Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by the prime rate and the borrower’s financial profile.
• A borrower’s credit score and debt-to-income ratio have a major impact on the rate they are offered.
• Home equity loans typically have fixed interest rates, which means monthly payments are predictable.
• Thorough property insurance coverage is often a requirement and can sway rates.
• Interest paid on a home equity loan may be tax deductible if funds are used for significant home improvements.
If you’re thinking about how to get equity out of your home in Las Vegas, this comprehensive guide is a great resource. We’ll take a deep dive into the current landscape of home equity loan rates, explaining how these loans work, what factors influence rates, and how you can qualify for the best terms. Whether you’re looking to finance a home renovation, consolidate debt, or cover other large expenses, understanding home equity loan rates will help you make the right financial decision.
Step one? Understand what a home equity loan is in the first place.
A home equity loan is a lump-sum loan that leverages the equity in your home (the market value of your home minus your mortgage balance). You’ll need at least 20% equity in your home to qualify for the loan. But once you clear that hurdle, many lenders will let you borrow up to 85% of your home equity. Home equity loan interest rates are typically lower than personal loan rates because your home secures the loan. (So if you are still paying off your original home loan, it’s important to understand that a home equity loan is a second mortgage.)
If you’re wondering how much you might be able to borrow, check out a home equity loan calculator. Once you’re approved for a home equity loan, you’ll receive the full amount and begin making payments immediately. These loans usually have fixed interest rates, so monthly payments are always the same. The repayment term can be anywhere from 5 to 30 years.
Interest rates for different types of home equity loans are influenced by a variety of economic and personal factors. The Federal Reserve’s monetary policy has a direct impact on lending rates. Lenders typically base their interest rates on the prime rate, which is influenced by Fed policy. It’s a simple equation: If the prime rate goes up, home equity loan rates are likely to follow. Your credit score and debt-to-income (DTI) ratio are also significant factors in the rate you’ll be offered. Generally, higher credit scores and lower DTIs translate to more favorable rates. Every lender has its own specific criteria, so seek quotes from multiple lenders.
Your interest rate is a big deal when it comes to the affordability of a home equity loan. Even a small change in the rate can mean big savings or extra costs for you. You can see this in the chart showing different loan amounts, terms, and rates. The longer the term, the more interest you will typically 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 |
While no one can say for certain where home equity loan rates are headed, a look at recent rate trends may provide some insight into how high or low current rates are versus historical ones. The prime rate was as low as 3.25% in 2020 and as high as 8.50% in 2023. Because home equity loan rates are typically set starting with the prime rate, these fluctuations can cause home equity loan rates to change, too. Whether you’re seeking a home equity loan or considering a mortgage refinance, you would be wise to keep an eye on them.
| 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 watch the prime rate, but you can’t control it. Fortunately there are some other factors that govern what rate you will be offered that you can control. Before you apply for a home equity loan, check these off your to-do list:
As noted above, you’ll need at least 20% equity to qualify for a home equity loan. To calculate your equity, simply subtract your mortgage balance from your home’s estimated value (find that number on an online real-estate site). For example, if your home is worth $550,000 and you have a remaining mortgage of $400,000, you’ve got $150,000 in equity. To determine the percentage of equity, divide your equity amount by your home’s value. (So in this example, you would have 27% equity.)
Lenders typically like to see credit scores of 680 or higher for home equity loans, with many looking for 700 or above. A robust credit score is a testament to your financial management skills and can significantly influence the rates you’re eligible for. To bolster your credit score, ensure you’re paying bills promptly and maintain low credit card balances. Refrain from opening new credit accounts in the months leading up to your loan application. Regularly review your credit report for inaccuracies and address them.
Your debt-to-income (DTI) ratio is a critical piece of the lending puzzle. Lenders generally look for a DTI below 50%, with 36% or lower being ideal. To calculate your DTI ratio, divide your total monthly debt payments by your gross monthly income. The lower the ratio, the better your chances of securing a competitive rate. If your DTI is on the higher side, consider whittling down existing debts or finding ways to boost your income (or both). Not only will this improve your odds of approval, but it could also lead to a more favorable rate.
Property insurance is a must-have when you apply for a home equity loan in Las Vegas. It’s a safety net for you and your lender. Depending on your home’s location, a lender may also require additional coverage, such as flood insurance. Make sure your policy meets your lender’s criteria to keep the loan process smooth and to safeguard your investment.
Recommended: What Is a Home Equity Line of Credit?
Online calculators like the three shown here can help you quickly see how a loan might affect your monthly budget and how much interest you would pay over the long haul.
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.
Like home loans, home equity loans have closing costs. You’re looking at costs that typically run from 2% to 5% of your loan amount. The fees cover an appraisal, credit reports, document preparation, loan origination, notary, title searches, and insurance. While no-closing-cost loans are out there, they may come with higher rates, so carefully consider all costs associated with a loan before signing.
The interest on your home equity loan may be tax deductible if you’re using it to buy, build, or improve your home. The current rules are set to last through 2025. Joint filers can deduct interest on loans up to $750,000; for single filers, it’s loans up to $375,000. Just remember, you’ll need to itemize to claim this deduction, as the standard deduction doesn’t cover it.
There are alternatives to home equity loans, including a home equity line of credit (HELOC) and a cash-out refinance. All three options allow you to tap into the equity you’ve built in your home, but each has unique features and eligibility requirements.
A HELOC is a flexible line of credit that’s secured by your home’s equity, often offering a more favorable interest rate than a credit card. As you consider a HELOC vs. a home equity loan, one important difference is that with a HELOC, you can borrow as you need funds, up to a certain limit. During the “draw” period of the HELOC, which is often 10 years, you’ll only pay interest on the amount that you’ve borrowed. (You can use a HELOC interest-only calculator to see what payments might be like.) After the draw period ends, you begin to repay all that you have borrowed plus interest.
Keep in mind that HELOCs often have variable rates, which could mean fluctuating monthly costs. A HELOC repayment calculator can help you compute what you owe as rates change. To qualify, you’re generally looking at a 680+ credit score (though 700+ is preferred) and a DTI below 50% (but ideally less than 36%). Many homeowners can borrow up to 90% of their equity. Be sure to compare HELOC rates and terms with home equity loans before making a decision.
A cash-out refinance replaces your existing mortgage with a larger one, giving you the difference in cash. Most lenders allow you to borrow up to 80% of your home value. You’ll need a credit score of 620 or higher and a DTI of 43% or less to qualify. You can choose between a fixed or variable interest rate, with variable rates potentially allowing you to access more equity.
As you consider a cash-out refinance vs. a home equity line of credit or a home equity loan, keep in mind that with a refi, you’ll have just one mortgage and one monthly payment. If you have a low rate on your existing mortgage, however, a refinance may not be the best move. Compare costs of your current loan versus a new one carefully.
When you’re considering a home equity loan in Las Vegas, building a strong credit score, managing your DTI ratio, and obtaining adequate property insurance can help you get the best terms. Before committing to a home equity loan, it’s wise to explore other financing options, like a HELOC or a cash-out refinance. Whatever home equity lending option feels right for you, shop around and compare rates from multiple lenders.
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 a versatile tool. Whether you’re eyeing a big-ticket item, planning a home makeover, or aiming to streamline high-interest debt, this loan can be the answer. It’s a smart way to tap into your home’s value without parting with it. But here’s the key—do your homework on current rates. The interest and repayment term are the magic ingredients that can make a big difference in what you pay each month and overall.
What you’ll pay for a $30,000 home equity loan (and whether it is in fact a deal) depends on the interest rate and repayment term you choose. For instance, at an 8.00% rate, a 10-year term would mean a monthly payment of about $364, with total interest paid of $13,678. Extending the term to 20 years would lower your monthly payment to approximately $251, but the total interest would be $30,224. Shop around to find the lowest interest rate, then look carefully at the total costs.
The monthly payment on a $100,000 home equity line of credit will vary depending on how much of the credit line you have utilized, whether you are in the HELOC’s draw period (paying interest only) or its repayment period (paying both interest and principal), and what the current interest rate is. HELOC interest rates are usually variable, adding to the complexity. Your best strategy is to put your principal balance and interest rate into an online calculator to get an estimate of what you owe.
There are a few key factors that could prevent you from securing a home equity loan. Lenders often look for a minimum credit score of 680, a debt-to-income ratio of 50% or less, and at least 20% equity in your primary residence. In addition, insufficient property insurance, particularly in flood zones, could also be a disqualifying factor.
Home equity loans usually offer lower interest rates than credit cards or personal loans because your home serves as collateral on the loan. They also allow borrowers to obtain substantial amounts of money that can be used for any purpose. The funds come in a lump sum, with predictable, fixed-rate payments that can be made over a long term.
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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 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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