Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Columbus, OH are influenced by the ebb and flow of economic tides as well as by your unique financial profile.
• Because your home backs up your home equity loan, the interest rate is likely to be more favorable than rates available on unsecured personal loans.
• Even a slight difference in interest rates can add up to a substantial difference in a loan’s total interest cost.
• Home equity loans usually come with fixed interest rates, offering the stability of a predictable monthly payment for the life of the loan.
• Through 2025, some or all of the interest on a home equity loan could be tax-deductible if used for home improvements.
Home equity loans can be a fantastic resource for homeowners in need of cash for a major purchase, a big home improvement project, or a consolidation of high-interest debt. 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 article, we’ll delve into the specifics of home equity loan rates in Columbus, OH, and shed some light on both the economic trends and the personal financial factors that can influence them. We’ll walk you through the basics of home equity loans and provide guidance on how to qualify for the most favorable rates. Plus, we’ll discuss different types of home equity loans, like home equity lines of credit (HELOCs) and cash-out refinances.
By the time you’re done reading, you’ll have a better grasp on how to make the most of your home equity effectively and prudently so that you can reach your financial goals.
If yhou’ve been wondering how to get equity out of your home, home equity loans could be an answer.
With a home equity loan, you borrow against the equity you’ve built up in your home. The amount of equity you have is the market value of your home minus the balance of your mortgage.
For example, if your home is worth $500,000 and you still owe $350,000 on your mortgage, you have $150,000 in equity.
Lenders will typically let you borrow up to 85% or sometimes 90% of your home’s equity. In this example, you might be able to borrow as much as $135,000.
A home equity loan calculator can help you determine your home equity and maximum loan amount.
Home equity loan rates are usually fixed and the loan term can be anywhere from five to 30 years.
Home equity loan interest rates in Columbus are a product of both the broader economy and your personal financial situation.
The Federal Reserve’s monetary policy, and specifically the federal funds rate, can have a big impact on the lending market. Lenders typically set their base interest rates by adding a margin to the prime rate, which is influenced by the federal funds rate. So when the Fed raises the funds rate, the prime rate and home equity loan rates are likely to follow.
Your personal financial profile, including your credit score and debt-to-income ratio, will also play a big role. For example, lenders may be likely to give you a lower interest rate if you have a higher credit score. The loan amount and term of the loan can also factor in, with longer terms generally having higher rates due to the increased risk for the lender.
Interest rates are a big deal when it comes to the cost of your home equity loan. Even a percentage point or two more can result in significant extra interest costs over the life of your loan.
Let’s get more granular by looking 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 would be $627 and the total interest you’d pay over the duration of the loan’s term would add up to $75,559. But with a rate just a percentage point lower, at 7.00%, your monthly payment would be $581 and the total interest would drop to $64,554. That means that the lower rate could ultimately 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 |
Fixed rates are the steady-Eddies of the home equity loan world, offering you the comfort of knowing your payments will remain exactly the same every month for the duration of the loan. That consistency can make budgeting more straightforward.
Adjustable rates may start at a fixed rate for an initial period – and often a rate lower than you would get with a fixed-rate loan – but after that period they adjust to changes in the market, meaning that they have the potential to climb.
Before choosing, it can help to consider how comfortable you are with uncertainty and how flexible your budget is likely to be throughout the length of the loan.
The landscape of interest rates for home equity loans has been a rollercoaster, thanks to the shifting balance of macroeconomic factors.
Take the prime rate, for example, a pivotal player in the home equity loan rate game. Its recent history shows just how volatile it is. As you can see in the chart below, it dropped to 3.25% in 2020 and jumped 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% |
These fluctuations have a direct impact on the rates you might encounter in Columbus. Staying in the know about these trends and timing your application to sync with favorable economic conditions could help you unlock more favorable rates.
To access the most competitive home equity loan rates, it’s essential to present a robust financial profile. This includes a healthy credit score, a balanced debt-to-income ratio, and adequate equity.
Lenders typically look for a minimum credit score of 700, although some may consider lower scores with the trade-off of higher interest rates. A debt-to-income ratio of 36% or lower is generally considered optimal, though, again, some lenders may be more flexible. Additionally, a steady income and a history of punctual payments can bolster your chances of securing a favorable rate.
Let’s look at some strategies to strengthen your metrics. And note: Even if you haven’t decided yet on a HELOC vs. a home equity loan or cash-out refi, the tactics are largely the same to boost your chances of getting the most competitive interest rates and loan terms.
To be eligible for a home equity loan, you need to maintain at least 20% equity in your home.
It’s easy to calculate your equity: Simply take your house’s current value and subtract your mortgage balance.
For instance, let’s say your mortgage balance is $400,000 and your home is now valued at $550,000. That leaves you with $150,000 in home equity.
Most lenders will allow you to borrow up to 85% and sometimes even 90% of this equity, which in this case would be $127,500 (or $135,000, if your lender sets the higher limit).
It’s important to maintain enough equity to secure a loan, as well as good rates.
In the world of home equity loans, a credit score of 680 is often the starting line, but many lenders look for 700 or more. A robust credit score is a sign of financial prudence and may open doors to more attractive loan rates.
To bolster your score, concentrate on making payments punctually, keeping credit card balances in check, and steering clear of new debt. Regularly reviewing your credit report for inaccuracies and addressing them right away can also help keep your score in good repair. By maintaining a solid credit score, you’re setting yourself up for potential savings that could amount to thousands over your loan’s lifetime.
Your debt-to-income (DTI) ratio, which compares your monthly income to your monthly debt obligations, is a key factor in determining your loan eligibility. The DTI requirement for a home equity loan is typically less than 50%, and ideally no more than 36%.
A lower DTI ratio shows that you are able to manage your monthly payments responsibly, and that can garner you more competitive home equity loan rates. To improve your DTI, consider paying down your existing debts, increasing your income, or both.
Property insurance is a must-have for homeowners seeking home equity loans, particularly in flood-prone areas. This insurance is a safety net for both your home and the lender’s investment if there are any mishaps. That’s why having the right coverage can affect the terms of your loan, including the rates you’re offered.
Make sure your insurance policy covers the value of your home and any future improvements you’re planning. Some lenders may also require additional coverage, like flood or earthquake insurance, depending on common risks where your home is located. Take the time to review your insurance options and check in with your lender to avoid any unexpected hiccups during the application process.
Online tools and calculators can be invaluable when you’re planning a home equity loan. A home equity loan calculator can quickly and easily serve up estimates of monthly payments and total interest costs for different loans based on your loan amount, interest rate, and term. It can take just seconds to learn that a $75,000 loan at an 8.00% interest rate over 10 years could mean a payment of $910 a month.
And if you’re feeling overwhelmed by all the numbers, a loan comparison tool can be your translator, laying out various loan offers side by side, so you can easily weigh the terms and fees of each option.
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 you’re planning a home equity loan, bear in mind that closing costs will also come into play. Closing costs for home equity loans usually total between 2% and 5% of the loan amount.
These costs can include a number of expenses. Here are some of the most common, alons with typical prices.:
• Appraisal fee: $300-$500
• Credit report fee: $30-$50 or more
• Document preparation: $100-$500 (may also be billed on an hourly basis if an attorney is involved or be built into the loan origination fee)
• Loan origination fee: 0.5%-1.0% of the loan amount
• Notary fee: $20-$100
• Title insurance fee: 0.5%-1.0% of the loan amount
• Title search fee: $75-$250 or more
Here’s something else to consider as you think about getting a home equity loan:The interest on your loan might 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 jointly can deduct the interest on up to $750,000 of debt. But you will have to itemize if you want to claim this deduction.
Currently, the deduction is set to run through 2025, but it might be extended, so it’s a good idea to check with a qualified tax advisor to get the most up-to-date information and advice.
Home equity loans are a popular way to draw on home equity, but there are also other options to consider.
One is a home equity line of credit (HELOC), which is a flexible solution that offers a revolving line of credit with variable interest rates.
Another alternative is a cash-out refinance, which is a kind of mortgage refinance that lets you replace your current mortgage with a new one that has a higher balance. A cash-out refi can have either fixed or adjustable interest rates.
What is a home equity line of credit? A HELOC is like a relatively low-interest credit card for homeowners, allowing you to borrow up to a limit and pay interest only on what you’ve used. Typically, you’ll have a “draw” period, during which you can make withdrawals, followed by a repayment period, during which you’ll repay principal and interest on what you’ve borrowed. HELOCS generally have variable interest rates that can fluctuate with the market, so your costs can increase if rates rise.
For HELOCs, lenders typically look for a credit score of at least 680 (700 is generally preferred) and a DTI below 50% (ideally under 36%).
HELOCs can work well when you’re unsure of the exact amount you’ll need or are anticipating costs that will be spread over time. With HELOCs, lenders often let you borrow up to 90% of your equity, making them a flexible loan alternative.
To figure out how much monthly payments for a HELOC would be, consider using a HELOC monthly payment calculator.
And to calculate how much interest you’d pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
A cash-out refinance can also be a strategic way to access funds secured by your home’s equity. Your original mortgage is replaced with a new home loan that’s larger than the amount you still owe, and you take the difference in a lump sum.
If you’re considering the merits of a cash-out refinance vs. a home equity liine of credit, take into account the fact that requirements for borrowing tend to be different. Qualifying for a cash-out refi is usually easier than it is for a HELOC or home equity loan. Lenders typically require a minimum credit score of 620 and a DTI ratio of 43% or less for a cash-out refinance.
These refis can have either fixed or variable interest rates, with variable rates sometimes offering more equity access.
One more plus: A cash-out refi will mean you have just one monthly payment instead of two, which can make budgeting easier to manage.
When you’re looking for a home equity loan in Columbus, OH, a good credit score, a manageable debt-to-income ratio and appropriate property insurance are important factors that can affect your loan rates. As you research your options, use online tools and calculators to estimate your payments and how much you could potentially save in interest. Understanding the pros and cons of HELOCs and cash-out refinances can also help you determine the right financial choice 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.
Home equity loans are often used to finance big expenses, like college tuition, major home renovations, or medical bills. They can also be used to consolidate high-interest debt. Home equity loans can be a useful tool for many homeowners, but before taking one out, it’s a good idea to consider the potential risks of borrowing against your home.
The monthly payment for a $50,000 home equity loan depends not only on the loan amount, but also on the loan term and interest rate. For instance, at a 7.00% interest rate over 15 years, the monthly payment will be about $449. At an 8.00% interest rate over 15 years, the payment will be about $478. A loan calculator can help you figure out the best loan term and interest rate for you.
The payment on a $30,000 home equity loan varies with the interest rate and loan term. For instance, at a 6.00% interest rate, a loan with a 10-year term would lead to a monthly payment of approximately $333. Extending the term to 20 years would reduce the monthly payment to about $215. Just remember that, while a longer term can lower monthly payments, it also means paying more in total interest over the life of the loan.
Home equity loans can be a smart choice for homeowners in need of funds. With their home as collateral, they can enjoy lower interest rates than those typical on unsecured personal loans. Home equity loans are often useful for big, one-time expenses like home renovations or paying off high-interest debt. Since they typically have fixed rate mortgages, they are suited to people who prefer the stability of fixed interest rates and their predictable monthly payments.
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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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