Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• In Fayetteville, home equity loan rates are influenced by many factors, including the Federal Reserve’s monetary policy and the borrower’s creditworthiness.
• Small interest rate differences can lead to big savings (or expenses) over the life of your loan.
• To secure lower home equity loan rates, aim for a credit score of 700 or above and keep your debt-to-income (DTI) ratio under 36%.
• To qualify for a home equity loan, you’ll need to have at least 20% equity in your home.
• Property insurance is often required for a home equity loan, especially in flood-prone areas.
This guide to Fayetteville’s home equity loan rates will give you all the information you need to understand how these rates are determined. You’ll learn about the factors that can influence the home equity loan interest rates you’ll be offered, as well as the benefits and risks of taking out a home equity loan. We’ll discuss different types of home equity loans, such as home equity lines of credit (HELOCs) and cash-out refinances, and give you tips on getting the best rates. By the time you finish reading, you’ll be better prepared to decide whether a home equity loan is right for you and how to find the best rates in Fayetteville.
If you’ve been dutifully paying your mortgage for a few years and are wondering how to get equity out of your home, you may want to consider a home equity loan. What is a home equity loan? Basically, it’s a second mortgage, using your house as collateral. You get the loan in a lump sum, which you repay in monthly installments over a period of five to 30 years.
Since a home equity loan is secured by your property, it typically comes with a lower interest rate than an unsecured personal loan. The interest rate is fixed, so monthly payments will always be the same during the life of the loan. When you’re applying for a home equity loan, lenders generally want to see that you have at least 20% equity in your home.
The interest rates on home equity loans are influenced by a variety of economic and personal factors. The Federal Reserve’s monetary policy, including changes to the federal funds rate, directly impact the lending market. Lenders set their base interest rates by adding a margin to the prime rate, which moves in tandem with the federal funds rate. When those rates rise, so do home equity lending rates.
The borrower’s credit score and debt-to-income (DTI) ratio are also significant in determining home equity loan rates. Higher credit scores and lower DTI ratios generally lead to more favorable rates. Additionally, the loan amount and repayment term can affect rates, with longer terms and larger loans often carrying higher interest rates due to increased risk for the lender.
The interest rate on your home equity loan has a lot to do with how affordable the loan will be for you. Even a seemingly small difference in rates can have a major effect. For example, let’s say you’re considering a $100,000 home equity loan with a 15-year repayment term. At an 8.50% interest rate, the monthly payment is approximately $986, and the total interest adds up to $77,253.
| Loan Amount | Loan Term | Interest Rate | Monthly Payment |
|---|---|---|---|
| $100,000 | 20 years | 8.00% | $836 |
| 7.00% | $775 | ||
| 10 years | 8.00% | $1,213 | |
| 7.00% | $1,161 | ||
| $50,000 | 20 years | 8.00% | $418 |
| 7.00% | $388 | ||
| 10 years | 8.00% | $607 | |
| 7.00% | $581 | ||
| $25,000 | 20 years | 8.00% | $209 |
| 7.00% | $194 | ||
| 10 years | 8.00% | $303 | |
| 7.00% | $290 |
Home equity loans generally offer fixed interest rates, which provide a steady and predictable monthly payment schedule over the life of the loan. However, some lenders do offer adjustable rates, so it’s worth considering which might work better in your case.
While fixed rates can offer peace of mind, they may be initially higher than adjustable rates. Adjustable rates often start at a lower rate, but after that initial period, they change according to the market. That means that the payments can be unpredictable and may be higher than you expected.
When you’re deciding what kind of rate is preferable for you, it’s important to consider how flexible your budget is likely to be as you’re paying back your loan and how important the stability of predictable payments is to you.
Interest rates are subject to myriad shifting factors, and their rise and fall can feel like a rollercoaster. Take the prime rate, for instance. It’s a pivotal marker for home equity loan rates, and it has seen dramatic shifts in recent years — from a mere 3.25% in 2020 to a peak of 8.50% in 2023. These fluctuations have a direct impact on the rates you’ll encounter in Fayetteville. Understanding the trends behind them and burnishing your financial profile can help you time your application strategically.
| 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 offer you the most competitive home equity loan rates, lenders will need to see evidence of your financial responsibility and ability to pay back your loan. They’ll typically look at a standard set of factors, including your credit score, your debt-to-income (DTI) ratio, and the amount of equity you have in your property, among others.
Even if you haven’t decided yet on a HELOC vs. a home equity loan or even a cash-out refinance, the same strategies can help you secure the most favorable interest rates and loan terms in Fayetteville.
To be eligible for a home equity loan, you’ll need to keep at least 20% equity in your home. To figure out your equity, subtract your mortgage balance from your home’s current value. For instance, if your mortgage balance is $150,000 and your home is valued at $225,000, your equity would be $75,000. This equity is what you can tap into with a home equity loan. In this case, you have approximately 33% equity, which puts you in a good position if you want a home equity loan.
To maintain or build your equity, it can be helpful to make extra payments on your mortgage or to invest in home improvements that will increase the worth of your home.
Lenders typically prefer a credit score of 680 or more for home equity loans, with many leaning toward 700 or above. A robust credit score signifies to lenders that you have a history of financial prudence and are likely to handle the loan responsibly.
To bolster your credit score, concentrate on making payments punctually, keeping credit card balances low, and steering clear of new debt. Regularly reviewing your credit report for inaccuracies and disputing them can also be helpful. By maintaining a high credit score, you increase your prospects of securing a home equity loan with advantageous terms and lower interest rates.
Your debt-to-income (DTI) ratio, which compares your monthly debt obligations to your gross monthly income, is a critical factor in determining your loan eligibility. The DTI ratio requirement for a home equity loan is typically below 50%, and ideally below 36%.
A lower DTI ratio suggests to lenders that you’ll have the ability to manage monthly payments, which is why it can lead to more competitive home equity loan rates. To improve your DTI, do what you can to pay down existing debts, increase your income, or both.
Property insurance is a must-have for home equity loans, particularly in areas that are prone to hurricanes and flooding. This insurance provides a financial safety net for both you and the lender, protecting the investment and your home in case of potential damage.
Having the right coverage can also work in your favor with lenders. Make sure your insurance is comprehensive and covers the natural disasters common in your area. Local Fayetteville insurance providers can guide you through specific coverage requirements and costs.
Using these online resources can help you get a better handle on your borrowing power and what your monthly payments might look like.
For example, a home equity loan calculator can give you a detailed picture of how much you could borrow based on your home’s value and your current mortgage balance. Taking advantage of these tools can help you make informed decisions and find the best loan for your unique financial situation.
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.
Closing costs for home equity loans typically add up to somewhere between 2% and 5% of the loan amount. Here are some of the most common fees, with their typical costs.
• 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 included in 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
Some lenders may offer no-closing-cost home equity loans, but these options often come with higher interest rates.
The interest on a home equity loan could be tax deductible if the funds are used to buy, build, or improve your home. For single filers, interest is deductible on the first $375,000 of loan debt. Married couples filing jointly can deduct the interest on up to $750,000 of debt. If you want to take advantage, you’ll need to itemize your tax return. Check with your tax advisor to get the most current information and advice.
A home equity loan can be a good option, but there are other ways you can tap your home’s equity to borrow money. Two of these are home equity lines of credit (HELOCs) and cash-out refinances, a kind of mortgage refinance.
Each of these options has its own unique features. A HELOC, for example, can be a good choice if you need to borrow money over time, as for a college education. A cash-out refinance, on the other hand, may be a better option if you need a lump sum to consolidate high-interest debt. Be sure to compare rates and terms for each option to find the best fit for your needs.
What is a home equity line of credit? A HELOC is similar to a credit card, but it’s secured by your home equity. It lets you borrow funds up to a set limit and pay interest only on the amount you use. During the HELOC’s initial “draw” period, you may only need to pay interest on what you withdraw; during the repayment period that follows, you’ll pay back the principal you borrowed and any additional interest. HELOCs usually have adjustable interest rates, which can be tricky to work into a strict budget.
For a HELOC, lenders typically want to see a credit score of 680+ (700+ is even better) and a debt-to-income ratio below 50% (though 36% or less is most desirable). They generally allow you to borrow up to 90% of your home equity.
If the ebb and flow of variable rates doesn’t bother you, and you’ll need to have funds available over several years, a HELOC might be worth considering. To see what your monthly payments for a HELOC would be, you can try a HELOC monthly payment calculator. And to learn how much interest you pay during the “draw” period of a HELOC, use a HELOC interest-only calculator.
A cash-out refinance offers another option for using your home equity to access cash. Here, you swap out your current mortgage for a new home loan that’s larger than the amount you owe on the old one, and take the difference in a lump sum.
If you’re comparing the advantages of a cash-out refinance vs. a home equity line of credit, consider the fact that requirements for borrowing tend to be different. It’s often easier to qualify for a cash-out refi than for a home equity loan or a HELOC. Cash-out refinances usually require a minimum credit score of 620 and a DTI ratio of 43% or less. They might have either fixed or variable interest rates, with variable rates sometimes offering more equity access.
And one more bonus: A cash-out refi means you have one single monthly payment, rather than separate payments for your mortgage and your loan, which can simplify budgeting.
When you’re looking to tap your equity in Fayetteville, home equity loan rates are key, so make sure you’re doing everything you can to get the best rate. This means checking your credit score, managing your debt-to-income (DTI) ratio, and making sure you have enough equity in your home. You can use online tools to get an idea of how much you can borrow and what your monthly payments might look like. Don’t forget to factor in closing costs and other fees as you plan. And remember, there are other options, like HELOCs and cash-out refinances. Armed with the information in this guide, you should be prepared to assess what the right move will be 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.
A home equity loan can be used for a variety of purposes, such as making home improvements, paying for your child’s college tuition, or consolidating high-interest debt. Before you apply, make sure you’re using the funds for a worthwhile reason and that you’re prepared to take on the extra debt.
The monthly payments for a $50,000 home equity loan will vary based on the interest rate and loan term. For instance, with a 7.00% interest rate and a 15-year term, you’re looking at around $449 per month. At an 8.00% interest rate over 15 years, the monthly payment would be approximately $478.
Your monthly payment for a $25,000 home equity loan will depend on the interest rate and loan term. For instance, at a 6.00% interest rate over a 10-year term, your monthly payment would be about $278. If the interest rate is 7.00% and the term extends to 15 years, your monthly payment would be approximately $225.
Home equity loans provide a lump sum of money, usually at a fixed interest rate, which results in predictable monthly payments. Since these loans typically have lower interest rates than unsecured personal loans or credit cards, they may save you a significant amount over the loan term. Plus, the interest on home equity loans may be tax-deductible if you use the loan to buy, build, or improve a home. Check with your tax advisor for the most up-to-date advice.
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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.
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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