Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by credit score, debt-to-income ratio, and equity level among other factors.
• Your local market and lender policies will also play a role.
• Even a small rate difference can mean big changes in your monthly payments.
• Most home equity loans are fixed-rate loans, which means monthly payments stay steady.
• Closing costs typically fall between 2% to 5% of the loan amount.
• Interest can be tax-deductible if the loan is used for significant home improvements.
A home equity loan is a powerful financial resource for homeowners who want to tap into the value of their property without selling it. In this guide, we’ll explore the current home equity loan rates in Jacksonville, FL, and help you understand the factors that influence the rate you might be offered. We’ll also discuss how to evaluate different loan offers, the potential advantages and drawbacks of home equity loans, and alternative financing solutions. Armed with this information, you’ll be better prepared to decide if a home equity loan is the right way to get equity out of your home.
An improtant thing to understand about what a home equity loan is: Technically, it’s a second mortgage that uses your home as collateral. This often means you can qualify to borrow a larger loan amount at a lower interest rate than you would with an unsecured personal loan. However, it also means that if you don’t repay the loan, you could lose your home.
The loan is disbursed as a lump sum, which you will immediately begin to repay in equal monthly installments over a term that generally ranges from five to 30 years. Because the loan is secured by the equity in your home, the interest rate is typically fixed, providing a predictable monthly payment. To qualify, you’ll generally need to have at least 20% equity in your home, and the maximum loan amount is typically 85% of your equity. A home equity loan calculator can help you determine how much you might be able to borrow.Recommended: HELOC vs. Home Equity Loan
Like the rate on your home loan, the interest rates on different types of home equity loans are determined by a combination of economic factors and the borrower’s individual financial profile. Federal Reserve policies play a large role in the direction of the lending market. Lenders typically base their home equity loan rates on the prime rate, which is influenced by the Fed’s policy. Your credit score and debt-to-income (DTI) ratio will also play a significant role in the interest rate you are offered. Your loan amount and term length are also factors. Generally, the longer the term the less interest you will pay each month, but the more you will pay in interest over the life of the loan.
You know that interest rates are a big deal when it comes to the affordability of a loan. Even a tiny change in the rate can add up to a significant amount in extra interest over the life of your loan. Need convincing? Let’s see how that plays out for a $75,000 loan that is repaid over 20 years (of course, the more you borrow, the greater the rate’s effect in terms of money spent):
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Anticipating the ebb and flow of interest rates is no easy feat, given the many elements at play. But examining recent patterns may offer some helpful insight as to whether a rate is relatively high or low. In 2020, it sat at a borrower-friendly 3.25%, but by 2023, it had risen to 8.50%. By keeping an eye on fluctuations, you may be able to time your application to coincide with more favorable rates. But even if you can’t wait for a low prime rate, there are things you can do to improve your odds of obtaining the lowest available rate for your loan.
| 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 snag the most competitive home equity loan rates, your financial profile needs to be in tip-top shape. Here are four steps you can take before filing a single loan application to help ensure you get the best available rate:
To be eligible for a home equity loan, you need to have at least 20% equity in your home. Calculating your equity is simple: Just subtract your outstanding mortgage balance from your home’s estimated value. (Find the latter on a real estate site.) Next, divide the answer by the home value to arrive at a percentage. For instance, if your mortgage balance is $400,000 and your home is valued at $550,000, your equity is $150,000. Divide $550,000 into $150,000 and you get an equity level of 27%.
To obtain the most favorable home equity loan rates, a robust credit score is your golden ticket. Lenders often seek scores of 680 or higher, but many like 700+. A higher credit score paints a picture of financial prudence. To polish your credit score, focus on being a model borrower: Pay on time, keep credit card balances in check, and sidestep new debt. Regularly peruse your credit report for inaccuracies and dispute any you find.
Your DTI ratio is a crucial piece of the home equity loan puzzle. Lenders typically look for a DTI ratio under 50%, with an ideal being 36% or less. To compute your ratio, add up all your monthly debts (car loan, student loan, credit cards, etc.) and divide by your gross monthly income. To keep your DTI in check, consider paying down existing debts, finding ways to boost your income, or doing both. A lower DTI improves your loan prospects by painting a positive picture of your financial well-being.
Property insurance is a must-have from the lender’s perspective, especially in disaster-prone areas. So make sure your coverage meets a lender’s qualifications before you file an application. This step isn’t just about ticking a box; it’s about safeguarding your investment in your home for the long haul.
Running the numbers on a home equity loan can help you get a feel for how borrowing might affect your finances. Fortunately, online tools can do the math for you. Here are a few of our favorite calculators.
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 usually fall between 2% and 5% of the loan amount. These fees cover a range of expenses, from an appraisal to the title search and more. While no-closing-cost home equity loans are sometimes available, they often come with higher interest rates. It’s crucial to include a comparison of closing costs when you are looking at offers from multiple lenders to find the best deal.
Recommended: What is a Home Equity Line of Credit
Home equity loans are a popular choice, but don’t forget to explore other options for borrowing based on the equity you’ve built up in your home. Here are two popular alternatives:
A HELOC is similar to a credit card in that you have a certain limit you can borrow up to. You only pay interest during the “draw” period, which is typically 10 years. (A HELOC interest-only calculator can be helpful at this time.) Once the draw period ends, you’ll pay back the principal plus interest (this is when a HELOC monthly payment calculator is handy).
To qualify, you’ll generally need a credit score of 680 or higher (700 is preferred) and a debt-to-income ratio of less than 50% (36% is the ideal). HELOCs tend to be best for people who aren’t sure exactly how much they will need to borrow or for expenses that will be incurred over time.
Another option when you’re looking to borrow against your equity is a mortgage refinance. A cash-out refinance replaces your current loan with a larger one. You get the difference between your initial loan and your new one as a lump sum, which you can use for any purpose. The amount you receive is based on your home’s equity,
To qualify, you’ll generally need a credit score of 620 or higher and a DTI ratio under 43%. Interest rates can be fixed or variable. One key consideration as you think about a cash-out refinance vs. a home equity line of credit: A cash-out refinance results in a single monthly payment, which can simplify your finances. Cash-out refinances are also often easier to qualify for than a HELOC. If you have a sweet interest rate on your original home loan, however, a refinance may not be the best move.
When you’re ready to explore a home equity loan in Jacksonville, FL, here’s the game plan: Give your equity level, credit score, and DTI ratio a checkup and make sure your home is well insured. Use handy online tools to get a grip on your payments and costs. Consider a HELOC and cash-out refinance—they could be the ticket to even lower rates and a better financial fit. And pursue rate quotes from multiple lenders to find the lowest possible rate for your loan.
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.
Home equity loans are a versatile financial tool. The money you borrow with a home equity loan can be used for home improvements, educational expenses, medical bills, or debt consolidation. These loans provide a lump sum of money with fixed-rate interest, which can make budgeting for repayment easier. In some cases, the interest on a home equity loan may be tax-deductible if the funds are used for home improvements.
The monthly payment on a $50,000 home equity loan can fluctuate based on the interest rate and loan term. For instance, with a 7.00% interest rate across a 15-year term, you’re looking at approximately $449 per month. But, if the interest rate is 8.00% and the term extends to 20 years, the monthly payment could drop to $418. It’s clear that comparing rates and terms is key to finding the most budget-friendly option.
A $100,000 HELOC offers a level of flexibility not found in a fixed-rate home equity loan. But this also means it’s hard to predict a monthly payment. What you’ll pay will change each month depending on how much of the credit line you have accessed and whether you are in the draw period (paying interest only) or in the repayment period (paying both principal and interest). For the most accurate estimate, use a HELOC monthly payment calculator.
Home equity loans are a great way to get a lump sum at a fixed interest rate that is typically lower than the rate you would have with an unsecured loan. This makes them a great option for large expenses like home renovations or debt consolidation. The fixed rate means you’ll have predictable monthly payments, which can help you budget. Plus, the interest you pay on a home equity loan may be tax-deductible if you use the money for significant home improvements. But remember, your home is on the line, so make sure you understand the risks and that your financial situation is stable enough to take on the additional debt.
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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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