Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans typically offer much lower rates than unsecured personal loans and credit cards.
• Home equity loans provide a lump sum with fixed interest rates.
• The prime rate and the borrower’s credit score and financial history go into determining your rate.
• To secure the most favorable rates, keep your credit in good standing and your debt-to-income ratio low (ideally, below 36%).
• Before you apply, compare offers from multiple lenders and be sure to review the Loan Estimate form.
• Weigh the risks and benefits, and don’t forget to consider alternatives like a HELOC or cash-out refinance.
If you’re exploring home equity loan interest rates in Collins, Mississippi, we can help. This guide will explain a bit about interest rates in general and the home equity loan application process. By the end, you should have a good understanding of how to secure the lowest available rate for your home loan, potentially saving you thousands of dollars.
First, what is a home equity loan, exactly?
A home equity loan is a smart way to get equity out of your home, providing a lump sum of cash that you can use however you want. The amount you can borrow is based on the difference between your home’s appraised value and the remaining balance on your primary mortgage.
Let’s look at an example based on the average home value in Collins, which in July 2025 was just under $150,000. If your home is appraised at $150,000 and you owe $100,000 on mortgage, you have $50,000 in equity. Most lenders will allow you to borrow up to 85% of your equity, which is $42,500 in this case. Home equity loans typically feature fixed interest rates, making them a steady and predictable option. They’re great for large, one-time expenses and typically offer lower rates than unsecured personal loans.
A home equity loan calculator can help you determine your equity level and how large a loan you might qualify for.
Recommended: HELOC vs. Home Equity Loan
The interest rates on home equity loans are the result of economic conditions and your own financial situation. The Federal Reserve’s decisions have a ripple effect on the broader lending market, which in turn influences home equity loan rates. Lenders typically set their base rates by adding a margin to the prime rate, which moves in sync with Fed policy.
Your credit score and debt-to-income ratio are also significant factors, with higher scores and lower ratios typically leading to more favorable rates. The loan amount and term can also play a role, with longer terms and larger loans often carrying higher interest rates due to increased risk.
Your interest rate is a big deal when it comes to the affordability of a home equity loan. Even a fraction of a percent can add up to significant extra interest over the life of the loan. For example, a $30,000 home equity loan with a 15-year term at 8.50% interest has a monthly payment of $295 and total interest of $23,176. At 9.50% interest, the monthly payment jumps to $314 and the total interest comes to $26,388.
While a $20 difference in your monthly payment might not seem like much, it adds up. The higher interest rate will cost you more than $3,200 over the life of the loan. And the longer your repayment term, the higher those interest costs will be.
Predicting interest rate movements is challenging due to the many factors involved. Still, with a little practice, you can get a sense of where interest rates are heading. The recent history of the prime rate, which home equity loan rates are tied to, shows how much variability there can be. In 2020, the prime rate hit a historic low of 3.25%. By 2023, it had shot up to 8.50%.
The goal is to time your application to catch lower rates. During times of extended elevated rates, that’s not always possible. That’s why it’s important to compare offers from multiple lenders to make sure you’re getting the best rate that’s currently available.
| 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 an enviably low rate, you’ll need to present your best financial self. A robust credit score of 680 or above and a debt-to-income ratio below 36% are ideal. By working on your credit and shopping around for the best deal, you’ll be well on your way to scoring the most wallet-friendly terms and keeping those borrowing costs down.
To be eligible for a home equity loan, homeowners must maintain at least 20% equity. To calculate your home equity, simply subtract your mortgage balance from your current home value. For example, if your mortgage balance is $140,000 and your home is valued at $200,000, your home equity would be $60,000, or 30% — well within the qualifying zone.
Equity is the key to unlocking a home equity loan, and ensuring you have enough is an important first step before you apply for any type of home equity loan.
Lenders generally look for a credit score of 680 or higher when considering home equity loans, with many favoring 700 or above. A robust credit score is a testament to your financial prudence and can significantly impact the rate you’re offered. Borrowers with a track record of timely payments and low credit utilization are more likely to secure favorable terms, potentially saving you thousands in interest over the loan’s lifetime.
To bolster your credit score, simply stay on top of your bills, keep credit card balances in check, and resist the urge to open multiple new credit lines at once. Regularly reviewing your credit report for inaccuracies and disputing them can also give your score a lift.
Your debt-to-income (DTI) ratio is another important number that lenders look at when determining your eligibility for a home equity loan. Your DTI, which compares your monthly income to your monthly debt obligations, should be below 50%, and even better, below 36%. A lower DTI ratio shows lenders that you have a good handle on your monthly payments, which can lead to more favorable loan terms.
To improve your DTI, consider paying down your existing debt, increasing your income (easier said than done, right?), or both. Lenders want to be sure that you can handle the additional financial responsibility without the risk of default.
This requirement might come as a surprise: Property insurance is a must-have for home equity loans, particularly in flood-prone areas. But it makes sense, since insurance safeguards both the lender’s investment and your home. Having the right insurance can even influence the interest rate you’re offered, as lenders often see well-insured properties as lower risk.
Pro tip: Chat with your insurance provider to suss out the best coverage and costs, and don’t be shy to shop around for the most competitive rates and terms.
Using these resources wisely can help you make informed decisions about home equity loans. By playing with different rates and terms, you can see how they impact your overall costs. And when you’re ready to move forward, comparing loan estimates from multiple lenders will help you find the best deal. Be sure to review all the details, including fees, to find the most suitable loan for your needs.
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.
Typically, closing costs for home equity loans fall between 2% and 5% of the loan amount. Standard fees include the appraisal, credit report, document prep, title search, and title insurance. Appraisals can be anywhere from $300 to $500, and credit reports for lenders average $50 to $100. Document prep has a wide range, from $500 to $2,000. Title searches usually cost between $100 and $250, and title insurance might be 0.5% to 1% of the loan amount.
The interest you pay on a home equity loan might just be tax-deductible, especially if you’re using it to buy, build, or spruce up your home. The current rules are in play through 2025. If you’re married and filing jointly, you can potentially deduct the interest on loans up to $750,000; for single filers, that’s $375,000. Just remember, you’ll need to itemize to claim this deduction. It’s a great perk that might make a home equity loan even more attractive.
You might also consider a HELOC or a cash-out refinance. All three options allow you to tap into the equity you’ve built in your home, but each has its own features and requirements. A cash-out refi is a type of mortgage refinance, where you end up with one payment instead of two. A HELOC is more like a credit card, allowing you to take out money as you need it.
A HELOC is a credit line that allows you to borrow up to a certain limit determined by your home equity. But you only pay interest on the amount you use. Just keep in mind that the interest rate can fluctuate with the market, which could mean increased costs if rates go up.
Lenders typically look for a credit score of 680 or higher (700 is preferred) and a debt-to-income ratio of less than 50% (ideally less than 36%). A HELOC is a great option if you’re not sure of the total amount you need to borrow or if you expect to have costs spread out over time.
During the initial “draw period,” which is usually 5-10 years, you usually make interest-only payments. (A HELOC interest-only calculator can show you how much payments might be based on the interest rate and amount borrowed.) Then during the repayment period, of 10-20 years, you stop borrowing and repay the full amount. (A HELOC monthly payment calculator can calculate what your payments will be including principal and interest.)
Recommended: What Is a Home Equity Line of Credit?
A cash-out refinance is like hitting the reset button on your mortgage, but with a little extra cash in your pocket. You can typically borrow up to 80% of your home’s value, and you’ll need a credit score of 620 or higher and a DTI of 43% or less to qualify. The beauty of a cash-out refinance is that you can simplify your finances with just one monthly payment. Plus, it’s generally easier to qualify for than a home equity loan or HELOC.
For you visual learners, here’s an at-a-glance look at a cash-out refinance vs. a home equity line of credit vs. home equity loan.
| 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) |
Home equity loans can be a powerful financial tool for homeowners seeking to tap into their home’s equity for major expenses. However, it’s important to evaluate your financial situation and shop around with multiple lenders to secure the best home equity loan rates in Collins. Your credit score, debt-to-income ratio, and the amount of equity in your home all play a role in determining the interest rate you qualify for. Before you apply, make sure you understand the risks and benefits, and consider alternatives like a HELOC and cash-out refinance. By making informed decisions, you can use your home equity to reach 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.
You can use a home equity loan for just about anything you want. Common uses include large purchases, home improvements, and paying off high-interest credit card debt. The flexibility of these loans is what makes them so attractive.
The monthly payment for a $50,000 home equity loan depends on the interest rate and loan term. For instance, at an 8.50% interest rate over a 15-year term, you’re looking at $492 per month. If you extend the repayment term to 20 years, the monthly payment drops to $434 – however the overall cost of the loan will actually increase, because you’re paying interest for longer.
A $100,000 HELOC usually comes with a variable interest rate, which means your monthly payment could fluctuate. During the draw period, you might only pay interest. At a 9.00% interest rate over a 10-year draw, your payment might be $750, not including rate changes. Once the draw period ends, you’ll start paying back both the principal and interest. With a 20-year repayment period, your payment could increase to about $900.
The payment on a $25,000 home equity loan varies with the interest rate and loan term. For instance, at a 9.50% interest rate over a 10-year term, the monthly payment would be about $324. If you choose a repayment period of 15 years, the monthly payment drops to $261 — but you’ll end up paying more in interest over the longer term.
There are several factors that can disqualify you from getting a home equity loan. The most common is not having enough equity in your home. Most lenders require 20% equity or more. Lenders also look at your debt-to-income (DTI) ratio, which should be 43% or lower (ideally, below 36%). Additionally, a poor credit history can prevent you from getting a home equity loan. If your credit score is below 620, you may have a hard time getting approved.
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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.
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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