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• Home equity loan rates in Pittsburgh are influenced by economic factors as well as by your credit score, debt-to-income ratio, and loan-to-value ratio.
• Comparing rates from different lenders can help you find the best deal available to you.
• A mere 1 percentage point hike in rates – from 7.00% to 8.00% – could mean an extra $11,005 in interest over a 20-year $75,000 loan.
• To secure the most competitive home equity loan rates in PIttsburgh, PA, target a credit score of 700+ and a DTI ratio under 36%.
• Through 2025, part or all of the interest on a home equity loan might be tax-deductible if you use it for home improvements.
Introduction to Home Equity Loan Rates
What is a home equity loan? First and foremost, it’s a great way for many homeowners to access the value that they’ve built in their homes when they need cash.
In this article we’ll cover everything you need to know about home equity loans. We’ll discuss the factors that affect loan rates and provide tips for getting the best rate possible. We’ll even explain the different types of home equity loans, including home equity lines of credit (HELOCs) and cash-out refinances, so you’ll be aware of the alternatives and their pros and cons.
Whether you’re planning a home renovation, consolidating high-interest debt, or making a major purchase, understanding Pittsburgh home equity loan rates can help you make smart financial decisions and set you up for a successful economic future.
How Do Home Equity Loans Work?
A home equity loan is akin to a second mortgage. It allows you to tap into your home’s equity to receive a lump sum, which you then repay, usually in fixed monthly installments over a period of five to 30 years. The loan is secured by your home, which often means lower interest rates than you’d get with unsecured personal loans.
One important caveat: In order to draw on the equity in your home, you have to have equity in your home. You can still be paying off your mortgage, but the money you owe should not be more than the house is worth. Typically, lenders want you to have a minimum of 20% equity in your home to qualify.
But if you’ve been paying your mortgage diligently and now you’re wondering how to get equity out of your home, home equity loans can be a great option.
The Origin of Home Equity Loan Interest Rates
Multiple factors determine the home equity loan rates in and near Pittsburgh, PA, including both big-picture economic conditions and your individual financial profile.
Federal Reserve policies affect lenders’ base rates and thus the rates they charge borrowers. Increases in the federal funds rate and the prime rate, for instance, lead to rises in home equity loan rates as well.
Your credit score and debt-to-income ratio typically also influence what rate you’re offered. Additionally, the amount of your loan and the length of your repayment term may have an impact on your rate. Generally, larger loans and longer terms will have higher rates due to the increased risk for lenders.
How Interest Rates Impact Affordability
Your interest rate is a major player when it comes to how affordable a home equity loan will be.
Let’s break it down by looking at the chart below, which shows a $75,000 home equity loan with a 20-year repayment term at several different interest rates.
With an 8.00% interest rate, your monthly payment would be $627, and the total interest you’d pay over the duration of the loan’s term would add up to $75,559. But with a rate just a percentage point lower, at 7.00%, your monthly payment would be $581, and the total interest would drop to $64,554. That means that the lower rate could ultimately save you $11,005 in extra interest.
Interest Rate
Monthly Payment
Total Interest Paid
8.00%
$627
$75,559
7.50%
$604
$70,007
7.00%
$581
$64,554
Fixed vs Adjustable Interest Rates
Home equity loans, unlike HELOCs, for instance, often have fixed interest rates, which means your monthly payments will stay the same for the entire length of the loan. While fixed rates may start off higher than adjustable rates, their stability may give you peace of mind since you’ll know that your payments won’t suddenly spike.
On the other hand, adjustable rates might seem more attractive at first, but after a defined period, the rates “adjust” to follow a market index, which may be higher than the initial rate. And since the rates can change quite a bit over the life of the loan, your payments may feel unpredictable.
When deciding between the two kinds of rates, think carefully about your financial goals, how flexible your budget can be, and how much risk you’re comfortable with.
Home Equity Loan Rate Trends
Interest rates can be a bit like the weather – almost always variable and hard to predict. But if you look at recent history, you may be able to get a good sense of what you can expect. The prime rate, which banks use to set home equity loan rates, has been all over the place in recent years. In March of 2020, curing the Covid-19 pandemic, it hit a low of 3.25%, but by July, 2023, it had shot up to 8.50%, as you can see in the chart below.
Looking at the prime rate over the longer term, below, we can see how much ups and downs have defined the landscape over time.
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
The fluctuating prime rate has a direct impact on the rates offered for home equity loans in Pittsburgh, so it can be useful to be aware of its movements. While the future is always full of surprises, knowing past patterns may help you time your application to get a more competitive rate.
How to Qualify for the Lowest Rates
To be offered the most favorable home equity loan interest rates in and near Pittsburgh, PA, you’ll need to present yourself as a responsible, low-risk borrower. That means that you’ll want to focus on keeping your debt-to-income ratio below 36%, ensuring that you have at least 20% equity in your home, and strengthening your credit. Aim for a credit score of 700 or higher to be in the running for the best rates. Even if you haven’t decided yet on a HELOC vs. a home equity loan or even a cash-out refi, these tactics should help you secure the most competitive interest rates.
Maintain Sufficient Home Equity
To be eligible for a home equity loan, it’s crucial to maintain a minimum of 20% equity in your home.
Calculating how much equity you have in your home is simple: Just subtract your current mortgage balance from your home’s market value.
For instance, if your mortgage balance is $400,000 and your home is valued at $550,000, your equity would be $150,000.
Many lenders will loan you up to 85% or even 90% of your available equity, meaning that in this example, you could potentially receive as much as $135,000. A home equity loan calculator can help you estimate how large a loan you may be able to access.
Making timely mortgage payments and investing in home improvements are great ways to build equity so you can meet this requirement.
Build a Strong Credit Score
When it comes to home equity loans, lenders often look for a credit score of 680 or higher, with many favoring 700 or more. A robust credit score is a testament to your financial responsibility and can lead lenders to offer you more attractive loan rates.
To bolster your credit score, concentrate on making payments on time, maintaining low credit card balances, and steering clear of new debt. And don’t forget to check your credit report regularly for inaccuracies – and reporting and disputing any that appear.
Manage Debt-to-Income Ratio
Your debt-to-income (DTI) ratio – how much you owe in various payments each month compared to how much money you have coming in – is a critical factor in determining your loan eligibility. The DTI ratio lenders require for a home equity loan is typically below 50%, and ideally below 36%.
Since it indicates that your debt is under control, a lower DTI ratio suggests a better ability to manage monthly payments, which can convince lenders to offer you more competitive home equity loan rates.
The two most direct ways to improve your DTI ratio are paying down your existing debts or increasing your regular monthly income, whether it’s through a side hustle or getting a raise.
Obtain Adequate Property Insurance
When you’re looking to secure a home equity loan, property insurance is a must, particularly if you’re living in a flood-prone area. This insurance not only safeguards your home’s worth in the event of damage, but also the lender’s investment. That’s why having the right coverage can work in your favor, potentially getting you better loan terms. Let that knowledge provide you with the incentive to make sure your policy is up to snuff and covers both the full value of your home and any unique risks in your locale.
Current home equity loan rates by state.
Compare current home equity loan interest rates by state and find a home equity loan rate that suits your financial goals.
Select a state to view current rates:
Tools & Calculators
Online tools and calculators can help you estimate monthly payments and maximum loan amounts, and when you’re searching for the right home equity loan, they’re invaluable.
For example, our calculators can help you quickly evaluate the potential benefits of a home equity loan. You can see how your home’s value, your current mortgage balance, and your desired loan amount would all factor into your loan options. You can also use these online tools to compare different lenders and the home equity loan rates they offer. And you can input your financial information and find out how different loan terms and interest rates will affect your monthly payments and total interest paid.
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
Closing costs for home equity loans typically range between 2% and 5% of the loan amount.
These costs may include appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. Loan origination fees are usually 0.5% to 1% of the loan amount; title insurance can also run from 0.5% to 1% of the loan amount; and title searches cost $75-$250 or more. Appraisals average $300-$500, and credit reports for lenders are $30-$50 or more. Document preparation can vary from $100-$500, be paid by an hourly rate if an attorney is involved, or be folded into the appraisal fee.
No-closing-cost options exist but may have higher rates. Compare lenders to find the best terms.
Tax Deductibility of Home Equity Loan Interest
Here’s a tip:The interest on your home equity loan might be tax-deductible if it’s used to buy, build, or improve your home. For single filers, interest is deductible on the first $375,000 of loan debt. Spouses filing together can deduct the interest on up to $750,000 of debt. But you will have to itemize if you want to to claim this deduction.
This deduction is currently set to run through 2025 but could be extended, so it’s a good idea (as it always is) to check with a qualified tax advisor to get the latest information and advice.
Alternatives to Home Equity Loans
If a home equity loan doesn’t quite seem like what you’re looking for, there are a couple of other options that might be a better fit. You could consider a home equity line of credit (HELOC) or a cash-out refinance. Each of these options also allows you to tap into your home’s equity, but they have different features and requirements. A HELOC, for example, gives you a revolving line of credit with variable interest rates, which can be great for ongoing expenses. A cash-out refinance, on the other hand, replaces your current mortgage with a new one for more than you currently owe, giving you a lump sum of cash.
Home Equity Line of Credit (HELOC)
What is a home equity line of credit? A HELOC is a flexible loan option for homeowners. With a HELOC, you pay interest only on the amount you borrow. During the initial “draw” period, you can use the funds (up to a set limit), and then, during the repayment period, you make payments on the money you’ve pulled out plus interest. It’s important to realize that the interest rate is variable, which means it can fluctuate, and your payments may change.
To qualify for a HELOC, you’ll generally need a credit score of 680 or higher (700 is even better) and a debt-to-income ratio of 50% or less (36% or less is ideal). A HELOC can be a good option if you’re not sure how much you need to borrow or if you need to borrow money over time.
If you’re wondering how much the monthly payments for a HELOC would cost, you might consider using a HELOC monthly payment calculator.
And if you’d like to calculate how much interest you’d have to pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
Cash-Out Refinance
A cash-out refinance is a type of mortgage refinance that replaces your existing mortgage with one that’s for more than you owe, providing you with a cash payout based on your home equity
If you’re evaluating the benefits of a cash-out refinance vs. a home equity line of credit, it’s worth noting that the requirements tend to be different. It’s usually easier to qualify for a cash-out refi than for a home equity loan or HELOC. While lenders can have different standards, cash-out refinances often require a minimum credit score of 620 and a DTI ratio of 43% or less. Cash-out refinances can have either fixed or variable interest rates.
The Takeaway
To get the best home equity loan rates in Pittsburgh, you’ll want to work on building your credit, managing your debt-to-income ratio, and securing property insurance. You can use online tools to estimate your payments and the amount you can borrow, but be sure to factor in closing costs as well as you make your decision. If a home equity loan isn’t the best fit for you, a HELOCs\ or a cash-out refinance could also be an option, so be sure to weigh the benefits and risks of each to find the one that works best for your financial goals and 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.
A home equity loan is a versatile tool with many uses. Some of the most popular reasons people get them are to finance major expenses, to pay for home improvements, and to consolidate high-interest debt. Just remember to use the funds wisely and make sure the loan fits into your bigger financial picture.
Are you wondering what your monthly payments might look like on a $50,000 loan?
The amount of your monthly payment for a $50,000 home equity loan can vary depending on the interest rate and the loan term. For example, if you got your loan at 7.00% interest over 15 years, your monthly payment would be about $449. At a 9.00% interest over 15 years, the payment would be around $507. A loan calculator can help you figure out what your monthly payments would be with different variables.
What might prevent you from getting a home equity loan?
There are a number of factors that could stop you from securing a home equity loan. First of all, lenders typically require a minimum credit score, generally around 680 or more, so having a lower one could disqualify you. A high debt-to-income (DTI) ratio – usually above 50% – might also nix your loan. And having less than 20% equity in your home could be a red flag for lenders as well. Potential lenders will also look at how stable your home’s value is and how good your property insurance is. Qualifications can vary by lender, but these are some of the most common disqualifiers.
What are the benefits of a home equity loan?
Home equity loans often come with fixed interest rates and therefore have predictable monthly payments, which can make budgeting easier. They usually have lower rates than unsecured personal loans, making them a cost-effective option for significant one-time expenses like home improvements or debt consolidation. Just be sure to balance these benefits with the potential risks, such as the threat of foreclosure if you fall behind on payments.
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