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Compare home equity loan rates in Illinois.
Key Points
• Home equity loan rates in Illinois depend on various factors like credit score, loan-to-value ratio, and debt levels.
• Lender policies, prevailing interest rates, and housing market conditions also have an impact on rates lenders will offer.
• Home equity loans provide homeowners with access to additional funds by leveraging the accumulated equity they have in their properties.
• Fixed interest rates offer consistent and predictable monthly payments, while variable rates may initially be lower but carry the risk of future increases.
• Alternatives to home equity loans include HELOCs, HECMs, and cash-out refinances, each with its own features and eligibility requirements.
Introduction to Home Equity Loan Rates
This guide will help you become a savvy consumer when it comes to Illinois home equity loan rates. The rate you might be offered as a borrower will depend on the lender, your financial situation, and the country’s larger financial environment. We’ll take you through the factors that help determine rates and provide tips for getting the best one available for you. Prepare to maximize the equity you get out of your home and find a loan that will help you achieve your financial goals.
How Do Home Equity Loans Work?
A home equity loan is a lump-sum loan that leverages your home as collateral. Because a home guarantees the loan, borrowers often find they can get a lower interest rate with a home equity loan than with a personal loan. If you are currently paying off your primary home loan, the home equity loan would be a second mortgage.
The interest rate is typically fixed, ensuring your repayments remain steady, and you repay the money you borrow over a term of 5 to 30 years. To qualify for this type of loan, homeowners need a minimum of 20% equity in their primary residence. In Illinois, as elsewhere in the U.S., a home equity loan can be used for a variety of purposes, from home improvements to debt consolidation.
Where Do Home Equity Loan Interst Rates Originate From?
The interest rates lenders set for home equity loans are a product of various economic factors. The Federal Reserve sets its own rates and then lenders set their prime rate — the rate they offer their most creditworthy clients. From there, your personal financial profile helps determine what rate you’ll be offered — we’ll cover that in more detail below.
How Interest Rates Impact Home Equity Loan Affordability
The interest rate you secure can have a significant impact on your ability to afford a loan. When considering a 20-year mortgage, a seemingly small 1% difference in the interest rate can translate to a substantially greater amount of interest paid. Check out this example, assuming a homeowner borrows $60,000 with a 20-year term:
• At 6.00% interest, monthly payments would be $430 and the total interest paid would be $43,166.
• At 7.00% interest monthly payments would be $465 and the total interest paid would be $51,643.
• At 8.00% interest monthly payments would be $502 and the total interest paid would be $60,447.
Home Equity Loan Rate Trends
The prime interest rate is a key indicator of home equity loan rates, as noted above. So it’s helpful to keep an eye on the prime rate and to understand how it has changed over time. Since 2018, the U.S. prime rate has fluctuated, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023. Below you’ll find a look at recent years and an overview of more than 50 years.
Historical Prime Interest Rates
| 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
Source: TradingView.com
Factors Influencing Home Equity Loan Rates
The prime rate isn’t the only factor driving what interest rate you’re offered. These other factors determine the level of risk associated with your application, and thus the rate that you might qualify for.
Credit Score
You know how your lender examined your credit score when you took out a home loan to purchase your home? Well they’ll look again if you apply for a home equity loan. They’re more likely to approve you if your credit score is 680 or higher, but many prefer to see 700 or above.
Home Value
You’ll need a home appraisal if you apply for a home equity loan, as the value of your property will determine how much equity you have in your home (remember, you need at least 20% equity in order to get the loan).
Loan-to-Value (LTV) Ratio
Your home value is also important for figuring your loan-to-value (LTV) ratio, which helps determine how much you can borrow. You can compute your personal number by adding the amount you wish to borrow to the amount you currently owe on your mortgage (if anything). Then divide that total by the appraised value of your home. Multiply the result by 100 and you’ll have what’s called a “combined LTV,” or CLTV. The highest LTV most lenders will allow for a home equity loan is 85%. If you’re not sure how much you might be allowed to borrow, you can run the numbers with a home equity loan calculator.
Home Value Stability
How stable home values are in your area is another thing that lenders consider. When the market is healthy and values are stable or rising, lenders are more likely to give the okay to larger loans. But when the housing market is soft, lenders may tighten their criteria and offer smaller loan amounts.
Property Location
If your property is located in an area that is deemed at high risk for natural disasters such as flooding or tornadoes, higher interest rates may be in your future, as lenders consider these areas more risky.
Lender Policies
Policies set by individual lenders can have a noticeable impact on the interest rates they offer borrowers. That’s why you’ll want to compare offers from a few different lenders during the loan application process and look not only at the interest rate you’re offered but also at the fees.
How to Qualify for the Lowest Rates
Take these steps and you’ll improve your chances of getting the lowest possible home equity loan rate in Illinois:
1. Build a Strong Credit Score
Keep tabs on your credit report, promptly report any inaccuracies, and request a correction. Pay your bills on time, naturally. And don’t spend to the max on every credit line you have.
2. Manage Debt-to-Income Ratio
The debt-to-income (DTI) ratio, which compares your monthly debt obligations to your gross monthly income, is a significant factor when lenders evaluate loan applications. The typical DTI limit for a home equity loan is 36%, though some lenders allow up to 50%.
3. Obtain Adequate Property Insurance
It’s standard for lenders to require proof of adequate property insurance before granting Illinois home equity loans. This is especially important if you live in an area prone to flooding or other natural disasters.
4. Maintain Sufficient Home Equity
In Illinois, and across the country, you need to keep at least 20% equity in your home to qualify for a home equity loan. It’s the lender’s way of making sure you aren’t borrowing more than you can afford.
Fixed vs. Variable Interest Rates
Home equity loans, which use your home as collateral, often come with fixed interest rates. The upside to this is that your rate stays the same over the loan’s life, making it easier to plan for monthly payments. But because fixed rates are, well, fixed, they might be a bit higher when you first take out the loan compared to variable rates. Variable rates, on the other hand, can start out lower but may change over time.
Tools & Calculators
As you search for the best home equity loan for you, online calculators can help you estimate your future payments. Here are some of our favorites:
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
Home equity loans come with closing costs that hover between 2% and 5% of your loan amount. Lenders may (or may not, according to their policies) charge for the appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. Factor in each lender’s fees as you compare home equity loan offers.
Tax Deductibility of Home Equity Loan Interest
Couples filing joint tax returns can deduct interest paid on up to $750,000 of qualified home equity loans obtained after December 15, 2017, while single filers may deduct interest paid on loans up to $375,000 — that is, provided you use the money to “buy, build, or substantially improve” a home. For the nitty-gritty on how to maximize your tax benefits, a sit-down with a tax advisor is a smart move.
Alternatives to Home Equity Loans
There are different types of home equity loans you might consider if you’re looking to take advantage of the equity you’ve built up in your property. Here are three options:
1. Home Equity Line of Credit (HELOC)
A HELOC is akin to a credit card, but one that’s backed by your home. If you’re approved, you’ll be allowed to borrow up to a certain amount, but (here’s the key) you’ll only pay interest on the portion of the credit line that you actually use. This makes a HELOC a good solution if you know you need to borrow money but you aren’t exactly sure how much. When you compare a HELOC vs.a home equity loan, there is another difference to note: Unlike a home equity loan, a HELOC typically has a variable rate that changes over time, which means your monthly costs might increase, too.
2. Home Equity Conversion Mortgage (HECM)
An HECM, or home equity conversion mortgage, is a government-insured reverse mortgage that lets homeowners aged 62 and older receive payments from the lender based on their home’s value. The payment can be a lump sum, regular installments, or a line of credit. And no repayment is required until you leave the home. This is in contrast to home equity loans and HELOCs, which demand monthly payments. While HECMs may have higher closing costs and longer processing times, they offer unique benefits that may be worth exploring. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
3. Cash-Out Refinance
A cash-out refinance is a type of mortgage refinance that lets you pay off your old mortgage and borrow extra funds to use in any way you like. As with a home equity loan, lenders usually allow you to borrow up to 85% of your home’s value. When comparing a cash-out refinance vs. a home equity line of credit, the main difference, of course, is that the former is a refinance — meaning you’ll be getting a brand new mortgage at whatever current rate you qualify for in Illinois.
The Takeaway
Understanding home equity loan rates and the various factors that influence them can empower Illinois homeowners to make smart financial decisions. Using an online calculator, polishing up your financial profile, and exploring all options including a HELOC or a cash-out refi, will help ensure you get the right loan for your needs.
Unlock your home’s value with a home equity loan from SoFi.
FAQ
What’s the monthly payment on a $50,000 home equity loan?
The payment on a $50,000 home equity loan will vary depending on the interest rate and loan term. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 home equity line of credit (HELOC) will depend on how much of the line of credit you have used. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month.
What is the payment on a $25,000 home equity loan?
Remember that the payment on a $25,000 loan is determined by the interest rate and the loan term. To understand what your monthly payment might be at different terms and rates, use a home equity loan calculator.
What would the payment be on a $30,000 home equity loan?
Borrowing $30,000 with a home equity loan would cost you $348 per month if you had a 7.00% interest rate and repaid the loan over 10 years.
What could disqualify you from getting a home equity loan?
Things that could make a lender disqualify you include having too little equity in your home, lacking a strong credit score, having a high debt-to-income ratio, or not adequately insuring your property.
What are the benefits of a HELOC?
A home equity line of credit (HELOC) provides flexibility. You only borrow what you need at any given time, and you pay interest only on the amount you borrow. This makes HELOCs a popular choice for homeowners who know they need some cash on hand but aren’t sure exactly how much.
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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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.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.Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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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