find the best fit for you.
The interest on your home equity loan may be tax-deductible if you’re using the funds for significant home-related expenses, like building a new addition or renovating your kitchen. This tax benefit is currently set to last through 2025, and there’s talk of extending it. If you’re married and filing jointly, you can potentially deduct interest on up to $750,000 of your loan. Single filers can deduct interest on loans of up to $375,000. To claim this deduction, you’ll need to itemize your deductions on your tax return, so a meeting with a tax advisor may be in order.
As you think about how to get equity out of your home, bear in mind that there are alternatives to a home equity loan. Each of the options below has its own benefits and considerations.
A home equity line of credit (HELOC) is a flexible line of credit that is guaranteed by the equity you hold in your home. You can borrow what you need, when you need it, and during the “draw” period of the HELOC, usually ten years, you only pay interest on the amount of the credit line you’ve used. (This is when a HELOC interest-only calculator comes in handy.) After the draw period ends, you repay the entire amount you owe, with interest, in monthly installments over 10 or 20 years. An important distinction in the HELOC vs. home equity loan comparison: HELOCs have variable rates, which means your monthly payment could increase or decrease.
Qualifying for a is similar to qualifying for a home equity loan. You’ll need a credit score of at least 680 (700 is preferred) and your DTI should be less than 50% (but ideally less than 36%). HELOCs are a good choice if you need to borrow a small amount over time or you want the option to borrow more later. You can typically borrow up to 90% of your equity.
A cash-out refinance is a type of mortgage refinance that could have you replacing your existing mortgage with a larger one, pocketing the difference in cash to use as you wish. You can borrow up to 80% of your equity. Typically, a 620 minimum credit score and a 43% DTI ratio are needed. Interest rates can be fixed or variable — you choose. When weighing a cash-out refinance vs. a home equity line of credit or home equity loan, one thing to think about is that a refinance would leave you with a single monthly payment instead of two payments. Cash-out refinances are often easier to qualify for than home equity loans or HELOCs. Compare offers from multiple lenders to find the best rates.
Here’s a quick take on the three options:
| 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, followed by 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) |
If you’re considering a home equity loan in Atlanta, you’ll want to focus on a few key factors: Work on cultivating a strong credit score and keeping your DTI ratio in check. Make sure you have the right property insurance in place. These elements can affect your eligibility and the rates you’ll be offered. Seek rate quotes from several different lenders to find the loan that will work best for you.
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.
A home equity loan can be a good way to finance a large purchase, fund a home improvement project, or cover a debt consolidation. The flexibility of these loans makes them a popular choice for homeowners. However, it’s important to use the funds responsibly and ensure the loan aligns with your long-term financial goals. Before applying, consider how the loan will impact your monthly budget and overall financial health.
The monthly payment for a $50,000 home equity loan varies with the interest rate and the term of the loan. At an 8.00% interest rate, for instance, a 10-year loan would have a $607 monthly payment. Choose a 20-year term, and that monthly amount drops to about $418. Consider your budget and goals to pick the term that suits you best. A home equity loan calculator can help you estimate these payments and plan your budget accordingly.
The payment on a $25,000 home equity loan depends on the interest rate and the loan term. For example, at an 8.00% interest rate over a 20-year term, the monthly payment would be about $209. This fixed-rate loan means your monthly payment won’t change, which can be helpful for budgeting.
There are several factors that can disqualify you from getting a home equity loan. Lenders typically require at least 20% equity in your home, a strong credit history, and a low debt-to-income ratio. A credit score below 620 or a DTI ratio above 50% might make it difficult to qualify.
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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 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.
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