ERIE HOME EQUITY LOAN RATES TODAY
Current home equity loan
rates in Erie.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
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Key Points
• The rates for home equity loans in Erie are impacted by the Federal Reserve and the prime rate, as well as your unique financial standing.
• Comparing rates from multiple lenders can help you find the best deal.
• Even a fraction of a difference in the interest rate can translate to substantial savings over time.
• Home equity loans usually demand a minimum of 20% equity and come with fixed interest rates.
• Good property insurance coverage is a must and lenders will look for it.
Introduction to Home Equity Loan Rates
Home equity loans are a smart option for homeowners who want to tap into the equity they’ve built in their home without selling the property. In this article, we’ll take a look at what a home equity loan is, as well as the current home equity loan rates, how they’re influenced by different economic factors, and what you can do to get your best possible rate. Whether you’re planning a home renovation, looking to consolidate debt, or need funds for another major purchase, this guide will help you navigate the loan process.
How Do Home Equity Loans Work?
A home equity loan is essentially a second mortgage, with your home as the collateral. You’ll receive a lump sum, and then begin repaying it immediately in fixed monthly installments over a period that can range from five to 30 years. Because the loan is secured by your home’s equity, the interest rates are typically lower than those of an unsecured personal loan. Plus, with fixed rates, you’ll have the peace of mind of predictable payments.
Most lenders require you to have at least 20% equity in your home, which is the difference between its value and what you still owe on your home loan. Typically, they’ll let you borrow up to 85% of your equity. A home equity loan calculator can help you get a sense of what you might borrow and what the costs might be.
Where Do Home Equity Loan Interest Rates Come From?
Home equity loan interest rates are influenced by a variety of factors, from the state of the economy to your personal financial profile. Federal Reserve policies play a significant role, as lenders typically peg their rates to the prime rate. So the prime rate can serve as a barometer for different types of home equity loans in Erie. Your credit score and debt-to-income (DTI) ratio are also important. As a general rule, a higher credit score and a lower DTI ratio will get you a better rate.
How Interest Rates Impact Affordability
Your interest rate plays a significant role in the overall cost of your loan. What might seem like a small interest rate variance — a fraction of a percentage point — can result in a noticeably greater interest payment over time. Need proof? Take a look at the chart below, which shows you how different loan terms and rates affect monthly payments for a $75,000 loan being repaid over 20 years.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Home Equity Loan Rate Trends
The prime rate is a variable one, and it’s a bit like the weather — you can’t know for sure what it’s going to do next. Looking at the graphic below, you can see it’s had a few ups and downs. In 2020, it hit a low of 3.25%, only to climb to 8.50% by 2023. These fluctuations can have a big impact on the rates you’re offered for home equity loans. If you have the flexibility to do so, you can try to time your application to one of the lower periods and potentially snag a more favorable rate.
Source: TradingView.com
| 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% |
Source: St. Louis Fed
How to Qualify for the Lowest Rates
To snag the best available home equity loan rate, it’s all about presenting yourself as the most creditworthy you can be. That means taking a good look at your financial situation and making some smart moves before you submit an application. Here are the details:
Maintain Sufficient Home Equity
It’s a good rule of thumb to have at least 20% equity in your home when applying for a home equity loan. Calculating your equity is a breeze — just subtract your outstanding mortgage balance from your home’s estimated value (find that on a real estate site). Then divide the result by the estimated home value to arrive at a percentage of equity. Hopefully it will be at least 20%.
Build a Strong Credit Score
Lenders typically set their sights on scores of 680 or higher, with many favoring 700 and above. Why the fuss over numbers? A higher score showcases your money smarts and potentially nets you friendlier terms, such as lower interest rates. Practice credit score TLC: Make timely payments, keep credit card balances in check, and steer clear of new debt. And don’t forget to give your credit report a once-over to catch any errors.
Manage Debt-to-Income Ratio
In order to qualify for a home equity loan, you’ll need a DTI ratio under 50% — but the sweet spot for the best rates is 36% or lower. To assess your DTI, add up your monthly debts and divide by your gross monthly income. To improve your ratio, try to chip away at existing debts, find ways to boost your income, or do both.
Obtain Adequate Property Insurance
Property insurance is a must-have when you apply for a home equity loan. It’s a safety net for you and your lender. Depending on your home’s location, a lender may also require additional coverage, such as flood insurance. Make sure your policy meets your lender’s criteria to keep the loan process smooth and to safeguard your investment.
Useful Tools & Calculators
Online tools can give you a solid estimate of what your monthly payments might look like for different types of loans. Here are three you’ll find helpful during your financing journey in Erie.
Run the numbers on your home equity loan.
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Home Equity Loan Calculator
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment Calculator
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only Calculator
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.
Closing Costs and Fees
When it comes to closing costs for home equity loans, you’re looking at a range of 2% to 5% of the loan amount. This typically covers appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. Remember, those “no-closing-cost” loans often come with higher rates. It’s all about finding the right balance.
Tax Deductibility of Home Equity Loan Interest
The interest on home equity loans might be your ticket to a tax deduction if you’re using the funds to invest in your home’s value. For those married and filing jointly, interest on home equity loans up to $750,000 is deductible. Single filers can claim interest on loans up to $375,000. To snag this deduction, you’ll need to itemize your deductions on your tax return. If you’re not sure where to start, a tax advisor can provide advice.
Alternatives to Home Equity Loans
While home equity loans are a common choice, there are other ways to get equity out of your home. A home equity line of credit (HELOC) and a cash-out refinance are two options. Each has its own qualifications and benefits:
Home Equity Line of Credit (HELOC)
Let’s talk about a home equity line of credit, which is often confused with a home equity loan. A HELOC is a flexible credit line that is guaranteed by your home equity. As you consider a HELOC vs. a home equity loan, one important difference is that with a HELOC, you can borrow as you need funds, up to a certain limit. During the “draw” period of the HELOC, which is often 10 years, you’ll only pay interest on the amount that you’ve borrowed. After that, you begin to repay all that you have borrowed plus interest.
Keep in mind that HELOCs often have variable rates, which could mean fluctuating monthly costs. A HELOC repayment calculator can help you compute what you owe as rates change. To qualify, you’re generally looking at a 680+ credit score (though 700+ is preferred) and a DTI below 50% (but ideally less than 36%).
Cash-Out Refinance
A cash-out refinance is a special kind of mortgage refinance that lets you tap into the equity you’ve built in your home by replacing your existing mortgage with a new one that’s larger than what you owe. The amount of cash you can take out will depend on your equity, with most lenders allowing you to access up to 80% of your home’s value. Typically, you’ll need a credit score of at least 620 and a DTI ratio below 43%. These loans can have either fixed or variable rates. As you think about a cash-out refinance vs. a home equity line of credit, consider that, unlike a home equity loan, a cash-out refinance streamlines your finances by giving you just one monthly payment. You’ll want to look closely at the current interest rates in Erie and compare costs to those of your existing home loan, as you would with any refinance.
Recommended: HELOC Interest-Only Calculator
The Takeaway
When considering a home equity loan in Erie, it’s important to understand the factors that influence home equity loan rates. Building a strong credit score, managing your DTI ratio, and obtaining adequate property insurance are key steps to securing favorable terms. Additionally, using tools and calculators can help you estimate costs and plan your budget. While home equity loans are a viable option, alternatives like a HELOC or cash-out refinance also offer benefits and are worth exploring.
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.
FAQ
What can a home equity loan be used for?
Home equity loans are versatile and can be used for a variety of needs, such as large purchases, home improvements, and debt consolidation. The funds are typically distributed as a lump sum, which can be beneficial if you know how much money you will need and when you will need it. If you aren’t sure, a home equity line of credit might be a better fit.
What’s the monthly payment on a $25,000 home equity loan?
The payment on a $25,000 home equity loan is calculated using the loan’s interest rate and term. For example, at a 7.00% interest rate over 15 years, the monthly payment would be approximately $225. This fixed-rate payment includes both principal and interest, making it easier to budget.
How about a $30,000 home equity loan? What’s the monthly payment?
The payment on a $30,000 home equity loan is determined by the interest rate and loan term. For a 15-year fixed-rate loan at 7.50%, the monthly payment would be $278. If you choose a 30-year term at the same rate, the monthly payment would be about $210. This fixed-rate payment would cover both the principal and interest.Longer terms offer lower monthly payments but increase the total interest paid over the life of the loan.
What might disqualify you from a home equity loan?
There are a few things that might prevent you from securing a home equity loan. Most lenders look for a credit score of at least 700, although some may be open to lower scores. Your debt-to-income (DTI) ratio should not exceed 50% (and ideally be closer to 36%) to ensure you can comfortably handle the additional financial responsibility. And, you’ll need to have at least 20% equity in your home.
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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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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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More home equity resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare