Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans in Cincinnati give you the opportunity to borrow a lump sum, using your home as collateral.
• With fixed interest rates, you’ll get the benefit of predictable monthly payments.
• Working to strengthen your credit score and keeping your debt-to-income ratio in check can help you get more favorable interest rates in Cincinnati.
• Lenders may allow you to borrow up to 85% or 90% of your available home equity.
• Having property insurance is a must for most home equity loans.
Welcome to our comprehensive guide on home equity loan rates in Cincinnati, Ohio. What is a home equity loan? Simply put, it’s a way to get a loan by drawing on the money you’ve already invested in your home (your equity).
In this guide, we’ll explore the current home equity loan rates, the factors that influence them, and how to qualify for the most favorable terms. We’ll also look into the differences between fixed and adjustable interest rates, the impact of these rates on your financial plan, and the potential risks and benefits of home equity loans. And we’ll touch on two alternatives that also draw on home equity: home equity lines of credit (HELOCs) and cash-out refinances.
Armed with this knowledge, you’ll be better equipped to decide if a home equity loan is the right choice for you and how to approach the lending process with confidence.
If you’re wondering how to get equity out of your home, home equity loans can be a great option.
A home equity loan allows you to borrow against the equity you have in your home. To calculate your equity, take the market value of your home and subtract the balance of your mortgage. For example, if your home is worth $500,000 and you have a mortgage of $350,000, you have $150,000 in equity. Lenders will typically let you borrow up to 85% or 90% of your home’s equity, meaning that in this example, you may be able to borrow up to $135,000.
Home equity loan rates are typically fixed, and you can choose a loan term of five to 30 years. These loans are best for large expenses such as home renovations or debt consolidation. A home equity loan calculator can help you determine your home equity and maximum loan amount.
Home equity loan rates are influenced by a combination of economic and personal factors. The Federal Reserve’s monetary policy, particularly changes to the federal funds rate, has a significant impact on the lending market. Lenders often set their base interest rates by adding a margin to the prime rate, which tends to move in tandem with the Fed’s decisions. For example, if the prime rate increases, you can expect rates for different types of home equity loans to rise as well.
Additionally, your credit score and debt-to-income ratio play a role in the rate you’re offered. Higher credit scores and lower debt-to-income ratios generally lead to more favorable rates.
Understanding these influences can help you anticipate rate fluctuations and make informed decisions about getting a home equity loan.
Your interest rate is a big factor in the affordability game. A single percentage point can add up to significant extra interest over the life of your loan. For example, let’s say you have a $100,000 home equity loan with a 15-year repayment term at 8.50% interest. You’d be looking at a monthly payment of around $985 and total interest of about $77,253.
Now, if that rate were one percentage point higher, at 9.50%, your monthly payment would jump to around $1,044, and the total interest paid would rise to $87,960. That’s an extra $10,707 over the life of the loan. So when considering your options, don’t underestimate the impact of the interest rate.
While home equity loans (unlike HELOCs) most often have fixed interest rates, some lenders do offer them with adjustable rates, so it’s important to understand what impact that can have. Fixed rates are the unsung heroes of predictability, staying constant throughout your loan term and making budgeting easier to manage.
On the flip side, adjustable rates generally kick off lower but are subject to market changes. If the market stays mellow, your rate follows suit, but if it gets tumultuous and rates shoot up, you could be in for a bumpy ride and higher payments.
When you’re pondering fixed or adjustable rates for your home equity loan, consider what matters most to you — steady predictability or the chance for lower initial payments.
As we’ve seen, the trends in home equity loan rates are influenced by different economic factors. Take the prime rate, for instance, which is closely linked to the Federal Reserve’s federal funds rate. It has swung dramatically in recent years, from a low of 3.25% in 2020 to a high of 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% |
Stepping back for a longer historical perspective, below, we can see that the rollercoaster ride is not unique to the last few years.
These fluctuations have a direct impact on home equity loan rates in Cincinnati, making it important to keep your finger on the pulse of current market conditions. While nobody can predict the future with certainty, having a grasp of past patterns can certainly help you time your application to secure a more favorable rate.
Even if you haven’t decided yet on a HELOC vs. a home equity loan, the tactics are the same to secure the most favorable interest rates: Maintain a strong credit score and keep your debt-to-income ratio in check. Here’s what to do to position yourself for a good rate.
To be eligible for a home equity loan, you need to maintain at least 20% equity in your home. Here’s how you can calculate how much equity you’ve built up: Subtract your mortgage balance from your current home value. For instance, if your mortgage balance is $400,000 and your home is valued at $550,000, your home equity is $150,000.
Most lenders permit you to borrow up to 85% or 90% of your equity, which means you could potentially borrow up to $135,000. Keeping a healthy amount of home equity not only helps you secure attractive home equity loan rates, but it also provides a financial cushion in case you need it.
To qualify for the lowest available home equity loan rates, a robust credit score is your not-so-secret weapon. Lenders are typically on the lookout for scores of 680 or higher, with many favoring the 700+ range. Why? A higher credit score is an indicator of financial responsibility, signaling to lenders that you’re likely to be a safe bet, and that impression can translate to more attractive loan terms.
If you’re in the habit of making timely payments and keeping your credit card balances in check, you’re already on the right track. It’s also a smart move to review your credit report for any inaccuracies and address them before you apply. This proactive step can help you secure a better rate, which means more money saved over the loan’s lifetime.
Your debt-to-income (DTI) ratio is a critical factor when it comes to qualifying for a home equity loan and scoring the best rates. Your DTI ratio is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI ratio signals to lenders that you’re in a good position to handle your monthly payments, making you a more appealing candidate. Lenders generally look for a DTI ratio under 50%, but the sweet spot is 36% or lower.
To lower your DTI, chip away at existing debts or explore ways to increase your income, which can include anything from side hustles to career advancements.
Property insurance is a must-have for most home equity loans, especially if you live in an area vulnerable to natural disasters. It’s a safety net for both you and the lender in case of property damage. Make sure your insurance policy covers not just your home’s value but also any improvements you’re planning to make. If you’re not sure about the appropriate coverage, a chat with your insurance agent can set you on the right path.
Online tools and calculators can be your best friends when it comes to home equity loans. They help you estimate monthly payments, total interest paid, and the impact of different home equity loan rates on your finances.
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, you can expect to pay anywhere from 2% to 5% of the loan amount in closing costs. These can include fees for appraisals, credit reports, and more. The chart below shows some of the most common.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 |
| 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 |
Some lenders may offer no-closing-cost loans, but be mindful of potentially higher rates.
Here’s a tip that could save you some money: The interest on your home equity loan might just be tax deductible if it’s used to improve your home. For single filers, interest is deductible on the first $375,000 of loan debt. Spouses filing together can deduct the interest on up to $750,000 of debt. Just remember, you’ll need to itemize to claim this deduction. Consult your tax advisor to get the most up-to-date advice.
There are a few alternatives to home equity loans, including HELOCs and cash-out refinancing, which both let you tap your home’s equity as collateral. HELOCs allow you to borrow up to a certain amount of money with a variable interest rate. A cash-out refinance is a type of mortgage refinance that lets you replace your current mortgage with a one that’s larger than the amount you still owe on your house, allowing you to take the difference in cash.
What is a home equity line of credit? A HELOC is akin to a credit card, giving you the ability to borrow funds as you need them up to a set limit. You can withdraw money during the initial “draw” period; you then repay principal and interest on what you’ve used during the repayment period. Bear in mind that HELOC rates are usually variable, so they can fluctuate with the market.
To qualify for a HELOC, you generally need a 680 credit score (though 700 is preferred) and a debt-to-income ratio below 50% (but ideally under 36%). Homeowners can often borrow up to 90% of their home equity.
To evaluate the total cost of a HELOC, you can turn to a HELOC repayment calculator. A HELOC interest-only calulator can help you calculate how much interest you might be paying during the initial “draw” period of a HELOC.
A cash-out refinance lets you replace your existing mortgage with a larger one, tapping into your home’s equity to access a cash sum in addition to a new home loan.
If you’re looking at the merits of a cash-out refinance vs. home equity line of credit, note that the standards for borrowing tend to be different. Lenders typically allow you to borrow up to 80% of your home’s equity. They’ll usually want to see a credit score of 620 or above and a debt-to-income ratio of 43% or less. Cash-out refinances can have either fixed or variable rates, with the latter offering more equity access. And here’s a bonus of these refinances: You’ll have just one monthly payment to manage.
When you’re considering a home equity loan in Cincinnati, it’s important to understand the factors that can influence your rate so you can work to improve your options. A strong credit score, a manageable debt-to-income ratio, and property insurance can help you secure better terms. HELOCs and cash-out refinances have different features, so compare your options to find the best financing – online calculators can help. And as always, it’s a good idea to consult with a qualified financial advisor to make the most informed decision for your situation.
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 useful option for making large purchases, financing home renovations, or paying down high-interest debt. The flexibility of these loans makes them a useful financial tool for homeowners who need a significant amount of money without having to sell their property.
The monthly payment on a $50,000 home equity loan can vary depending on the loan term and interest rate. For example, at 7.00% interest over 15 years, the monthly payment will be about $449. At 8.00% interest over 15 years, the payment will be about $478. Use a loan calculator to help you determine the best loan term and interest rate for your situation.
The payment on a $30,000 home equity loan is determined by the interest rate and the repayment term of the loan. For example, at 7.00% interest over 10 years, the monthly payment would be approximately $348. At 8.00% interest over 15 years, the monthly payment would be about $287. Use a mortgage payment calculator to help you determine your payment and the total interest you will pay.
There are several factors that could prevent you from securing a home equity loan. For one, lenders generally look for a minimum credit score, often around 680 or more, so having a low one could work against you. A high debt-to-income (DTI) ratio, typically above 50%, might also be a red flag. Having less than 20% equity in your home could be a disqualifier as well. Lenders will also consider the stability of your home’s value and the adequacy of your property insurance. If you don’t meet these criteria, you may need to work on improving your financial situation or consider other types of loans.
SoFi Mortgages
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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