Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Baltimore are influenced by credit score, debt-to-income ratio, and equity level.
• Even a slight variance in rates can make a world of difference in the long-term cost of borrowing.
• Shop around and compare offers from multiple lenders to find the best rates.
• Property insurance is often a must and can influence loan terms.
• The interest on a home equity loan may be tax deductible if you’re using it to significantly improve your home.
>Home equity loans are a powerful financial resource for homeowners who want to leverage the equity they’ve built in their home by paying down their home loan. This guide will walk you through the current home equity loan rates in Baltimore and illuminate the factors that influence these rates. We’ll demystify the application process, and equip you with strategies to secure the most favorable rates. Whether you’re gearing up for a major home transformation, aiming to streamline your debt, or eyeing a significant purchase, a grasp of home equity loan rates can empower you to maximize your borrowing power while minimizing your costs.
First, the lowdown on what a home equity loan is: These loans allow you to borrow against your equity, which is the difference between your home’s market value and your outstanding mortgage balance. Usually, you’ll need at least 20% equity to qualify. But once you qualify, many lenders allow you to borrow up to 85% of your equity amount. A home equity loan calculator can help you figure out how much you might be able to borrow.
The lender issues the borrowed funds as a lump sum, and you repay them, with interest, in monthly installments over a period of five to 30 years. The shorter your loan term, generally speaking, the higher your monthly payments — but the less interest you’ll pay over the life of the loan. Because these loans are secured by your home, they often come with lower interest rates than unsecured loans. But that also means that missing payments puts your home at risk of foreclosure.
The home equity loan, technically, is a second mortgage. Fortunately, the interest rate on a home equity loan is typically fixed, which means you can plan your budget with confidence.
Home equity loan interest rates are influenced by a variety of economic and personal factors. The Federal Reserve’s decisions have a direct impact on lending rates. Most lenders base their rates on the prime rate, which is tied to the Fed’s interest-rate decisions. Your credit score and debt-to-income (DTI) ratio also play a significant role in the rates you’re offered. Generally, the better your credit score and the lower your DTI ratio, the better your interest rate. Loan amount and repayment term also affect rates. Because each lender has its own recipe for success, it’s important to shop around and get rates and terms from different lenders if you decide to pursue a home equity loan.
Your interest rate makes all the difference in the affordability of a home equity loan. Even a seemingly small difference in rates can add up to significant savings or extra costs over the loan’s lifetime. Take a look at these examples. As you can see, on a $50,000 loan, the difference between an interest rate of 7.00% and 8.00% means paying an additional $30 per month over a 20-year loan. That may not seem like a lot, but over time it adds up. And the more you borrow and the higher the rates, the greater the expense.
| 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 interest rates for home equity loans can be a bit like the weather — unpredictable. But as you think about borrowing, it may help to watch the prime rate, which has fluctuated significantly in recent years. It was as low as 3.25% in 2020 and as high as 8.50% in 2023. Having a sense of these high and low marks can give you perspective on the rates you are seeing in the marketplace. Some borrowers try to time their application to get a good rate. But it’s not possible for everyone. What can you do? Take all the right steps to make your application shine so that you get 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 secure the most competitive home equity loan rates, you’ll want to make sure you complete these tasks before trying to borrow money:
You know you’ll need to have at least 20% equity in your home to get a home equity loan. So crunch the numbers to check your equity level by subtracting your outstanding mortgage balance from your home’s estimated value. (Find the latter on an online real estate site.) Let’s say your mortgage balance is $300,000 and your home’s value is $550,000. That leaves you with $250,000 in home equity. Divide your equity number by the home value to arrive at a percentage — in this example, 45%.
Lenders usually look for a credit score of 680 or more when considering home equity loans, and many prefer a score of 700-plus. A strong credit score demonstrates financial responsibility and can lead to more favorable rates. To build a strong score, focus on making timely payments, keeping credit card balances low, and avoiding new debt. Regularly check your credit report for errors and dispute any inaccuracies.
Your DTI ratio is a critical piece of the home equity loan puzzle. To determine yours, divide your monthly debts (car loan, student loan, credit card debt, etc.) by your gross monthly income. Lenders typically look for a ratio under 50%, but the sweet spot is 36% or less. The lower your DTI, the better your chances of securing a more competitive rate. To enhance your DTI, consider paying down existing debts and exploring opportunities to boost your income.
Property insurance is often a must-have for home equity loans. Lenders want to be sure that your property, which is the collateral for the loan, is protected. Before you apply, make sure to check with your insurance provider to ensure that your coverage is up to date.
By using these tools and calculators, you can get a rough idea of what your monthly payments might look like and how much you could potentially borrow. You may find yourself coming back to the calculator again and again during the process of comparing rates from different lenders.
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.
It costs money to borrow, and we’re not just talking about your interest payments. You can expect to set aside 2% to 5% of your loan amount for closing costs. These include a variety of fees, including those for the appraisal, credit report, document preparation, origination, notary, title search, and title insurance.
Recommended: Different Types of Home Equity Loans
Here’s a tip: The interest on your home equity loan could be tax deductible if the money was used to significantly improve your home. Joint filers can deduct interest on loans up to $750,000, and single filers up to $375,000, provided you itemize your deductions.
As you’re thinking about how to get equity out of your home, there are two other borrowing you may want to consider: a home equity line of credit and a cash-out refinance.
A HELOC is a bit like having a credit card with your home equity governing the spending limit. During the “draw” portion of a HELOC, usually 10 years, you can borrow in increments, as you need the money, and you only pay interest on what you borrow. After the draw period ends you enter a repayment period when you’ll repay all that you owe with interest. Because the interest rate on a HELOC is variable, payments can be somewhat unpredictable.
This is where two calculators will come in handy: a HELOC interest-only calculator for the draw period and a HELOC repayment calculator for the repayment phase.
To qualify for a HELOC, you’ll generally need a credit score of at least 680 (though 700 is preferred) and a DTI ratio of no more than 50% (but ideally 36% or lower). As you consider a HELOC vs. a home equity loan, a HELOC could be a better choice if you’re not sure how much you’ll need to borrow, or if you don’t need all the funds at one time.
A cash-out refinance is like hitting two birds with one stone. You do a mortgage refinance but you replace your old mortgage with a larger one, pocketing the difference in cash to use as you wish. Most lenders will let you borrow up to 80% of your equity. With a credit score of 620 or above and a DTI of 43% or less, you can choose either fixed or variable rates (because it’s an entirely new mortgage, after all).
Another advantage of a cash-out refinance vs. a home equity line of credit or home equity loan is that it leaves you with only one payment to keep track of. Before you commit to a refinance, however, you’ll want to make sure that the current interest rates are favorable when compared to the rate you already have.
When considering a home equity loan in Baltimore, you’ll want to check your equity level, credit score, and DTI ratio. Assuming they’re all in good shape, get rate and closing cost information from multiple lenders to see who will offer you the most favorable terms. Along the way, you can use online calculators to suss out what monthly payments might look like. In no time, you’ll be able to pick the type of loan and lender that align with your financial goals.
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 help you finance a large purchase, fund a home improvement project, or pay down higher-interest debts. 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 money goals. Before applying, consider how the loan will impact your monthly budget and overall financial health.
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 the amount you’ve borrowed, which isn’t always 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 rate of 8.00% and a repayment term of 20 years, you would pay $836 per month.
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 a few things that could stop 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. Lenders usually require at least 20% equity in your home and a credit score of 680 or greater. A DTI ratio of 50% — and ideally below 36% — is generally preferred. Failing to provide adequate property insurance or a history of missed payments can also impact your eligibility.
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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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.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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