Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans in Modesto offer a lump sum and typically have fixed interest rates.
• Rates are influenced by the prime rate and the borrower’s credit score and debt-to-income ratio.
• To qualify for a home equity loan, you’ll need to have at least 20% equity in your home.
• The interest on home equity loans may be tax-deductible if you’re using the money you borrow for home improvements.
• Online tools, such as a home equity loan calculator, can help you estimate monthly payments.
Welcome to our comprehensive guide to home equity loan rates and how to get equity out of your home in Modesto, CA. We’re here to help you understand the factors that influence the rate you might be offered and share tips on how to secure the best deal. Home equity loans are a valuable financial tool for homeowners, allowing you to borrow money for renovations, education, and debt consolidation. We’ll break down the process, from understanding the interest rates to comparing offers from different lenders, to help you make informed decisions about your financial future.
Your first step: understand exactly what a home equity loan is. A home equity loan is a type of second mortgage that uses your home as collateral, providing a lump sum of money for large purchases or debt consolidation. Funds are disbursed all at once and repaid in equal monthly installments over a term ranging from five to 30 years. Because home equity loans use the equity in your home as collateral, they usually offer lower interest rates than unsecured personal loans. The interest rate is typically fixed, which is good for borrowers who prefer a consistent and predictable repayment structure.
To qualify, homeowners should have at least 20% equity in their primary residence. A home equity loan calculator can give you a sense of how much you might be able to borrow.
Interest rates on different types of home equity loans are determined by a variety of factors, including the current economic climate and your personal financial situation. The Federal Reserve’s policies can affect lending rates. Lenders set home equity loan rates based on the prime rate, which is driven largely by the Fed’s decisions. Any change to the prime rate can have a direct impact on the interest rates for home equity loans.
As with the rate you obtained on your original home loan, the interest rate you secure for your home equity loan plays a pivotal role in the loan’s long-term affordability. Even a seemingly minor difference in rates can add up to significant extra costs. A $100,000 home equity loan with a 15-year repayment term at 8.50% interest would mean a monthly payment of $984 and a total interest of $77,253. Bump that rate up to 9.50%, and the payment jumps to $1,044, with a total interest of $87,961. The takeaway? The borrower with the higher rate ends up shelling out $10,700 more in interest over the life of the loan.
The numbers change depending on how much you borrow, but the importance of the rate remains the same. Here are different monthly payment amounts and total interest costs for a $75,000 home equity loan that is repaid over 20 years.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Predicting the exact trajectory of interest rates is a bit like forecasting the weather — there are many moving parts. The prime rate, which is the reference point for home equity loan rates, has seen its fair share of ups and downs. In 2020, it was a mere 3.25%, while in 2023, it peaked at 8.50%. These fluctuations can have a real impact on the rates you encounter in Modesto. To capitalize on the current market, be sure to compare offers from different lenders. Having a sense of the prime rate’s history can give you some perspective on current 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% |
Fluctuations like these strongly impact Modesto’s home equity loan rates, so it’s a good idea to stay on top of economic trends. Even if you can’t predict the future perfectly, you may be able to time your loan strategically if you have a sense of the market.
To secure enviable home equity loan rates, you need a game plan. Consider this your to-do list:
To be eligible for a home equity loan, you need to have at least 20% equity in your home. Calculating your equity is as simple as subtracting your mortgage balance from your home’s estimated value, which you can find on a real-estate site. Let’s say your mortgage balance is $400,000 and your home is now valued at $550,000. That means you’ve got $150,000 in home equity. Divide your equity number by your home’s estimated value to arrive at a percentage of equity. That’s the magic number to keep in mind if you’re aiming for the best home equity loan rates. You can boost your equity over time by making regular mortgage payments and sprucing up your home.
To snag an enviable home equity loan rate, a robust credit score is key. Lenders are often looking for a score of 680 or even 700. A high score speaks volumes about your financial prudence and reassures a lender about your risk level. The result? Sweeter interest rates. So make timely payments, keep credit card balances in check, and steer clear of new debt. Also give your credit report a regular once-over to catch any errors — disputing them can nudge your score in the right direction.
Your debt-to-income (DTI) ratio is a big deal when it comes to securing a home equity loan. Lenders typically look for a ratio that’s under 50%, with 36% or less being the sweet spot. This ratio is a comparison of your monthly income to your monthly debt commitments. (To compute your DTI ratio, tally all your monthly debt payments and divide by your gross monthly income.) A lower DTI is a sign that you’re in a good place to manage monthly loan payments. If your ratio is around 50%, consider paying down your existing debts or finding ways to increase your income before you apply.
Property insurance is a standard requirement for home loans, so if you haven’t updated yours in a while, give it a look to make sure you are fully protected. Having the right insurance coverage not only safeguards you from extra expenses but also streamlines the loan application process. If you happen to reside in a high-risk area, it’s wise to explore insurance policies that align with your potential lender’s requirements.
Using online resources like a home equity loan calculator can help you get a rough idea of how much you might be able to borrow and what your monthly payments could look like. These are three useful calculators if you’re considering a home equity loan or its cousin, a home equity line of credit (HELOC).
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.
When it comes to closing costs for home equity loans, you’re typically looking at a range of 2% to 5% of the loan amount. These costs include some things that you’ll be familiar with from your original home purchase process: fees for the appraisal, credit report, document preparation, loan origination, notary, title search, and title insurance.
You’ll be pleased to know that the interest on a home equity loan could be tax-deductible if the funds are used to buy, build, or significantly improve your home. As of 2025, those filing jointly can deduct interest on up to $750,000 of qualified home equity loans, and single filers can claim up to $375,000. To take this deduction, you need to itemize when filing your taxes. Chat with a tax advisor about future tax years and to see how this could play out in your specific situation.
In addition to a HELOC, a cash-out refinance is another option when you’re looking to borrow against your equity. The latter is a special kind of mortgage refinance. Here are the details:
A HELOC is like a credit card: You’re approved to borrow up to a certain amount and you borrow as needed up to that amount. During the initial “draw” period on the HELOC, which can be up to 10 years, you only have to pay interest on the money you borrow. You can use a HELOC interest-only calculator to get a sense of what those payments might look like.
Once the draw period ends, you repay all that you have borrowed, plus interest, over a period of 5 to 20 years. At this point, you might be using a HELOC repayment calculator to help keep tabs on estimated payments.
HELOCs have variable interest rates, which means your payment can go up or down as the market changes. Lenders typically require a 680+ credit score (700 is ideal) and a DTI ratio of 50% or less (36% is the ideal). A HELOC is a good option if you’re not sure how much you need to borrow or if you don’t need to borrow everything at once. Here’s a quick look at a HELOC vs a home equity loan:
| 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 plus interest; 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 |
With a cash-out refinance, you’re swapping your current mortgage for a larger one and pocketing the difference between the old and new mortgage in cash to use as you wish. The exact amount depends on your home equity, with most lenders green-lighting up to 80%. To qualify, a credit score of 620 or above and a DTI of 43% or less are typically the benchmarks. You can choose between fixed or variable interest rates, with variable rates potentially offering access to more equity. When you compare a cash-out refinance vs. a home equity line of credit, one difference is that the refi leaves you with just one monthly payment to keep track of.
When you’re ready to apply for a home equity loan in Modesto, take the time to build your credit, manage your debt-to-income ratio, and secure property insurance. These factors can all impact the rates you’re offered. Use online calculators to estimate your monthly payments and understand the financial impact of taking on a new loan. Keep in mind that closing costs for home equity loans can be 2% to 5% of the loan amount. You may also be able to deduct the interest you pay on a home equity loan from your taxes. Consider the benefits of a HELOC or cash-out refinance, and weigh the pros and cons of each option to help you secure the best home equity loan rates for your financial goals.
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 very versatile and can be used to cover major expenses, home improvements, or to pay off higher-interest debt. The adaptability of these loans makes them a good resource for homeowners who are in need of a substantial sum but who don’t want to part with their property. When contemplating a home equity loan, it’s crucial to employ the funds smartly and in a manner that supports your financial goals.
Crunching the numbers for a $50,000 home equity loan is a breeze with an online calculator. The monthly payment will depend on the loan term and interest rate. For instance, a 15-year fixed-rate loan at 7.50% would mean a monthly payment of approximately $464. Opting for a 30-year term at the same rate would lower the monthly payment to around $350. It’s important to note that the total interest paid over the life of the loan is usually higher with a longer term.
The monthly payment on a $30,000 home equity loan is determined by the loan’s interest rate and term. For a 15-year fixed-rate loan at 7.50%, the monthly payment would be about $278. If you choose a 30-year term at the same rate, the monthly payment would be roughly $210. These payments include both principal and interest. Longer terms offer lower monthly payments but increase the total interest paid over the span of the loan.
There are a few things that might raise a red flag with lenders, such as not having at least 20% equity in your home, or having a credit score that’s less than stellar (below 680). If your DTI ratio is under 36% that could also be a dealbreaker. Understanding these requirements can help you present your best profile to a potential lender.
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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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