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Compare home equity loan rates in Missouri.
Key Points
• Home equity loans use your home as collateral and offer borrowers a lump-sum payment that is repaid in regular installments.
• Home equity loan interest rates vary based on credit score, loan-to-value ratio, home value stability, lender policies, and property location.
• Home equity loans typically have fixed interest rates, providing a consistent and predictable pattern of monthly payments.
• Home equity loans often allow homeowners to access up to 85% of their home equity and are commonly used for home renovations, educational expenses, medical bills, and debt consolidation.
• Home equity loan interest rates are influenced by the prime rate and economic factors such as inflation and the federal funds rate
Introduction to Home Equity Loan Rates
Thinking about getting a home equity loan in Missouri? We’ll walk you through the current Missouri home equity loan rates, what influences them, and how you can snag your lowest possible rate. We’ll also explore alternatives to home equity loans and address some of the most frequently asked questions. The first item of business? Let’s discuss what is a home equity loan in the first place.
How Do Home Equity Loans Work?
A home equity loan is a loan that is secured with your home. Assuming you still have a mortgage on your property, a home equity loan would be a second mortgage. Home equity loans typically offer lower fixed interest rates than unsecured loans. To qualify, you’ll need to have at least 20% equity in your primary residence. You can use the money you borrow for anything you want, from home improvements to paying for college to consolidating debt. If you’re wondering what is a home equity line of credit (and how it’s different from a home equity loan), rest assured we’ll get to that below.
Where Do Home Equity Loan Interst Rates Originate?
Federal Reserve policies on interest rates also play a part in shaping Missouri home equity loan rates. Lenders look to these rates when setting their prime rate, which is what they charge their most creditworthy clients. By understanding these influencing factors, you can better prepare for potential rate changes and make well-informed decisions about home equity loans.
How Interest Rates Impact Home Equity Loan Affordability
Just as the interest rate you get on your home loan when you purchase your property is critically important, the interest rate you lock in on your home equity loan can make a world of difference in your finances long-term. Let’s say you’re borrowing $80,000 with a 20-year term. A mere 1% variance in your home equity loan interest rate, from 7.00% to 8.00%, could mean a higher monthly payment ($620 vs. $669). Over the life of the loan, that small difference could add up to more than $11,000 in extra interest.
Home Equity Loan Rate Trends
The prime interest rate is a key indicator of where home equity loan rates are headed. By keeping an eye on the prime rate, you can get a sense of how the lending market is changing and how it might affect the rate you’re offered on a loan. Check out the ups and downs of the prime rate below.
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
Prime rates aren’t the only thing governing the rate you’ll be offered. By familiarizing yourself with the other factors that drive rates, you can better position yourself to make a smart choice. Good news: Unlike the prime rate, many of these things are within your control.
Credit Score
If you’ve been diligent about paying your bills on time and have a credit score of 680 or higher, you’re in a good position to secure a competitive interest rate. Many lenders will look for a credit score of at least 680 when considering Missouri home equity loan applications, and a score of 700 or higher may be required to qualify for the best rates, especially on larger loan amounts.
Home Value
Lenders will put your home through an independent appraisal process to determine its market value, which in turn will help establish how much you can borrow.
Loan-to-Value (LTV) Ratio
The loan-to-value (LTV) ratio is a key number. Most lenders will let you borrow up to 85% of your home’s value, but the exact number can vary. The higher your LTV, the higher your interest rate is likely to be. To compute your combined LTV (CLTV) you’ll need to add the amount you owe on your first mortgage to the amount you’d like to borrow. Then divide that total by the appraised value of your home. If the answer is under .85, you’re within the 85% guideline. Easier still is to use a home equity loan calculator to do the math.
Home Value Stability
When home values have been rising, lenders are often more willing to approve larger loan amounts, as their risk is reduced. On the flip side, a dip in home values in Missouri, or in your specific part of the state, can make lenders more cautious, which could impact your loan options.
Property Location
If your home is in an area that’s at high risk of damage from extreme weather or natural disasters, like tornados, floods, or wildfires, this can affect the terms of your loan.
Lender Policies
When looking for a home equity loan, it’s important to consider that each lender will have its own policies and formula that impact the interest rate you receive. By doing your research and comparing your options, you could end up with a better loan and save money in the long run.
How to Qualify for the Lowest Rates
When you’re looking for the best home equity loan rates in Missouri, make sure you meet these requirements.
Build a Strong Credit Score
It’s wise to take good care of your credit score if you have your eye on the best home equity loan rates in Missouri. Lenders often favor those with higher scores, seeing them as less of a risk. A few pointers: Check your credit report periodically and promptly request corrections on any inaccuracies. Don’t max out every credit line you have in the months leading up to your home equity loan application. And pay your bills on time, of course.
Manage Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is a critical piece of the puzzle when it comes to loan eligibility. It’s a simple calculation: Add up all your monthly debts and divide the total by your gross monthly income. For a home equity loan, lenders often look for a DTI of 36% to 50%, with lower numbers being better. If your monthly debt payments tip over the 50% mark of your income, you might find it challenging to qualify.
Obtain Adequate Property Insurance
It’s a standard requirement for lenders to ask for proof of sufficient property insurance before granting you a home equity loan. This is especially important if you live in an area prone to natural disasters.
Maintain Sufficient Home Equity
In Missouri, as elsewhere, homeowners need a minimum of 20% equity in their primary residence to qualify for a home equity loan. When you’re assessing your equity, remember to use the current appraised value of your home, not the amount you paid for it initially.
Fixed vs. Variable Interest Rates
Home equity loans typically come with fixed interest rates. This means you’ll have the same predictable monthly payment for the life of the loan. While fixed rates offer stability, they can sometimes start out a bit higher than variable rates. Variable rates, on the other hand, can start out lower, but they have the potential to increase over time.
Tools & Calculators
Make the most of our online calculators during your search for a Missouri home equity loan. These tools can help you compute how much you might be able to borrow with your home as collateral, as well as what your monthly payments and total interest paid would be at various rates and terms.
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
You’ll find closing costs for home equity loans typically range from 2% to 5% of the loan amount. Things you might see on your tab include the appraisal, credit report, document preparation, and title search, but every lender is different so it’s important to look not only at what interest rate you’re being offered but also what fees you’ll be asked to absorb.
Tax Deductibility of Home Equity Loan Interest
Here’s a plus: The interest you pay on a home equity loan can be tax deductible, but only if you use the funds to buy, build, or significantly improve a home. Couples filing jointly can currently deduct interest on loans up to $750,000, while single filers can deduct interest on loans up to $375,000. Remember, to claim this deduction, you’ll need to itemize your deductions on your tax return.
Alternatives to Home Equity Loans
In Missouri, you have several ways to get equity out of your home besides a home equity loan. You can consider a home equity line of credit (HELOC), a home equity conversion mortgage (HECM), or a special type of mortgage refinance called a cash-out refinance. Get the lowdown on different types of home equity loans and other options:
Home Equity Line of Credit (HELOC)
A home equity line of credit (HELOC) is a bit like a credit card, in that you have a revolving line of credit up to a lender-approved credit line. You only pay interest on the amount you actually borrow. HELOCs often have a variable interest rate, so your payments could go up or down over time. Here’s a quick guide to HELOCs vs home equity loans
| 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; 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. |
Home Equity Conversion Mortgage (HECM)
Now, let’s talk about HECMs. These are government-backed reverse mortgages that can be a game-changer for those 62 and older. With an HECM, you can receive payments from the lender based on your home’s value. And the best part? You don’t have to make payments until you leave your home. That’s very different from Missouri home equity loans and HELOCs, which require regular payments. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
Cash-Out Refinance
A cash-out refinance is a new mortgage that you use to pay off the old one plus borrow extra funds. One big difference when you are comparing a cash-out refinance vs. a home equity line of credit is that the refi leaves you with one loan and one payment, while the HELOC is a second payment on top of your initial loan. If you were lucky enough to score a very attractive interest rate on your first mortgage, you’ll want to look closely at how current rates in Missouri compare before committing to a cash-out refi.
The Takeaway
Knowing the ins and outs of current home equity loan rates in Missouri and what factors can impact the rate you’re offered can help homeowners in the Show-Me State make the best financial decisions. By comparing rates from different lenders, tending carefully to your credit score, and considering your financial goals, you can get the best home equity loan or line of credit for your needs.
Unlock your home’s value with a home equity loan from SoFi.
FAQ
What would my monthly payment be on a $50,000 loan?
To better understand the monthly payment on a $50,000 home equity loan, it’s important to consider the interest rate and loan term. For the most accurate estimate based on current rates in Missouri, we recommend using a loan calculator.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 HELOC will depend on how much of your credit line you’ve utilized, as well as on the interest rate you’re paying. If you used the full $100,000 and your interest rate was 8.00%, you’d pay $836 per month to repay the funds over 20 years.
What is the payment on a $25,000 home equity loan?
The payment on a $25,000 home equity loan will be based on your interest rate and loan term. If you repay the loan over 10 years at a rate of 8.00%, your monthly payment would be $303. If you instead had a rate of 6.00%, you would pay $278 per month on a 10-year term.
What would the payment be on a $30,000 home equity loan?
A $30,000 home equity loan with rate of 7.50% and a 20-year term at a would cost you $242 each month. A different loan term or interest rate would change the monthly payment amount as well as the amount of total interest paid over the life of the loan.
What could disqualify you from getting a home equity loan?
A poor credit score, not having at least 20% equity in your home, having a high debt-to-income ratio, and being underinsured can all result in a lender refusing to provide you with a home equity loan. It’s important to carefully consider your financial situation before applying for any financing.
What are the benefits of a HELOC?
The biggest benefit of a HELOC is that you only use and pay interest on the amount of money you actually borrow. Having the credit line available can bring peace of mind. And HELOCs often have lower interest rates than credit cards, although rates can fluctuate, which means monthly payments aren’t predictable.
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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.
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.Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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