Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• The rates you’re offered for home equity loans in Auburn are a product of both the national economic landscape and your individual financial history.
• A difference of even a fraction of a percentage point in your interest rate can result in big savings or costs over the life of your loan.
• Home equity loans usually come with fixed interest rates, which means your monthly payments don’t vary.
• To get the best rates, keep your financial house in order — a solid credit score, low debt-to-income (DTI) ratio, and healthy home equity will work in your favor.
• Specialized online calculators can help you figure out the payments on different loans and compare and contrast the offers you get efficiently.
Home equity loan rates are a key consideration for homeowners looking to tap into the value of their property.
In this guide, we’ll take a closer look at current Auburn home equity loan rates and explore how these rates are determined by a variety of broad economic and personal financial factors. We’ll also discuss the benefits and potential risks of home equity loans, and provide some tips on how to get the best rates and terms. Whether you’re planning a major home improvement project, consolidating debt, or covering the cost of a big-ticket item, we’re here to help you make smart decisions about using your home equity.
What is a home equity loan? It’s a loan that allows you to tap your home’s equity to receive a lump sum, which you then repay, usually in fixed monthly installments over a period of five to 30 years. The loan is secured by your home, which means it comes with a lower interest rate than you’d get with an unsecured personal loan.
One important note: In order to draw on the equity in your home, you have to have equity in your home. You can still be paying off your mortgage, but the amount you owe should not be more than the house is worth. Typically, lenders want you to have a minimum of 20% equity in your home to qualify for a home equity loan.
But if you’ve been paying your mortgage diligently and now you’re wondering hwo to get equity out of your home, a home equity loan can be a great option.
The rates you’re offered are the product of many influences, from the broader economic landscape to your own financial standing.
Federal Reserve policy, particularly changes to the federal funds rate, sends ripples through the home loan market. Those changes affect the prime rate, which lenders peg their rates to. When the prime rate moves up or down, so do home equity loan rates. By keeping an eye on these factors, you can be better prepared to anticipate rate shifts and make savvy decisions about when to pursue a home equity loan.
On a more personal level, your credit score and debt-to-income (DTI) ratio are also key drivers of the rate you’re quoted. These are factors you have more control over, and you can prepare to apply for a home equity loan by working to improve them.
Your interest rate can make a world of difference in how affordable a home equity loan is over time. Even a seemingly small variation in the rate can lead to significant savings or extra costs. To demonstrate just how much, let’s look at the chart below, which shows monthly payment amounts and total interest for a $75,000 home equity loan with a 20-year repayment term at several different interest rates.
With an 8.00% interest rate, your monthly payment is approximately $627 and the total interest over the loan’s term adds up to $75,559. But if the interest rate is one percentage point lower, at 7.00%, your monthly payment is about $581 and your total interest is $64,554. That means that the lower rate could save you $11,005 in extra interest.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Home equity loans usually come with fixed interest rates. But some lenders may offer adjustable rates, and different types of home equity loans, like home equity lines of credit (HELOCs) and cash-out refinances, may also offer adjustable rates, so it’s a good idea to consider which you might prefer.
A fixed rate never changes through the life of the loan. That gives you the assurance of consistent monthly payments over the duration of the loan. This predictability is a great tool for your budgeting and financial planning. Adjustable rates tend to start off slightly lower than fixed rates, but after an initial period, they will change in accordance with market rates. That has the potential to lead to higher payments and can create some uncertainty about what to expect.
When you’re mulling over home equity loan rates, it’s a smart move to consider the merits of fixed versus adjustable rates, taking into account your financial standing and comfort with risk.
Predicting interest rate movements is like trying to forecast the weather – all but impossible. But by looking at recent trends, you can get a better sense of what might be coming.
Let’s look at the prime rate, a pivotal driver in the home equity loan rate game. Its recent history shows just how volatile it is. As you can see, it dropped to 3.25% in 2020 but rose to 8.50% in 2023.
| 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% |
As we’ve mentioned, these fluctuations impact the rates you might encounter in Auburn. But despite the unpredictability, staying in the know about financial trends and working on your financial standing so you’re ready can help you time your application to sync with favorable economic conditions and potentially score competitive rates.
To be offered those rock-bottom rates, you’ve got to keep your financial house in order. What lenders typically want to see: a solid credit score, a modest debt-to-income (DTI) ratio, and a good chunk of home equity. Let’s look at a few strategies to strengthen your numbers. Even if you haven’t decided yet on a HELOC vs. a home equity loan or cash-out refi, the tactics are more or less the same to boost your chances of getting the most competitive interest rates and terms.
To be eligible for a home equity loan, you need to have at least 20% equity in your home. You can calculate your home equity by subtracting your mortgage balance from your home’s value. For example, if your mortgage balance is $400,000 and your home is worth $550,000, your equity is $150,000. A home equity loan calculator can help you estimate how large a loan you may be able to access.
Lenders typically allow you to borrow up to 85% of your equity, depending on your financial situation. Paying your mortgage regularly and making home improvements can boost your home equity.
When you’re trying to snag the most favorable home equity loan rates in Auburn, a robust credit score is key. Lenders often set the bar at 680, but your options get better if your score is 700 or above.
Good financial habits can help keep your credit score healthy. If you’ve got a track record of making punctual payments and keeping credit card balances in check, you’re already on the right path. It’s also smart to give your credit report a once-over regularly for errors and address any you find right away. This way, you’ll be showcasing your financial profile in its best light for potential lenders.
Your debt-to-income (DTI) ratio is a significant factor when you’re trying to qualify for a home equity loan and net good rates. Lenders generally look for a DTI ratio that’s under 50%, but if you can get it down to 36% or under, that’s even better. The math to figure out your DTI ratio is simple: Divide your monthly debt payments by your gross monthly income. The lower the ratio, the better, since it shows your ability to handle more debt, which makes you a more attractive candidate.
To tip the scales in your favor, consider chipping away at your existing debts or exploring opportunities to boost your income. A well-managed DTI ratio can unlock your loan application’s potential.
Property insurance is a must-have for homeowners in search of home equity loans, especially in areas prone to natural disasters like flooding. To secure the most favorable Auburn home equity loan rates, it’s crucial to have the right coverage. This insurance safeguards both you and the lender in the event of property damage.
Lenders may ask for proof of insurance before greenlighting your loan, and insufficient coverage could mean steeper rates or a loan rejection. So be sure to scout for insurance policies that offer robust protection, and consider extra coverage if your home is in a high-risk zone.
Online tools and calculators can be a significant help in your quest for the best home equity loan rates. There are multiple tools to choose among.
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 closing costs for home equity loans, you’re looking at a ballpark figure of 2% to 5% of the loan amount. The table below shows some typical closing costs.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document preparation | $100-$500 (may be billed on an hourly basis if attorney involvement is required, or built into the loan origination fee) |
| Loan origination | 0.5%-1.0% of the loan amount |
| Notary | $20-$100 |
| Title insurance | 0.5%-1.0% of the loan amount |
| Title search | $75-$250 or more |
While some lenders may offer no-closing-cost loans, they frequently come with higher rates.
The interest on your home equity loan may be tax-deductible if you’re using the funds to improve your home. For single filers, interest is deductible on the first $375,000 of loan debt. Married couples filing jointly can deduct the interest on up to $750,000 of debt. Just remember that you’ll need to itemize if you want to take advantage of this.
To get the most up-to-date information, consult with a tax advisor, who can help you figure out what will make the most sense for your situation.
Home equity loans aren’t the only way to leverage your home’s value. You might also consider a home equity line of credit (HELOC) or a cash-out refinance.
What is a home equity line of credit? A HELOC is akin to a credit card, offering homeowners the freedom to borrow up to a set limit and pay interest solely on what they use. Usually there’s an initial “draw” period during which they can withdraw funds, followed by a repayment period, during which they repay principal and interest. Rates are generally adjustable.
Unlike a home equity loan, a HELOC is all about flexibility. Keep in mind that adjustable interest rates mean that payments can fluctuate, potentially impacting your costs. Qualifying for a HELOC generally requires a credit score of 680 or higher (700 is even better) and a DTI ratio under 50% (ideally below 36%). HELOCs often permit borrowing up to 90% of your home’s equity.
If you’re wondering how much the monthly payments for a HELOC would cost, you might consider using a HELOC monthly payment calculator. And if you’d like to calculate how much interest you’d have to pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
A cash-out refinance is a strategic mortgage refinance in which you swap your original mortgage for one that’s larger than what you owe and take the difference in a lump sum. The rates can be fixed or adjustable.
If you’re evaluating the benefits of a cash-out refinance vs a home equity line of credit, it’s worth noting that it’s usually easier to qualify for a cash-out refi than for a home equity loan or HELOC. While lenders can have different standards, cash-out refinances often require a minimum credit score of 620 and a DTI ratio of 43% or less.
As you contemplate the possibility of getting a home equity loan, remember that a robust credit score, a balanced debt-to-income ratio, and sufficient property insurance will be your allies in securing favorable loan rates. Leverage the power of online tools and calculators to illuminate the financial options for you. If a home equity loan doesn’t feel quite right, it’s also worth considering whether a HELOC or a cash-out refinance might be a better fit 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 used to pay for many large expenses, including home improvements, medical bills, education costs, and debt consolidation. With a home equity loan, you receive the full sum all at once and typically pay it back in fixed monthly payments so you’ll know exactly what to expect. Just remember, if you don’t make your payments, your lender can foreclose on your home.
The monthly payment on a $50,000 home equity loan varies based on the interest rate and loan term. For instance, at a 9.00% rate over 10 years, you’re looking at approximately $633 each month. But if you secure an 8.00% rate, your monthly payment could drop to about $607. Locking in the best rates is key to managing your finances effectively.
The payment on a $25,000 home equity loan varies depending on the interest rate and loan term. For example, at a 9.00% interest rate over 10 years, you’d be looking at around $317 per month. But if you get a lower rate, like 8.00%, your monthly payment would be about $303. These numbers should give you a sense of just how much home equity loan rates can affect your monthly budget.
Home equity loans have their upsides, including the ability to borrow a lump sum of cash at a fixed interest rate. With monthly payments that stay the same, budgeting can be easier. What’s more, since the loan is secured by your home, the rates are likely to be lower than they would be for a personal loan. Just remember, you do risk foreclosure if you can’t make your payments.
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.
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