Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Interest rates on home equity loans are influenced by the prime rate and, from a distance, the Federal Reserve’s monetary policy. The borrower’s financial profile also brings important factors to the equation.
• Comparing rates from multiple lenders is a smart move, and the only way to find the best deal and loan terms.
• Boost your credit score and reduce your debt-to-income (DTI) ratio, and you may see the rates lenders offer you drop.
• You’ll need to have 20% equity or more in your home to qualify for a home equity loan.
• Go for a fixed-rate loan if you are looking for predictable monthly payments. Consider an adjustable rate for flexibility, though it may result in higher payments later.
• Interest on home equity loans may be tax-deductible if you use the funds to cover the costs of home-related expenses.
Beginning with the basics: What is a home equity loan? It’s a great way for Honolulu homeowners to access the value they have built in their homes, and an option people with equity can use when they need to source cash. In this article, we will cover everything you should know if you’re considering pursuing a home equity loan. We will discuss factors impacting loan rates and give you tips to help you secure the best rates out there.
We’ll also define different types of home equity loans, including options like home equity lines of credit (HELOCs) and cash-out refinances, and explain how they work. This will make you aware of available alternatives, along with the pros and cons of each. Whether you are thinking about embarking on a home renovation, consolidating high-interest debt, or giving yourself permission (finally) to make a major purchase, understanding home equity loan rates in Honolulu will help you to make smart, successful financial decisions.
If you’re still paying off your original mortgage — like most people — a home equity loan is considered a second mortgage. It’s a product that lets you tap your home’s equity and withdraw a lump sum of cash to use as you need.
You will immediately begin repaying that loan, usually in fixed monthly installments. You’ll decide how long you should 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 most likely have access to a lower interest rate than you’d be able to get on an unsecured personal loan.
One important thing to know: In order to draw on the equity in your home, you have to actually have equity in your home. Lenders will typically want you to have built a minimum of 20% equity in order to qualify for a home equity loan. If you are still in the process of paying off your mortgage, the money you owe should not be more than your house is worth.
Many homeowners begin weighing options for drawing equity from their homes by looking at a HELOC vs. a home equity loan. Here’s a comparison of the two, so you can see how they measure up side-by-side.
Finding the right loan to pull equity from your home is a matter of priorities — including whether you care more about flexibility or long-term stability. A home equity loan’s interest rate is generally fixed, and that can give you the peace of mind of predictable payments during the life of the loan. Many borrowers choose the no-surprises fixed rate over a variable one for exactly that reason.
| 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 |
Both loans have benefits, but if you are wondering how to get equity out of your home, and you’ve been making a concerted effort to pay down your mortgage and want a predictable payment for your new loan, a home equity loan may be a compatible choice.
Multiple factors help determine what home equity loan rates in and near Honolulu will look like. They include some big-picture economic conditions — but also the details of your individual financial profile, which you’ll always have a lot more control over.
Let’s look at the factors you can’t influence, first. Increases in the federal funds rate and the prime rate, for example, can lead to home equity loan rates rising —but it’s not a simple, cause-and-effect relationship. Federal Reserve policies don’t directly impact home equity loan interest rates. But they can prompt lenders’ base rates to move up or down, and thus, down the line, the rates they charge their borrowers when they offer loans.
Understanding influences like these will help you anticipate rate fluctuations as a borrower, and make the most informed decisions about different home loans, including home equity loans.
Then there are the factors you can control, at least to a certain extent. Your credit score and DTI ratio will definitely be a consideration when lenders offer you a loan at a certain interest rate. The amount of the loan and the length of your repayment term will impact your rate, too. Larger loans and longer terms, as a rule, are subject to higher rates — this is due to risk factors for lenders and the amount of time they will need to wait for full repayment.
Your credit score and DTI truly are in your hands, as both reflect your fiscal choices and behavior. Caring for both is essential in preparing to apply for any loan.
You’re probably already seeing why qualifying for the best interest rates pays off, no matter what loan you are shopping for. No question: Your interest rate will be a big factor in the affordability of your financing, whether you go for a home equity loan or a HELOC. As of late July 2025, the average home equity loan interest rate was 8.25%.
Here is a chart detailing key numbers for a $75,000 home equity loan with a 20-year repayment term. We’ve calculated the payments and the total interest at various interest rates. If you have an 8.00% interest rate, for example, your monthly payment is $627, and you’ll pay $75,559 in interest over the loan’s term. Get a 7.00% rate — one full percentage point lower — and your payment will be $581, with total interest over the life of the loan adding up to $64,554. The lower rate would end up saving you $11,005 over the loan term. As you can see, even if you get a 7.50% rate, you’ll still pay $5,552 less in interest than you would with the 8.00% rate.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
When you compare a home equity loan with a HELOC, you’ll notice that the second option most often has a fixed interest rate. With a home equity loan, monthly payments generally won’t change — they will stay the same for the loan’s whole term. Rates like to try to trick you, though. Fixed rates very often start off higher than adjustable ones that are advertised in close proximity. Despite that initially lower variable, or adjustable, rate, a fixed option is usually a better choice for borrowers as payments won’t rise down the road.
Adjustable rates really do appear attractive at first glance, but keep in mind why they are called that. After a defined period, the lender can “adjust” your interest rate to follow a market index. Your rate could easily jump higher than the initial rate you signed up for, and continue to fluctuate. Payments over the life of an adjustable-rate loan can feel totally unpredictable.
If you’re deciding between the two types of rates, think about your financial goals and budget flexibility. Most importantly, consider the amount of risk you feel comfortable with in terms of making payments in the future.
As you look at options for getting equity out of your home, you may think about attempting to perfectly time your loan application. Is there a strategy for achieving the lowest possible rate with good forecasting or timing? Possibly. But the prime rate is a lot like the weather — nobody knows exactly what it will do. Unfortunately, not all borrowers will have time to wait for the prime rate to dip to their advantage. As you can see from the graphic below, it can change direction without much notice.
| 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% |
Take a few key steps in the years or months before you apply, and you can better position yourself to land a home equity loan — even a loan with a rate and term that is manageable and beneficial.
Here’s what to do:
You’re going to need at least 20% equity in your home in order to qualify for a home equity loan. Calculate what you’ve got now with this simple equation: Subtract your outstanding mortgage balance from your home’s estimated value. Take the answer and divide it by that same estimated value figure. You’ll arrive at your percentage of equity. (The higher the better!)
A top credit score is another good thing to possess when you’re trying to land a great home equity loan interest rate. Lenders look for scores of 680 or higher, and the higher your credit score, the more easily you can access the most advantageous loan terms. Borrowers with credit scores above 700 tend to score the best rates.
You can improve your score by making timely payments on your bills, reducing your credit card balances, and steering clear of new debt. Your chances to qualify for a home equity loan with a favorable interest rate will grow as you become more in control of your own financial security.
Another essential strategy for getting beneficial loan terms is to improve your DTI ratio. You can do this by working to pay down your existing debt, increasing your income, or both.
Lenders like DTI ratios of 50% or less, and will look at you longingly if you have one that is 36% or lower. Managing your DTI effectively comes with a big payoff. You’ll easily qualify for a loan you want and increase your chances of getting a great interest rate.
Nailing down solid insurance on your property is a must-do if you want to qualify for a home equity loan. Your coverage needs to be active and comprehensive, so keep it up to date. This is not a factor you want to take risks with. Your property insurance is the safety net that will protect both you and your lender should damage strike your home.
If you’re thinking about the closing costs on home equity loans, you’re right — they do add to your costs when you take out a loan. You’re likely to pay 2% to 5% of the loan amount by the time your loan closes. This table shows you how typical loan closing costs break down.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 |
| 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 |
Lenders do sometimes offer no-closing-cost loans, but these frequently come with higher interest rates. Do the math and see how much interest you will pay over the life of any potential loan before you spend time on the application.
Online tools and calculators can make your life easier as you look for the best home equity loan rates. Try out multiple tools, including a home equity loan calculator — it will figure out the maximum loan amount you’re likely to qualify for.
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.
Is the interest you pay on your home equity loan tax-deductible? It may be in 2025, as long as you use the funds to improve your home. Single filers can deduct the interest they pay on the first $375,000 of loan debt. Married couples filing jointly can deduct interest on up to $750,000 of loan debt. You’ll need to itemize your expenditures if you want to take advantage of these deductions. A tax advisor can help you figure out what makes sense for you.
If you are not sure you’re sold on a home equity loan, stick with us. You can consider a cash-out refinance or a home equity line of credit (HELOC), too. A cash-out refinance lets you take out a new mortgage for a sum larger than what you owe on your existing home loan, and you receive the difference as a lump sum to use as you wish. A HELOC lets you apply for a credit limit secured by your home and borrow against as you need to. You pay interest only on the cash you draw out.
If you want to learn even more about cash-out refinance vs. home equity line of credit similarities and differences, keep on reading.
What is a home equity line of credit? Often referred to as a HELOC, it’s a lot like a credit card. HELOCs offer homeowners a flexible freedom to borrow up to a set limit and pay interest on the money only when they actually use it. Usually, you can pull out funds during a “draw” period at the beginning, which is followed by a repayment period. At that point, you have to repay both the principal and the interest.
HELOC rates are adjustable, generally, unlike those on home equity loans. HELOC lenders often tout the product’s flexibility, but keep in mind that with an adjustable interest rate, your rate and payments may change — and your costs go up — down the line. Qualifying for a HELOC often requires a credit score of 680 or higher and a DTI ratio below 50%. A HELOC may let you borrow up to 90% of your home equity.
Want to know what your monthly payment would be on a hypothetical HELOC? Do your research and then run some probable loan amounts, annual percentage rates (APRs), and loan terms through a HELOC monthly payment calculator. When you play around with different interest rates and payment terms, you’ll see how they can affect your payments. Ultimately, this may help you understand how much of a loan you can afford.
Just want to calculate how much interest you’d have to pay during a HELOC’s “draw” period? Try a HELOC interest-only calculator.
This strategic mortgage refinance allows you to swap your original mortgage for a larger one, and receive the difference in a lump sum. Rates on cash-out refis may be fixed or adjustable. These are easier to qualify for, generally, than a home equity loan or a HELOC. Lenders’ criteria vary, but cash-out refis often require a 620 minimum credit score and a 43% or less DTI ratio.
Recommended: HELOC Repayment Calculator
If you are considering applying for a home equity loan in Honolulu, understanding interest rates and how they work will help you find and negotiate the very best terms. Your equity level, credit score, and DTI ratio will all play a role in the process, and shopping around can go a long way.
If you decide that a home equity loan isn’t the right fit, HELOCs and cash-out refis both have unique benefits that make them worth a look.
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 is versatile. People use them to borrow in order to finance major expenses like home improvements or essential purchases, or to ease high-interest debt consolidation. Every borrower should use the funds wisely and make sure the loan fits into their financial long game.
A $50,000 loan’s monthly payment will heavily depend on not only the interest rate, but the loan term. If you get a loan at a 7.00% interest rate with a 15-year term, your monthly payment would be $449. At a 9.00% rate over 15 years, the payment would be more — about $507. A loan calculator can help you figure out monthly payments with other variables for comparison.
A few factors could interfere with securing a home equity loan. Lenders typically require a minimum credit score of 680, so if you have a lower one, it could disqualify you off the bat. Another number that could nix your loan is a high debt-to-income (DTI) ratio – usually over 50%. If you have less than 20% equity in your home, that will probably be a red flag for lenders, too. They will also no doubt look at how stable your home’s value is and how comprehensive a property insurance plan you are carrying. Remember that requirements always vary among lenders.
Fixed interest rates, to start. Home equity loans often come with them, meaning they are going to have predictable monthly payments that make budgeting easier. Since those fixed rates are usually lower than rates on unsecured personal loans, they are also cost effective, and a good choice for significant one-time expenses like home renovations or high-interest debt consolidations. Look at these benefits alongside the potential risks, though. A stable interest rate won’t protect you from the threat of foreclosure if you can’t make your payments.
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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.
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.
