Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by the Federal Reserve’s monetary policy, market conditions, and borrower creditworthiness.
• Rates for home equity loans are typically more favorable than those for unsecured loans.
• Comparing offers from multiple lenders can help you secure the best terms and rates.
• To qualify for the most competitive rates, you’ll want a credit score of 700 or higher and a debt-to-income ratio under 36%.
• Even a fractional improvement in the interest rate you obtain can lead to significant savings over the term of your loan.
When you’re thinking about borrowing against the value of your home, home equity loan interest rates are an important consideration. In this article, we’ll explain the current home equity loan rates in Milwaukee, Wisconsin, and how they’re influenced by the larger economy as well as your personal situation. We’ll also cover the mechanics of home equity loans, the qualifications needed to get the best rates, and the potential risks. Whether you’re planning a home renovation, consolidating debt, or funding another major expense, understanding home equity loan rates can help you make a more informed financial decision.
It’s important to understand what a home equity loan is, exactly. It’s technically a second mortgage on your home (assuming you’re still paying off your first home loan). If you qualify, your lender will give you a lump sum of cash and you’ll immediately start paying off the loan. You’ll make monthly payments for a term of anywhere from five to 30 years. Because the loan is secured by your home, you’ll enjoy lower interest rates than you would with an unsecured loan. But you also face the risk of foreclosure if you don’t make those payments.
With most home equity loans, the interest rate is fixed, which means your monthly payment will stay the same. To qualify for this type of loan, you’ll need to have at least 20% equity in your home (equity is the value of your home minus the amount you owe on your mortgage). Many lenders will let you borrow up to 85% of your home’s equity, which makes these loans good for larger expenses.
Recommended: Home Equity Loan Calculator
The interest rates for different types of home equity loans in Milwaukee are determined by a mixture of economic and personal factors. Lenders base their rates on the prime rate, which is influenced by the policies of the Federal Reserve. Changes in the prime rate can have a direct effect on the interest rates for home equity loans. Additionally, a borrower’s credit score and debt-to-income (DTI) ratio are important factors. The loan amount and repayment term also play a role, with larger loans and longer terms typically having higher rates due to the increased risk.
Let’s talk about interest rates and the role they play in the affordability of your home equity loan. Even a fraction of a percentage point can snowball into significant extra interest over the loan’s life. Consider a $100,000 loan with a 15-year term—at 8.50%, you’d be looking at a $985 monthly payment and total interest of $77,253. Now, bump that rate to 9.50% and your monthly payment jumps to $1,044, with the total interest swelling to $87,960. That’s a $10,700 difference in interest alone. Understanding how rates affect costs can empower you to make a financially savvy decision.
Given that the prime rate underpins home equity loan rates, you’ll probably start paying close attention to the rate as you think about applying for a loan. Predicting the movement of interest rates is no easy feat, given the many variables at play, and the prime rate has seen quite a bit of fluctuation, as you can see from the graphic. Some borrowers will be tempted to try to time their application to coincide with a favorable prime rate. But if you aren’t able to wait out the market, remember that there are other things you can do to get the best available rate.
| 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 attractive home equity loan rates, you’ll want to put your best foot forward, and the time to do that is before you apply for a loan. Take these four steps to increase the chance that a lender will offer you the best rates.
To qualify for a home equity loan, you need at least 20% equity in your home. But the more equity, the better. Calculating your equity is simple: Subtract your mortgage balance from your current home value. Then divide the product by your home value to arrive at a percentage. Let’s say your mortgage balance is $400,000, and your home is now valued at $550,000. That means you have $150,000 in equity, or 27%. Keeping a healthy amount of equity in your home not only makes you eligible for a loan but also helps you manage the risks that come with borrowing.
To ensure you’re getting the best possible rates, a robust credit score is key. Most lenders are looking for a score of 680 or higher, but many offer their best rate to those with a 700 score or better. If you’ve got a track record of timely payments and keeping your credit card balances in check, you’re setting yourself up for success. It’s also a good idea to review your credit report for any inaccuracies and address them before you apply.
Your DTI ratio is a critical piece of the interest rate puzzle. Lenders might offer a loan to those with a DTI under 50%, but the sweet spot for great rates is 36% or less. You can calculate this ratio by dividing your total monthly debt payments by your gross monthly income. To improve your DTI, focus on paying down existing debt or finding ways to boost your income (or both).
Property insurance is a must-have when it comes to home equity loans, especially if you live in an area prone to natural disasters. Having good insurance coverage in place could even help you get a better interest rate on your loan. If you aren’t sure if your current coverage will meet your lender’s requirements, reach out to the lender to verify.
When you’re looking at home equity loan rates in Milwaukee, online calculators can help give you a sense of whether you’d qualify and even estimate what your monthly payments might be. Here are three you might use during your journey.
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.
The closing costs for a home equity loan are usually between 2% and 5% of the loan amount, and you’ll want to factor what each lender charges into the overall costs of the loan, so you aren’t just making your decision about which lender to go with based on interest rate alone. Closing costs may include fees for services such as appraisals, credit reports, document preparation, origination, notary, title search, and title insurance. Some lenders offer no-closing-cost home equity loans, but they often have higher interest rates to compensate.
Here’s a tip: The interest on your home equity loan could be tax-deductible if you’re using it to improve your home, so speak with a tax advisor. If you’re married and filing jointly, you could deduct interest on loans of up to $750,000; for single filers, it’s up to $375,000.
While home equity loans are a popular choice, there are other ways to get equity out of your home. You can open a home equity line of credit, or do a cash-out refinance. Take a look at these processes and how they differ from the home equity loan before you make a firm decision.
A HELOC, or home equity line of credit, is a bit like having a credit card that’s secured by your home. You can borrow up to a certain limit and during an initial “draw” period, typically 10 years, you’ll only need to pay interest on the amount of the credit line that you actually use. (A HELOC interest-only calculator can show you what payments might look like.) HELOCs usually come with variable interest rates, which means that rates can fluctuate with the market. So when the repayment period begins and you’re paying interest and principal, you might want to use a HELOC repayment calculator to estimate monthly payments as rates change.
To qualify for a HELOC, you’ll typically need a credit score of at least 680 (though 700 is preferred) and a DTI ratio of less than 50% (ideally under 36%). As you think about a HELOC vs. a home equity loan, keep in mind that a HELOC could be the smarter choice if you’re not quite sure how much money you need to borrow or if you have expenses that will be spread out over time.
A cash-out refinance is a mortgage refinance that lets you replace your current mortgage with a larger one, and receive a lump sum for the difference. Most lenders are willing to let you borrow up to 80% of your home equity. To qualify, you’ll generally need a credit score of at least 620 and a DTI ratio below 43%. When considering a cash-out refinance vs. a home equity line of credit or a home equity loan, remember that the refi consolidates debts into one payment, simplifying your financial landscape. You can also choose a fixed or variable interest rate. If your original mortgage has a nice, low interest rate, however, you will want to carefully weigh the costs of a refinance against what you would pay with a HELOC or home equity loan.
Recommended: HELOC Repayment Calculator
When you’re ready to consider a home equity loan in Milwaukee, remember to keep your credit score in good shape, manage your debts wisely, and have the right insurance for your property. These factors will play a big role in the rates you’re offered. Once you’ve determined whether a home equity loan, HELOC, or cash-out refi is right for you, make sure you seek out rate and term quotes from multiple lenders to find the one that’s best for your 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.
Home equity loans can be used to finance big projects like home renovations, education expenses, and debt consolidation. Because you’re leveraging the equity in your home, you’ll likely qualify for a lower interest rate than you would with many other types of loans. Just be sure to use the money wisely and have a plan to handle the extra debt.
A HELOC, or home equity line of credit, is a revolving line of credit, so your monthly payment will depend on how much of the credit line you’ve used. During the draw period, which is typically the first 10 years, you’ll only be on the hook for the interest. For example, with a 6.00% interest rate, if you’ve drawn $50,000, you’d be looking at an interest-only payment of about $250 per month. After the draw period you’ll repay the principal, with interest. Your payment amount will depend on the interest rate at that time.
The payment on a $30,000 home equity loan is determined by the interest rate and term. For example, at a 7.00% interest rate over 15 years, the monthly payment would be approximately $270. This fixed payment covers both principal and interest.
There are a few factors that can disqualify you from getting a home equity loan. Lenders typically require a minimum credit score of 680, a debt-to-income (DTI) ratio of 50% or less, and at least 20% equity in your primary residence. If you don’t meet lenders’ minimum qualifications, you might be refused. Inadequate property insurance can also be a barrier.
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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.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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