Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• The rates for home equity loans in Hampton are determined by your credit score, debt-to-income ratio, and other factors.
• Comparing rates from different lenders can help you find the most competitive terms.
• Home equity loans have fixed rates, making monthly payments predictable.
• Property insurance is often a must and can impact your loan rates.
• Home equity loan interest could be tax-deductible if you’re improving your home.
Home equity loan rates are a key consideration when you’re thinking about how to get euity out of your home in Hampton, VA. We’ll help you understand what they are, how they can affect your finances, and how to find the best rate and loan type for your personal situation as a homeowner. First step? Make sure you understand what a home equity loan is and how it differs from other methods of borrowing against your equity. By the time you’re through, you’ll be better prepared to determine if a home equity loan is the right financial move for you.
A home equity loan is a second mortgage — assuming you’re still paying off your first home loan. It uses your home as collateral for a lump-sum loan, which you would begin to repay soon after you receive it. You’ll repay it in equal monthly installments over a term that typically ranges from five to 30 years. Because the loan is secured by your home, you can expect a lower interest rate than you would get with an unsecured loan. To qualify, you’ll generally need to have at least 20% equity in your home. A home equity loan calculator can help you determine how much you might be able to borrow based on your equity.
Recommended: HELOC vs. a Home Equity Loan
Rates on different types of home equity loans are influenced by a variety of factors, including the economy and the borrower’s financial situation. The Federal Reserve’s policies can have a big impact on rates, as lenders often base their numbers on the prime rate. Your credit score and debt-to-income (DTI) ratio also play a big role in the rate you’re offered. Lender competition can impact rates as well. Understanding these factors can help you anticipate rate changes and make more informed decisions.
Your interest rate and term can make a world of difference in the affordability of your home equity loan. Even a mere fraction of a percentage can add up to significant savings over time. Here, you can see how different rates and terms affect loans of different amounts. Generally speaking, the longer the term the lower the monthly payments — but the more interest you will pay over the life of the loan.
| 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 |
Anticipating the ebb and flow of interest rates is no small feat, given the myriad factors at play. As you can see, the prime rate has had its ups and downs. In 2020, it hit a low of 3.25%, only to climb to 8.50% by 2023. These fluctuations can have an 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.
| 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% |
You can’t control the prime rate but you can focus on a few key areas before you apply for a home equity loan. Consider this your to-do list:
To be eligible for a home equity loan, homeowners need to have at least 20% equity in their property. Calculating your equity is simple: Just subtract your mortgage balance from your home’s estimated value. Divide the result by the estimated value to arrive at a percentage. Most lenders allow borrowing up to 85% of your home equity, so the more equity you have, the more you can borrow, and often at more favorable rates.
Lenders typically favor a credit score of 680 or higher for home equity loans, with many leaning toward 700 or more. A robust credit score is a testament to your financial prudence and can lead to more attractive home equity loan rates. To bolster your credit score, focus on punctual payments, keeping credit card balances in check, and steering clear of new debt. Regularly reviewing your credit report for inaccuracies and disputing any you find is a smart move, too.
Your DTI ratio is a crucial number that lenders consider when you apply for a home equity loan. This ratio is calculated by dividing your total monthly debt payments by your gross monthly income. The lower the percentage, the better. Most lenders require a DTI of 50% or less, and ideally, 36% or lower. To improve your DTI, you can either pay down your debt, increase your income, or both.
Property insurance is a must for home equity loan borrowers, particularly in flood-prone areas. This insurance safeguards the lender’s investment and your own equity in your home in the event of damage. Having the right coverage can even sway your rate in a positive direction.
Using these calculators can help you estimate your monthly payments and borrowing power, making it easier to decide on a loan. You’ll find yourself coming back to them to estimate scenarios as you get rate quotes from lenders.
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.
Recommended: What Is a Home Equity Line of Credit?
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 usually covers appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. A “no-closing-cost” loan may be advertised, but it often comes with higher rates. It’s all about finding the right balance.
Here’s a tip: The interest on your home equity loan might just be tax deductible, but only if you’re using it to buy, build, or improve your home. The tax guidelines are set through 2025, with a possible extension, but it’s not a sure thing. Joint filers can deduct interest on loans up to $750,000, and single filers up to $375,000, provided you itemize your deductions.
If a home equity loan isn’t quite what you’re looking for, there are two other options for borrowing based on your home equity. Let’s have a closer look at them:
A HELOC is somewhat like a credit card for homeowners. If approved, you’ll be given a credit limit. You can borrow what you need when you need it. During the “draw” period of the HELOC, usually 10 years, you only pay interest on the portion of the credit line that you use. A HELOC interest-only calculator can help you estimate payments. After the draw period comes the repayment period when you’ll repay the entire amount with interest. (You might find a HELOC repayment calculator helpful at this time.) HELOC interest rates are typically variable, influenced by the market.
To qualify, a 680 credit score is often the starting point, but a higher score, say 700, is more favorable. Lenders also look for a DTI below 50%, with 36% or lower being the ideal. HELOCs are a great choice for those who need to borrow, but don’t necessarily need all the funds at one time.
Here’s a quick look at a HELOC vs. a home equity 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 |
A cash-out refinance is a type of mortgage refinance that gets you a new, larger mortgage, and a lump sum of cash to use as you wish. The amount you can borrow depends on your home equity, with most lenders capping it at 80% of your home’s value. Generally, you’ll need a credit score of at least 620 and a debt-to-income ratio of around 43%. Interest rates can be fixed or variable. As you compare a cash-out refinance vs. a home equity line of credit, remember that a refinance will leave you with a single monthly payment, which can simplify your finances.
When you’re ready to explore a home equity loan in Hampton, remember that a strong credit score and a reasonable debt-to-income ratio are your best friends. Property insurance is also a must, as it can affect your loan rates. Explore alternatives like a HELOC or cash-out refinance, and always compare rates and terms from multiple lenders to find the best fit 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 a smart way to borrow for big home renovation projects. It can also be used for other large expenses, such as medical bills or college tuition. There are no restrictions on how you use the funds. However, in 2025, how you use the money will affect whether the interest you pay on the loan is tax-deductible. (Talk to a tax advisor.)
The monthly payment for a $50,000 home equity loan varies with the interest rate and the term of the loan. At an 8.00% interest rate, for instance, a 10-year loan would have a $607 monthly payment. Choose a 20-year term, and that monthly amount drops to about $418. Consider your budget and goals to pick the term that suits you best. A home equity loan calculator can help you estimate these payments and plan your budget accordingly.
The monthly payment on a $100,000 HELOC can go up or down depending on how much of the credit line you have used and whether you are in the draw or repayment period. If you use the entire $100,000 and are in a 20-year repayment period, here is the monthly payment amount at different interest rates: A rate of 7.00% would be $775. At 8.00% you are looking at a payment of $836. And at 9.00%, you can expect to pay $900. Remember, though, that HELOCs have variable interest rates so your exact number may differ.
Home equity loans offer fixed interest rates and predictable monthly payments, which can make budgeting easier. Because they’re secured by your home, you’ll often find that the rates are lower than those of unsecured loans. The lump-sum payment gives you immediate access to the funds you need, and with repayment terms that can be as flexible as five to 30 years, you’re sure to find a plan that fits your needs. Plus, the interest on home equity loans may be tax-deductible if used for significant home improvements, up to certain limits.
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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.
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