Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan interest rates are influenced by the prime rate and, from a distance, the Federal Reserve’s monetary policy — but the borrower’s financial profile also brings important factors to the equation.
• Comparing rates from multiple lenders is wise, and it’s the only way to find the best deal and loan terms.
• If you can boost your credit score and reduce your debt-to-income (DTI) ratio, you may see the rates you are offered by lenders drop.
• You’ll need 20% equity or more in your home to qualify for a home equity loan.
• Choose fixed rates if you are looking for predictable monthly payments. Look at adjustable rates for flexibility (at the possible cost of higher payments later on).
• Interest on home equity loans might be tax-deductible if you plan to use the funds to pay for home-related expenses.
Let’s begin with the basics. What is a home equity loan? It is a great way for homeowners to access the value they have built in their homes, and also an option many people with equity use when they need cash.
In this article, we’ll cover everything you’ll want to know if you’re thinking about pursuing a home equity loan. We will discuss factors affecting loan rates and give you tips for securing the best rates that are out there.
We’ll also explain and define different types of home equity loans, including options like home equity lines of credit (HELOCs) and cash-out refinances. This will make you aware of available alternatives, along with the pros and cons of each.
Whether you are considering embarking on a home renovation, wanting to consolidate high-interest debt, or preparing to make a major purchase, understanding home equity loan rates in Dayton can help you to make the smartest financial decisions.
If you’re still in the process of paying off your original mortgage — like most people — a home equity loan is considered a second mortgage. It is a product that lets you tap into your home’s equity and withdraw a lump sum of cash.
You will immediately begin to repay that loan, usually in fixed monthly installments. You’ll decide how long to take to pay it off, usually over a 5- to 30-year term. The loan is secured by your home, and that means you’ll likely have access to a lower interest rate than you could get on an unsecured personal loan.
One important thing you need to know: If you want to draw on the equity in your home, you have to actually have equity in your home. Lenders will typically want you to have a minimum of 20% equity in order to qualify. If you are still paying off your mortgage, the money you owe should not be more than your house is worth.
Looking at a HELOC vs. a home equity loan is where many homeowners begin comparing options. Here’s a view of these two types of borrowing options side by side, so you can see how they measure up if you use one to pull equity from your home.
Finding the right loan is often a matter of priorities, including whether you are more seriously looking for flexibility or long-term stability. A home equity loan’s interest rate is generally fixed, which can give you the peace of mind of predictable payments over the life of the loan.
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow plus interest; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment |
| Disbursement | Charge only the amount you need | Lump sum |
If you’ve been making a concerted effort to pay down your mortgage and are wondering how to get equity out of your home, a home equity loan may be the optimal choice for you.
Multiple factors go into determining what home equity loan rates in and near Dayton look like. These include not just big-picture economic conditions, but also the details of your individual financial profile.
Increases in the federal funds rate and the prime rate, for example, often lead to rises in home equity loan rates. Federal Reserve policies do not have a direct impact on home equity loan interest rates, but they can have an influence on lenders’ base rates, and thus, down the line, the rates they charge borrowers for loans.
Understanding such influences will enable you as a borrower to anticipate rate fluctuations and make informed decisions about different home loans, including home equity loans.
Your credit score and debt-to-income ratio will also influence the rate you’re offered by lenders. Additionally, the amount of the loan you are seeking and the length of your repayment term will impact your rate. The larger the loan and the longer the term, in general, the higher the rate you’ll get — this is due to risk factors for lenders and the amount of time they will need to wait for full repayment.
You are probably already seeing how it pays to look for the best interest rates, no matter what loan you’re shopping for. There’s no question that your interest rate will be a major factor when it comes to the affordability of your financing — home equity loan or a HELOC — overall. As of late July 2025, the average home equity loan interest rate was 8.28%.
This chart details numbers for a $75,000 home equity loan with a 20-year repayment term, calculating the payments and the total interest at various interest rates. If you have an 8.00% interest rate, your monthly payment would be $627, and you’d pay $75,559 in interest over the loan’s term. With a 7.00% rate — just one percentage point lower — your payment would be $581, and your total interest $64,554. If you’re able to get the lower rate, you’ll end up saving $11,005 over the life of the loan. And even if you get a 7.50% rate, you’ll still pay $5,552 less in interest.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
When it comes to comparing a HELOC to a home equity loan, the second option tends to have a fixed interest rate. With a home equity loan, monthly payments generally don’t change — they’ll stay the same for the loan’s entire term. These rates do like to try to trick you, though. A fixed rate may start off higher than the adjustable one advertised next to it. But despite initial appearances, a fixed option is usually the better choice. Its stability means that your payments won’t rise as they can if you opt for a variable rate.
Adjustable rates can appear attractive at first glance, but keep in mind that after a defined period, that rate will “adjust.” This means it will begin to follow a market index — and could easily jump higher than the initial rate you signed up for. Rates can continue to fluctuate over the life of an adjustable-rate loan, so payments can feel unpredictable as you look to the future.
If you are deciding between these two kinds of rates, think carefully about your financial goals, your budget’s flexibility, and the amount of risk you are going to feel comfortable with.
Thinking about how to get equity out of your home, you may decide you’ll try to time your loan application to achieve the lowest possible rate. You could get lucky! Unfortunately, predicting the prime rate is like forecasting the weather. Sometimes the direction things will go is impossible to guess, and not all borrowers have time to wait for the most favorable conditions.
The answer is, a lot — when you look at its movement over decades. The prime rate has seen its fair share of ups and downs, as you can see from the graphic and chart. It is not always predictable, and a drop is not necessarily in the near future at any given moment.
| 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% |
If you need a loan, focus to begin with on comparing offers from different lenders. Work on positioning yourself to get the best possible rate, too. How? By controlling the things you actually can.
To succeed at securing Dayton’s most competitive home equity loan rates, you should zero in on a few factors. Take these steps before you begin the application process. You will be in a better spot to line up a home equity loan with rates and terms that are not only manageable, but hopefully beneficial to your financial long game.
The amount of home equity you have in your home will be important. In general, you’ll have to have at least 20% equity in your home to qualify for a home equity loan.
To calculate it, you can use a simple equation: First, subtract your outstanding mortgage balance from the estimated value of the home. Next, divide the figure that results by your home’s estimated value. You will arrive at the percentage of equity you now possess. The higher it is, the better situation you are in.
Your credit score can help you land the best available home equity loan rate. Dayton lenders are likely to look for a robust score of 700 or higher. Higher credit scores are signs of financial fitness — they almost always open doors to favorable loan terms.
When it comes to qualifying for a home equity loan and getting a great rate, your DTI ratio is important. Lenders often look for a DTI ratio of 50% or less — and 36% or lower may give you a real chance at qualifying for the lowest rates. How can you manage your DTI? Work on paying down your existing debt, increasing your income, or achieving a combination of the two.
One must-have for a home equity loan is proper insurance coverage to protect both you and your lender should something unexpected strike your home or land. Be sure that your coverage is active and confirm annually that it’s sufficient, especially as you complete improvements.
If you’re taking steps to borrow against your home, you might want to run some numbers so you can understand what borrowing opportunities will be available to you, and what to expect to spend for future loan payments. A home equity loan calculator and other digital tools can make the math easy for you. Here are a few we use often.
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.
If you are wondering about closing costs on a home equity loan, they are likely to set you back about 2% to 5% of the loan amount. The table below details common closing costs and tells you about how much borrowers often pay for them.
| 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 |
Some lenders may offer no-closing-cost loans, but borrowers beware: They frequently come with higher rates built in, making them less desirable over the term of the loan.
Interest on your home equity loan may be tax-deductible if you’re using the funds to improve your home. For single filers, interest on the first $375,000 of loan debt is deductible. Married couples who file jointly can deduct interest on up to $750,000 of debt. You’ll need to itemize if you want to take advantage of this option, so be sure to track your spending. A tax advisor can help you figure out what deductions will make the most sense for you.
Home equity loans are one way to leverage your home’s value, but you might also decide to consider a home equity line of credit (HELOC) or a cash-out refinance. Here’s some information on those types of loans.
What is a home equity line of credit? A HELOC is similar to a credit card. It offers homeowners freedom to borrow and pay interest only on what they use, up to a set limit. Usually, during an initial “draw” period, they can withdraw funds. This is followed by a repayment period, in which they pay back the principal and the remaining interest. Rates on HELOCs are generally adjustable.
Unlike a home equity loan, a HELOC is flexible by design. But bear in mind that with adjustable interest rates, payments can fluctuate, and that could impact your costs down the line.
Qualifying for a HELOC will likely require a credit score of 680 and a DTI ratio that is under 50%. HELOCs will often permit you to borrow up to 90% of the home equity you have accrued. Check out a HELOC repayment payment calculator to help you see what your payments would look like as you pay down the loan.
Want to calculate the interest you’d have to pay during the HELOC “draw” period? Try out a HELOC interest-only calculator.
A cash-out refinance is a strategic mortgage refinance. With this loan, you swap your original mortgage for one that’s larger than what you owe now, and then take the difference as a lump sum. Cash-out refi rates may be fixed or adjustable.
When evaluating the benefits of a cash-out refinance vs. a home equity liine of credit, it’s worth noting that meeting the qualifications for a cash-out refi is usually easier than for a home equity loan or a HELOC. Lenders’ standards vary, but cash-out refinances tend to require a 630 minimum credit score and a 43% or lower DTI ratio.
To get access to Dayton’s best home equity loan rates, you’ll want to build your credit, manage your debt-to-income ratio, and secure reliable property insurance on your home. You can use online tools to help you estimate your payments and the amount you can borrow, but be sure you factor in closing costs and other expenses as you make your decision.
If a home equity loan doesn’t feel quite right, a HELOC or a cash-out refinance might be an option. Weigh all the benefits and risks. The goal is to find the financing that furthers your financial goals and best suits your needs.
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.
People often apply for home equity loans to fund home improvements and to consolidate high-interest debt, although there are lots of occasions when it can be helpful to draw equity from your home. If you decide to pursue a home equity loan, remember to use the funds wisely and make sure the loan fits with your overall financial situation.
Your monthly payment on a $50,000 home equity loan will depend on factors like your interest rate and the loan term. Here’s an example: If your loan had a 7.00% interest rate and a term of 15 years, your monthly payment would be about $449. At a 9.00% interest rate over 15 years, the payment would be around $507. Experiment with a loan calculator to figure out what your monthly payments would be with different variables inserted.
In all likelihood, a $100,000 home equity line of credit would come with a variable interest rate. During the draw period, you would probably need to pay interest only, based on the funds you pull out. When the draw period closes, you’d begin to repay both the principal and interest. If you repaid the full $100,000 over 20 years, and the interest rate held at 8.00%, you’d have an $836 monthly payment. But a variable rate makes predicting payments down the line harder.
Home equity loans offer fixed interest rates, so the monthly payment on yours should stay stable and predictable. Since a home equity loan is secured by your home, it will typically come with a lower interest rate than an unsecured personal loan. The interest you pay on a home equity loan may be tax-deductible if you’re borrowing funds to pay for home renovations or upgrades (consult a tax advisor to know for sure).
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.
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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