Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Oahu are shaped by the borrower’s creditworthiness and, from a distance, the Federal Reserve’s monetary policy.
• Smart borrowers will make efforts to compare multiple lenders’ rates, which will help with identifying the best terms and deals.
• If you work on boosting your credit score and reducing your debt-to-income (DTI) ratio, you may see the rates you are offered get better.
• You will need to build at least 20% equity in your home to qualify for a home equity loan.
• Borrowers can choose between fixed rates for predictable monthly payments, or adjustable rates for increased flexibility (but also uncertainty as to how rates will change).
• Home equity loan interest may be tax-deductible, if you use the funds to pay for home-related expenses.
Exactly what is a home equity loan? First and most importantly, it’s a product that lets homeowners access value they have built in their homes. It’s an option lots of people who’ve built home equity use to relieve the pressure when they need cash.
In this article, we’ll cover what you should know about home equity loans if you are considering initiating one. We will discuss various factors affecting loan rates in Oahu and share tips for getting the best rate on your loan. We will describe different types of home equity loans — alternatives that include home equity lines of credit (HELOCs) and cash-out refinances, so you’ll know the pros and cons of each option.
Whether you envision a home renovation, consolidating high-interest debt, or you want to be ready to make a major purchase, understanding how home equity loan rates work will help you make keen financial decisions for your own economic scenario.
A home equity loan is a second mortgage, assuming you’re still paying off your first one. It allows you to tap your home equity and collect a lump sum of cash — which you’ll need to immediately start to repay, usually in fixed monthly installments, over the next five to 30 years. Your home secures the loan, which means you’ll have access to lower interest rates than you could negotiate with an unsecured personal loan.
One important thing to keep in mind: In order to draw on the equity in your home, you have to actually have equity in your home. You may be still working to pay off your original mortgage, but the money you owe now must not exceed the house’s worth. Lenders will typically want you to have a minimum of 20% equity in your home to qualify.
Looking at a HELOC vs. a home equity loan is where many Oahu homeowners begin their comparisons among loans. These two options are similar, since you can use either to pull equity from your home. Home equity loan interest rates are often fixed, providing predictable payments and peace of mind. A HELOC’s rate will often be adjustable, which makes the future a little hazier in terms of what your payments will be.
| 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 |
The interest rates you’re offered when you shop for a home equity loan are a product of various influences, from your personal financial standing to the broad economic landscape.
Federal Reserve policy — including changes occurring to the federal funds rate — may send ripples through the lending market and the prime rate. When the prime rate moves up or down, home equity loan rates do, too. Keep an eye on these factors and you’ll possibly be better prepared to anticipate rate shifts and make your own confident decisions about when to pursue a home equity loan.
On a personal level, your credit score and DTI ratio are key drivers of the rates Oahu lenders will quote you, too, when you shop around as a borrower. You actually have some control over these two things, so work on being prepared by raising that credit score and lowering your DTI ratio. You’ll have a better outcome applying for a home equity loan if you’ve spent time and effort improving them.
Your home equity loan’s interest rate can make a world of difference in terms of how affordable it will be as you pay it down. What should you know? Even a seemingly small reduction in the rate you get — a half of a percentage point matters — can lead to significant savings over time, or extra costs if we’re talking about a rate increase.
To demonstrate how much an interest rate can impact loan costs, the chart below shows both monthly payment amounts and total interest on a $75,000 home equity loan with a 20-year repayment term. We’ve calculated both the payment and the total interest at several rates.
With an 8.00% interest rate, your monthly payment would be approximately $627, and total interest over the loan’s term would add up to $75,559. With the interest rate one percentage point lower, at 7.00%, the monthly payment would be about $581, and interest would total $64,554. The lower rate could save you $11,005 in interest over those 20 years.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Home equity loans often come with fixed interest rates. But some Oahu lenders may offer adjustable rates, too, and different types of home equity financing, such as home equity lines of credit (HELOCs) and cash-out refinances, also offer adjustable rates. It’s a good idea to think about which you prefer.
A fixed rate never changes during the life of the loan, giving you the certainty of consistent monthly payments as you pay it off. Such predictability is a great asset in budgeting and financial planning.
Adjustable rates often start slightly lower than fixed rates, but after an initial period, they change in accordance with market rates. This can mean your payments get higher, and it may make you feel uncertain about what to expect over the loan term.
When thinking about home equity loan rates in Oahu, considering the merits of fixed rates versus adjustable rates is a smart thing to do. Your financial standing and your comfort with risk should both factor into the type of rate you choose.
As you consider how to tap your home equity, you’ll probably ponder if there’s a way to time your loan application so you can achieve the lowest possible rate. Is there a perfect moment to move? Unfortunately, predicting the prime rate is like forecasting the weather — you might guess right, but not every borrower has such sharp intuition, or time to wait for a desirable turn.
If you can’t wait until rates are at their lowest to apply, don’t worry too much. If you’re in need of a loan, start comparing different lenders’ offers so you can zero in on the best possible rate.
Since 2018, the prime rate has seen its share of ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Take a look at the history of the prime rate to get a sense of how high or low it may go this year.
Source: TradingView.comSince 2018, the prime rate has seen its share of ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Take a look at the history of the prime rate to get a sense of how high or low it may go this year.
| 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 get the most competitive home equity loan rates in Oahu, keep a few factors in mind and then take the following steps before beginning the application process. You’ll get in a better position to land a home equity loan with a favorable, and with luck easily manageable, rate and term.
This is a fairly easy equation: 20% or more equity in your home generally qualifies you for a home equity loan. To determine how much equity you’ve got, subtract your outstanding mortgage balance from the home’s estimated value, and then divide your answer by that same estimated home value. You’ll arrive at your percentage of equity. The higher it is, the better.
A good credit score is needed to get the best available interest rate on your home equity loan. Lenders often look for a 680 or higher score to qualify you, and many expect a score above 700 to offer you their best rates. A higher score signals financial savvy, and that opens doors to desirable loan offerings. Focus on making bill payments on time each month, reducing your credit card balances, and avoiding new debt. These efforts will increase your chance to qualify for a home equity loan with a lower interest rate.
Your DTI ratio is an important factor, too, when it comes to qualifying for a home equity loan and getting an appealingly low rate. Oahu lenders usually want to confirm a borrower’s DTI ratio at 50% or less, and 36% or lower can bring the very best rates. Try to manage your DTI effectively. Pay down your existing debt, increase your income, or achieve a combination of these things.
Insurance on your property is a must-have when you apply for a home equity loan. The homeowners’ insurance safety-net protects both you and your lender should damage strike your home. Be sure your coverage is not only active, but adequate for your location in Oahu.
Before you take steps to borrow against your home, do some math. Specialized calculators can help you understand what borrowing options are available, and how much you’ll probably need to spend on your monthly loan payments. A home equity loan calculator and other online calculators can make crunching those numbers a cinch for you. Here are a few useful ones.
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 on your home equity loan are somewhat predictable — you’ll pay a ballpark figure of 2% to 5% of the loan amount. This table shows typical closing costs that borrowers encounter, and the approximate costs of each of them.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 |
| Loan origination | 0.5%-1.0% of the loan amount |
| Notary | $20-$100 |
| Title insurance | 0.5%-1.0% of the loan amount |
| Title search | $75-$250 or more |
Lenders may offer no-closing-cost loans. These frequently come with higher rates, so don’t forget to calculate what you’ll pay over the life of the loan before you sign your application.
Most interest you pay on a home equity loan is tax-deductible, but usually only if you use the funds to improve your home. Single filers are allowed to deduct interest on their first $375,000 in loan debt. Married couples filing jointly can deduct interest on up to $750,000 in debt. You’ll need to itemize on your tax return, though, so save your receipts and invoices. A tax advisor can help you figure out what makes sense for you when taking advantage of such a writeoff.
You can leverage the value of your Oahu property in other ways besides taking out a home equity loan. You may want to consider a cash-out refinance or a home equity line of credit (HELOC) as some other options. A cash-out ref lets you take out a new mortgage for a larger amount than what you owe on your home loan now. A HELOC is another loan scenario in which you apply for a credit limit, secured by your home, and then you can borrow against as needed and pay interest only on the cash you draw out.
You can learn more about cash-out refinance vs. a home equity line of credit similarities and differences so you’ll understand the options and be equipped to make the best choice.
What is a home equity line of credit? A HELOC is a loan that feels a bit like a credit card, offering homeowners freedom to borrow up to a set limit and pay interest only on the money they use. You can often pull out funds during an initial “draw” period, which is followed by a repayment period when you must repay both the loan principal and interest.
Unlike a home equity loan, a HELOC is about flexibility, and the interest rate on a HELOC is generally adjustable. Keep in mind: That means your rate and payments may fluctuate, potentially impacting your costs as you move further into the loan term.
What looks similar when you examine a HELOC alongside a home equity loan? Qualifying for a HELOC likely requires the same credit score of 680 or higher (700-plus puts you in an even better position to get a great rate) and a DTI ratio below 50% (36% or less is best). With a HELOC, you might be able to borrow more. Up to 90% of your accrued home equity is often possible.
If you’re wondering what the amount of your monthly payment would be on your hypothetical HELOC, try running figures through a HELOC repayment calculator. You can plug in different interest rates and terms to learn how they’d affect your payments, and find out just how much of a loan you can afford. Want to calculate how much interest you’d have to pay during the HELOC “draw” period? Plug the numbers into a HELOC interest-only calculator.
A cash-out refinance is a strategic mortgage refinance. You swap your original mortgage for one that’s larger than the amount you owe, and then receive the difference as a lump sum. Cash-out refi interest rates may be either fixed or adjustable. Lenders apply different criteria, but cash-out refis often require a 620 minimum credit score and a DTI ratio of 43% or less.
Note that it’s easier, usually, to qualify for a cash-out refi than for a home equity loan or a HELOC.
If you’re reading this because you want to apply for a home equity loan in Oahu, you should now have a much better understanding of how it works. Building an understanding of interest rates and their quirks will help you negotiate the best terms. Your equity level, credit score, and DTI ratio all play a role in the rate you’ll end up with.
Simply shopping around can go a long way when you’re trying to get the best rate. And if a home equity loan doesn’t feel like a fit, a HELOC or cash-out refinance offers you a Plan B with its own unique benefits.
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 and useful tool. Some popular reasons people use them to borrow against their accrued home equity are to finance a major expense, pay for home renovations, or consolidate high-interest debt. Make a firm plan to use the funds wisely and ensure the loan fits into your bigger financial picture.
It depends on the interest rate and the loan term. Your monthly payment for a $50,000 home equity loan, for example, with a 7.00% interest rate and a 15-year term, would be about $449. At a 9.00% rate over 15 years, the payment would be around $507. Use a loan calculator to figure out monthly payments with different variables as you look at lenders’ offers.
Several factors could slow you down as you try to secure a home equity loan. Lenders typically require a minimum credit score of 680 or more, so having a lower one may disqualify you. A debt-to-income (DTI) ratio above 50% might nudge you out of the loan qualification zone, too. If you have less than 20% equity in your home, that will likely be a red flag for lenders, who will also be wondering how stable your home’s value is and how good your property insurance plan is. These are all common disqualifiers, though what is a dealbreaker varies from lender to lender.
Home equity loans have a bunch of perks. They often come with fixed interest rates, and therefore have predictable monthly payments, which can make future plans easier. They also usually have lower rates than unsecured personal loans, so are cost effective for significant one-time expenses like a home improvement or a high-interest debt consolidation. Balance all the benefits with the potential risks, including the potential threat of foreclosure if you fall behind on payments.
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.
