Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in New Orleans are influenced by the prime rate and your individual qualifications as a borrower.
• If your credit score is 700 or above and your debt-to-income ratio is below 36%, you could qualify for the best available rate.
• Even a slight variance in rates can translate to substantial savings — or extra interest costs — over the life of the loan.
• Home equity loans often come with fixed interest rates, ensuring your monthly payments stay steady.
• The interest on home equity loans may be tax-deductible if funds are used for major home improvements.
Welcome to our guide to home equity loan rates. In this article, we’ll delve into the details of how current interest rates are determined in New Orleans, Louisiana. You’ll discover the benefits and risks of home equity loans, as well as the factors that can help you secure the best rate. Whether you’re planning a home renovation, consolidating debt, or funding a major purchase, understanding home equity loan rates can empower you to make the most of the equity you’ve accumulated by paying down your home loan.
It’s important to understand what a home equity loan is, exactly, before beginning the process of getting equity out of your home. Technically, a home equity loan is a second mortgage. Your home is the collateral on a lump-sum loan. It can be a smart way to borrow money for a renovation, debt consolidation, or other big expense, because the fact that the loan is secured by your home means you will probably be offered a lower interest rate than you would get with an unsecured loan. However, this also means your home is at risk of foreclosure if you fail to make your loan payments.
Most home equity loans come with a fixed interest rate, which means your monthly payment will stay the same over the life of the loan, which is anywhere from five to 30 years. To qualify, you’ll generally need to have at least 20% equity in your home. A home equity loan calculator can help you figure out how large a loan you might qualify for.
Recommended: Different Types of Home Equity Loans
Home equity loan rates are influenced by a variety of factors, from the economic climate to your personal financial situation. The Federal Reserve’s policies have a significant impact on the lending market. Lenders typically base their interest rates for home equity loans on the prime rate, which is closely tied to the Fed’s policies. Your credit score and debt-to-income (DTI) ratio influence your rate, and the amount and term of the loan also factor in.
The interest rate you secure can make a big difference in the affordability of a home equity loan. Even a small difference in the rate can have a big impact on the amount of interest you’ll pay over the life of the loan. This chart shows the interplay between loan amount, interest rate, and loan term. Generally speaking, the longer the term, the lower the monthly payment — but the more interest you’ll 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 |
Predicting the ebb and flow of interest rates is no easy feat, but recent history can offer perspective on current rates. The prime rate, a benchmark for home equity loan rates, has been on a rollercoaster in the last several years. It hit a low of 3.25% in 2020, and rose to 8.50% in 2023. These fluctuations can make a big difference in how much interest you pay.
If you can do so, timing your application to a period of lower rates can be a smart move. But if you need to renovate the kitchen or pay for another large expense now, remember that you can still make sure your personal financial stats are in good shape before applying for a loan. Doing this and seeking out loan offers from multiple lenders will help you 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 competitive home equity loan rate, there are a few key areas on which you should focus before filing any loan applications. Let’s take them one at a time.
Here’s a quick way to check if you meet the 20% equity requirement: Subtract your current mortgage balance from your home’s estimated value. (Find the latter on a real estate site.) Then divide the result by the home’s estimated value to arrive at a percentage.
For instance, if your home is valued at $350,000 and you owe $225,000 on your mortgage, your equity is $125,000. Dividing $125,000 by $350,000 shows you have 36% equity. This figure is key, as it not only confirms your eligibility for a home equity loan but also determines the maximum amount you can borrow. Most lenders permit borrowing up to 85% of your available equity.
To land the most favorable home equity loan rates, you’ll want to see a credit score of 680 or higher on your report. Lenders will be even more impressed with a 700 or above. A robust credit score is a testament to your financial prudence and can open the door to more attractive loan terms. Lenders will be looking at your payment history, credit utilization, and the length of your credit history, so keeping up with your bills and maintaining low credit card balances will work in your favor.
Lenders typically look for a DTI under 50% — and ideally under 36% — to ensure you can handle taking on additional debt. To calculate your DTI ratio, divide your total monthly debt payments by your gross monthly income. You can lower your DTI by paying down debt or increasing your income. A lower DTI not only increases your chances of approval, but can also help you secure a more favorable home equity loan rate.
Property insurance is a must-have for home equity loans. It’s a safety net for both you and the lender in the event of property damage. Lenders often have specific requirements for coverage, so it’s helpful to review these and to make sure your policy complies.
Recommended: What Is a Home Equity Line of Credit?
Utilizing these tools can help you make sound decisions about home equity loans. Online calculators can swiftly estimate your monthly payments. Choose the calculator that’s specific to your financing type.
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 are typically 2% to 5% of the loan amount. These costs can include fees for an appraisal, credit report, document preparation, origination, notary, title search, and title insurance. Some lenders offer no-closing-cost options, but they may come with higher interest rates. When you’re comparing offers from different lenders, always consider closing costs as well as interest rates.
The interest on home equity loans can be tax-deductible if the funds are used for significant home improvements. The current tax rules allow married couples filing jointly to deduct interest on up to $750,000 of qualified home equity loans, and single filers can deduct interest on up to $375,000 in loans. To claim this deduction, you’ll need to itemize your deductions on your tax return. If you’re unsure about your situation, it’s always a good idea to chat with a tax advisor.
Homeowners have other ways to get equity out of their home in addition to a home equity loan. Each of these choices comes with its own unique features and eligibility requirements.
A HELOC is a useful option if you’re not sure how much you’ll need to borrow or you want to borrow funds as needed as opposed to in a lump sum. It’s a flexible line of credit that works similarly to a credit card. During the HELOC’s “draw” period, you can borrow up to a certain credit line and only pay interest on the amount you borrow. This goes on for about 10 years in most cases, and then a repayment period begins. That’s when you’ll pay back all that you owe with interest. Use a HELOC interest-only calculator to compute payment amounts during the draw phase. A HELOC repayment calculator will be useful during the repayment phase.
HELOCs usually have a variable interest rate, which means your payments could go up or down in the future. To qualify, you’ll typically need a credit score of 680 or higher (700 is preferred) and a debt-to-income ratio of 50% or less (below 36% is preferred). As you think about a HELOC vs. a home equity loan, one thing to ask yourself is: Do I need to borrow all the money at once? If the answer is no, or if you are unsure about how much you might need to borrow, a HELOC might be a good choice.
A cash-out refinance is a mortgage refinance that lets you replace your existing mortgage with a new, larger one. You get the difference between your old mortgage amount and your new one as a lump sum to use as you wish. The amount you can borrow is determined by your home equity, with lenders typically allowing borrowing up to 80%. 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 — you’re choosing an entirely new mortgage, after all. You’ll want to make sure that the new rate you can get with a refi isn’t so much higher than your old one as to erase any benefits of refinancing. A key difference between a cash-out refinancce vs. a home equity line of credit or home equity loan: A cash-out refi means you’ll have just one monthly payment to manage.
When you’re considering a home equity loan in New Orleans, it’s helpful to understand the factors that can influence the rates you’re offered. Building a strong credit score, managing your DTI ratio, and obtaining adequate property insurance are all important steps to take to secure the best rates. Using tools and calculators can help you estimate monthly payments and compare different scenarios, and can also be useful when you’re exploring alternatives like a HELOC. Seek out and compare offers from multiple lenders, and you can find the most suitable and cost-effective loan for your financial needs.
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 tool, and the money you borrow with one can be used for large purchases, home renovations, and debt consolidation. How you use the money is entirely up to you, but considering long-term financial implications and your ability to repay what you borrow is important, because if you can’t make the payments, your home is on the line.
When you’re budgeting for a $50,000 home equity loan, it’s important to grasp the monthly commitment. For instance, in New Orleans, with a 10-year term, and a competitive 8.00% interest rate, you’re looking at approximately $607 each month. This covers both the principal and interest, with a total of $22,797 in interest accrued over the term.
The monthly payment on a $100,000 home equity line of credit (HELOC) can be unpredictable because it depends on the amount of the credit line that you have used, as well as on the current interest rate. Because HELOCs have variable interest rates, the amount you owe can change each month. If you are in the draw period and paying only interest, your payment will be lower than if you are in the repayment phase and repaying principal plus interest. The best way to learn what you might owe is to use a HELOC calculator.
There are several factors that could disqualify you from getting a home equity loan. Lenders typically require a minimum credit score of 680, although some may accept lower scores with higher interest rates. A high DTI ratio, exceeding 50%, can also be a barrier. Additionally, you must have at least 20% equity in your home. Inadequate property insurance or a history of late payments can also negatively impact your eligibility.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
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.
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.
