Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans in Riverside County are influenced by the prime rate and an individual borrower’s creditworthiness.
• A robust credit score (700 or above) and a DTI ratio under 36% can net you better rates.
• Lenders typically require borrowers to have 20% equity in order to qualify.
• Home equity loans have fixed interest rates, which provide stability and predictability in your monthly payments.
• Property insurance is often required and can impact loan rates.
Current home equity loan rates are an important part of the decision-making process when you’re considering tapping into your home’s equity by borrowing money. In this article, we’ll walk you through what a home equity loan is and how lenders determine rates in Riverside County, CA. Whether you’re planning to use the funds to consolidate debt, to make improvements on your home, or to cover another large expense, understanding home equity loan rates can help you make a more informed decision, whether you live in Riverside, Temecula, Palm Springs, or another location.
A home equity loan is a second mortgage that uses your home as collateral. To qualify, most borrowers will need 20% equity in their home. The loan is disbursed in a lump sum and typically repaid in equal monthly installments over five to 30 years. Using home equity to secure the loan typically results in a lower interest rate than borrowers would get with an unsecured loan. (It also means that borrowers who can’t make payments risk foreclosure.) Interest rates on home equity loans are typically fixed, which is why the monthly payments are predictable. A home equity loan calculator can help you determine what you might be able to borrow.
Recommended: Different Types of Home Equity Loans
Like the rate on your original home loan, the rate you’ll be offered for a home equity loan is influenced by both economic and personal factors. The Federal Reserve’s policies have a big impact on the lending market through their influence on the prime rate. Lenders add a margin to the prime rate to determine the base rate for their home equity loans. Your credit score and debt-to-income (DTI) ratio will also factor into the rate you receive, as do your loan amount and the repayment term. Interest rates vary from lender to lender, so it’s a good idea to seek out rate quotes from multiple sources.
As you’re thinkging about how to get equity out of your home, you’ll likely be keeping a close watch on interest rates. Even a fraction of a percentage point can add up to significant savings or costs over the life of your loan. Let’s break it down: Imagine you’re taking out a $100,000 home equity loan with a 15-year repayment term. At an 8.50% interest rate, your monthly payment would be around $985, with a total interest paid of $77,253. But if the rate nudges up to 9.50%, your monthly payment jumps to $1,044, and the total interest paid skyrockets to $87,960. That’s roughly $10,700 you’d be shelling out in extra interest. The loan term and rate together can influence what you’ll pay each month, as this chart shows:
| 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 |
Interest rates can be a bit like the weather — unpredictable. But as you’re thinking about when to apply for a home equity loan, it may help to have a sense of the rate’s history. The prime rate dropped to 3.25% in 2020 and climbed to 8.50% in 2023. Fluctuations can mean big differences in the rates you’re offered. To get the best deal, it’s smart to keep an eye on economic indicators and, if possible, apply when rates are low. But even if you can’t wait for a rate change, there are ways to better your chances of being offered a good 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% |
Fluctuations like these strongly impact Riverside County’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.
The prime rate is outside your control. But other factors that determine your interest rate are within your control. Take these steps before you apply to better your chances of snagging the lowest available home equity loan rate in the Inland Empire:
To be eligible for a home equity loan, you need at least 20% equity in your home. Calculating your equity is simple: Subtract your current mortgage balance from your home’s estimated value (find the value on a real estate site). For instance, if your mortgage balance is $800,000 and your home is valued at $1,100,000, your equity sits at $300,000. Next step: Divide your equity number by the estimated value to get a percentage of equity (in this case 27%). By keeping a healthy cushion of equity, you’re setting yourself up for the most favorable home equity loan rates. You can get a sense of how much you might be able to borrow based on your equity by using a home equity loan calculator.
Lenders typically favor credit scores of 680 or higher for home equity loans, with many looking for 700 or above. A robust credit score is a testament to your financial acumen and can significantly influence the rates you’re eligible for. To bolster your credit score, ensure you’re paying bills promptly and maintain low credit card balances. Refrain from opening new credit accounts in the months leading up to your loan application. Regularly review your credit report for inaccuracies and address them.
Your DTI ratio is a key driver where interest rates are concerned. To learn your DTI ratio, add up your monthly debts and divide by your gross monthly income. The sweet spot for a home equity loan is typically below 50%, but the real magic number is 36% or lower. A low DTI ratio tells lenders you’re a pro at managing monthly payments, and that can lead to more attractive home equity loan rates. To reduce your DTI, think about paying down those lingering debts, finding ways to increase your income — or even better, both.
Property insurance protects your investment in your home. It also safeguards a lender’s investment when you have a home equity loan. Having good coverage can positively impact the rates you’re offered, as well-insured properties are seen as lower risk by lenders. If you’re uncertain about the coverage needed, ask a lender what type of coverage would meet its requirements.
Recommended: HELOC vs. Home Equity Loan
Online tools can help you get a handle on what you might be able to borrow and assess monthly payment amounts, whether 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 often include fees for services such as appraisal, credit report, document preparation, origination, notary, title search, and title insurance. As you’re considering lenders’ offers and scrutinizing interest rates, don’t forget to look at fees as well.
Here’s some good news: The interest you pay on a home equity loan could be tax deductible, but only if you use the funds to buy, build, or significantly improve your home. If you file jointly, you may be able to deduct interest on loans up to $750,000; for single filers, it’s loans up to $375,000. Remember, you must itemize to claim this deduction so you may want to talk to a tax advisor.
Before you sign on to a home equity loan, it’s worth looking at the other ways you can borrow based on your home equity. A HELOC and a special type of mortgage refinance called a cash-out refinance are your other options.
A HELOC is similar to a credit card in that you have a certain limit you can borrow up to. You pay only interest during the “draw” period, which is typically 10 years. (A HELOC interest-only calculator can be helpful at this time.) Once the draw period ends, you’ll pay back the principal plus interest (this is when a HELOC montly payment calculator is handy).
To qualify, you’ll generally need a credit score of 680 or higher (700 is preferred) and a debt-to-income ratio of less than 50% (36% is the ideal). HELOCs tend to be best for people who aren’t sure exactly how much they will need to borrow or for expenses that will be incurred over time.
A cash-out refinance replaces your current loan with a larger one. The lender gives you the difference between your initial loan and your new one as a lump sum, which you can use for any purpose. The amount you receive is based on your home’s equity, with lenders often allowing borrowers up to 80% of equity.
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. A cash-out refinance results in a single monthly payment, which can simplify your finances. But if you have a sweet interest rate on your original home loan, a refinance may not be the best move.
Here’s a quick look at a cash-out refinance vs. a home equity line of credit and a home equity loan
| Home Equity Loan | HELOC | Cash-Out Refinance | |
|---|---|---|---|
| Borrowing Limit | Up to 85% of borrower’s equity | Up to 90% of borrower’s equity | 80% of borrower’s equity for most loans |
| Interest Rate | Fixed | Generally variable | May be fixed or variable |
| Type of Credit | Installment loan: Borrowers get a specific amount of money all at once that they then immediately begin repaying, with interest, in regular installments. | Revolving credit: Borrowers receive a line of credit. They have a draw period (5-10 years) during which they borrow and can only pay interest, followed by a repayment period (10-20 years) to repay the principal plus interest. | Installment loan: Borrowers receive a lump sum payment from the excess funds of their new mortgage, which has a new rate and repayment terms. |
| Repayment Term | Generally 5-30 years | A draw period of 5-10 years, followed by a HELOC repayment period of 10-20 years | Generally 15-30 years |
| Fees | Closing costs (typically 2-5% of the loan amount) | Closing costs (typically 2%-5% of the loan amount), plus other possible costs, depending on the lender (annual fees, transaction fees, inactivity fees, early termination fees) | Closing costs (typically 2-5% of the loan amount) |
If you’re considering a home equity loan in Riverside County, start by building a strong credit score and managing your DTI ratio. You’ll also want to make sure you have adequate property insurance. Get quotes from several lenders and don’t forget to ask about closing costs and fees. You can estimate your payments with different interest rates using online tools.
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 can be a good way to pay for large purchases, such as home improvements. Some borrowers also use it to pay off high-interest debt. The flexibility of these loans is a big draw for homeowners. Just make sure you’re clear on the terms and conditions. Because you’re borrowing with your home as collateral, you want to make sure you can keep up with payments.
The monthly payment on a $50,000 home equity loan can change based on the interest rate and loan term. For instance, with a 7.00% interest rate across a 15-year term, you’re looking at approximately $449 per month. But if the interest rate is 8.00% and the term extends to 20 years, the monthly payment could drop to $418. It’s clear that comparing rates and terms is key to finding the most budget-friendly option.
The monthly payment on a $100,000 home equity loan will depend on the loan term and interest rate, but with a 20-year term and an 8.50% interest rate, you’re looking at a monthly payment of $868.
Not having enough equity in your home can prevent you from qualifying for a home equity loan. Most lenders will want to see that you have at least 20% equity in your home. They’ll also look at your debt-to-income ratio (under 50% is essential) and your credit score (680 or more is good).
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
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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.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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