Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by Federal Reserve policy, borrower creditworthiness, and market competition.
• It’s a good idea to keep at least 20% equity in your home whenever possible.
• A credit score of 700+ and a debt-to-income ratio below 36% are your ticket to the best rates out there.
• Property insurance is a must, particularly if your home is in a flood zone.
• Online tools and calculators can help you estimate monthly payments and your borrowing capacity.
• The interest on a home equity loan may be tax-deductible.
What is a home equity loan? First and most important, it’s a great way for homeowners to access the value they have built in their homes. It’s also an option many use to relieve the pressure when they need cash.
In this article we’ll cover everything you need to know about home equity loans. We will discuss the factors that affect loan rates and provide tips for getting the very best rate possible. We’ll even explain the different types of home equity loans, including home equity lines of credit (HELOCs) and cash-out refinances, so you’ll be aware of the alternatives available, along with their pros and cons.
Whether you’re planning a home renovation, working to consolidate high-interest debt, or making a major purchase, understanding Houston home equity loan rates can help you make smart financial decisions and get you set up for a successful economic future.
A home equity loan is a type of second mortgage. It allows you to tap into your home’s equity to receive a lump sum of cash, which you then repay, usually in fixed monthly installments over a period of five to 30 years. The loan is secured by your home, and that can mean you’ll have access to lower interest rates than you’d get with unsecured personal loans.
One important thing to keep in mind: In order to draw on the equity in your home, you have to actually have equity in your home. You can still be paying off your mortgage, but the money you currently owe should not be more than the house is worth. Typically, lenders will want you to have a minimum of 20% equity in your home to qualify.
Here’s how the two types of financing compare if you use them to take equity from your home.
| 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 paying your mortgage diligently and now you are wondering just how to get equity out of your home, a home equity loan may be a particularly good option for you.
Multiple factors determine what the home equity loan rates in and near Houston look like, including both big-picture economic conditions and your individual financial profile.
Federal Reserve policies affect lenders’ base rates and thus the rates they charge borrowers. Increases in the federal funds rate and the prime rate, for instance, lead to rises in home equity loan rates. Understanding these influences can enable borrowers to anticipate rate fluctuations and make informed decisions about all kinds of home loans, including home equity loans.
Your credit score and debt-to-income ratio also influence what rate you are offered by lenders. Additionally, the amount of your loan and the length of your repayment term will have an impact on your rate. Generally, larger loans and longer terms will have higher rates — this is due to the increased risk for lenders.
As you see, it pays to look for the best available interest rates, whether you’re shopping for a home equity loan or a HELOC. Your interest rate is a major factor when it comes to how affordable your home equity loan will be. As of late June 2025, the average home equity loan interest rate was 8.26%.
The chart below shows a $75,000 home equity loan with a 20-year repayment term, with payments and interest paid calculated at several different interest rates. If you have an 8.00% interest rate, your monthly payment would be $627, and the total interest you’d pay over the loan’s full term would add up to $75,559. But with a rate just one percentage point lower, at 7.00%, your monthly payment would be $581, and the total interest would drop to $64,554. The lower rate could ultimately save you $11,005 in total extra interest.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Unlike HELOCs, home equity loans often have fixed interest rates. Your monthly payments will not change — they’ll stay the same for the entire length of the loan. A fixed rate may start off higher than an adjustable rate, but its stability can give you peace of mind, because you’ll know that your payments won’t suddenly spike.
Adjustable rates, on the other hand, might seem more attractive, but after a defined period, the rates “adjust” to follow a market index — and may be higher than the initial rate. Since the rates can change quite a bit over the life of an adjustable-rate loan, your payments may feel unpredictable.
When deciding between the two kinds of rates, think carefully about your financial goals, how flexible your budget can be, and how much risk you feel comfortable with.
As you’re thinking about how to get equity out of your home, you can try to time your loan application to achieve the lowest possible rate. But predicting the prime rate is a bit like trying to forecast the weather, and not all borrowers have time to wait for low points. If you need a loan, focus on comparing offers from different lenders, and positioning yourself to get the best possible rate.
The prime rate has seen its fair share of ups and downs, as you can see from the graphic and chart below.
| 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 secure the most competitive home equity loan rates in Houston, there are a few factors to keep in mind, whether you’re shopping for a HELOC vs. a home equity loan. Take the following steps before you begin the application process, and you’ll be positioned to land a home equity loan with an interest rate and term that are not just favorable, but smart and manageable.
You need at least 20% equity in your home to qualify for a home equity loan. To figure out your equity, subtract your outstanding mortgage balance from the estimated value of your home. Then simply divide the answer you get by the estimated home value to arrive at a percentage of equity. The higher that percentage is, the better off you’ll be.
To land the best available home equity loan rate, you’ll want a robust credit score. Lenders often look for a score of 680 or higher, with many requiring a score over 700. A higher credit score is a sign of financial savvy and can often open the door to more favorable loan terms. By focusing on timely payments, reducing credit card balances, and steering clear of new debt, you can boost your chances of qualifying for a home equity loan with a lower interest rate.
Your DTI ratio is an important factor when it comes to qualifying for a home equity loan and getting a good rate. Lenders typically want to see a DTI ratio of 50% or less, and if yours is 36% or lower, it will help you qualify for the lowest interest rates. Manage your DTI effectively by paying down your existing debt, increasing your income, or achieving some combination of the two.
Property insurance is a must-have if you want to get a home equity loan. This insurance is a safety net for both you and the lender should damage occur, so make sure your coverage is up to snuff.
Online tools and calculators can be a big help in your quest for the best home equity loan rates. You can choose among multiple tools. Here’s just one: A home equity loan calculator lets you enter info about a particular loan and learn what the monthly payments would be, giving you a clear picture of what you can expect. It’s a nifty tool to make sure you won’t overextend yourself. Plus, you can play around with different interest rates and terms to find out how they might affect your payments.
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.
When it comes to closing costs for home equity loans, you’re looking at 2% to 5% of the loan amount. The table below shows some typical closing costs.
| 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 |
While some lenders offer no-closing-cost loans, they often come with higher rates.
The interest on your home equity loan may be tax-deductible if you’ll be using the funds to 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. Just remember that you’ll need to itemize if you want to take advantage of this. A tax advisor can help you figure out what will make the most sense for your situation.
Home equity loans aren’t the only way to leverage your home’s value. You might also consider a home equity line of credit (HELOC) or a cash-out refinance vs. home equity line of credit.
What is a home equity line of credit? A HELOC is akin to a credit card, offering homeowners the freedom to borrow up to a set limit and pay interest solely on what they use. Usually, there’s an initial “draw” period during which they can withdraw funds, followed by a repayment period in which they repay principal and remaining interest. Rates are generally adjustable.
Unlike a home equity loan, a heloc-repayment-calculator is all about flexibility. Keep in mind that adjustable interest rates mean that payments can fluctuate, potentially impacting your costs down the line.
Qualifying for a HELOC generally requires a credit score of 680 or higher (700 is even better) and a DTI ratio under 50% (ideally below 36%). HELOCs often permit you to borrow up to 90% of your home’s equity. Check out this HELOC monthly repayment calcuclator to help you see how the loan would look as you pay it down.
And if you’d like to calculate how much interest you’d have to pay during the “draw” period of a HELOC, try a HELOC interest-only calcuclator.
A cash-out refinance is a strategic mortgage refinance in which you swap your original mortgage for one that’s larger than what you owe — and then take the difference in a lump sum. The rates on cash-out refis can be fixed or adjustable.
If you’re evaluating the benefits of a cash-out refinance vs. a home equity line of credit, it’s worth noting that it’s usually easier to qualify for a cash-out refi than for a home equity loan or a HELOC. While lenders can have different standards, cash-out refinances often require a minimum credit score of 620 and a DTI ratio of 43% or less.
To get the best home equity loan rates in Houston, you’ll want to work on building your credit, managing your debt-to-income ratio, and securing property insurance. You can use online tools to estimate your payments and the amount you can borrow, but be sure to factor in closing costs as you make your decision. If a home equity loan isn’t the best fit for you, a HELOC or a cash-out refinance could also be an option. Be sure to weigh the benefits and risks of each to find the one that works best for your financial goals and situation.
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.
Some popular reasons why people apply for home equity loans are to pay for home improvements and to consolidate high-interest debt. If you decide to pursue a home equity loan, remember to use the funds wisely and make sure the loan fits into your bigger financial picture.
The amount of your monthly payment for a $50,000 home equity loan can vary depending on the interest rate and the loan term. For example, if you got your loan at 7.00% interest over 15 years, your monthly payment would be about $449. At a 9.00% interest over 15 years, the payment would be around $507. A loan calculator can help you figure out what your monthly payments would be with different variables.
A number of factors could get in the way of your securing a home equity loan. First, lenders typically require a minimum credit score, generally around 680 or more, so having a lower one could disqualify you. A high debt-to-income (DTI) ratio – usually above 50% – might also nix your loan. And having less than 20% equity in your home could be a red flag for lenders, too. Potential lenders will also look at how stable your home’s value is and how comprehensive your property insurance is. Qualifications vary by lender, but these are some common disqualifiers.
Home equity loans often come with fixed interest rates. They therefore have predictable monthly payments, which can make budgeting easier. They also usually have lower rates than unsecured personal loans, making them a cost-effective option for significant one-time expenses, such as home improvements or debt consolidation. Just be sure to balance the benefits with the potential risks. These include the threat of foreclosure on your home if you fall behind on payments.
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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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