Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by the prime rate and personal financial factors.
• Home equity loans have fixed rates, which means predictable monthly payments.
• Your goal is a credit score of 680 or more and a debt-to-income ratio of 50% or less.
• Make sure you have at least 20% equity in your home and full home insurance before applying.
• Use online calculators to estimate monthly payments and total interest costs.
Home equity loans can be a great way to access the money you need by borrowing against the equity in your home. In this guide, we’ll explain how home equity loan rates in Rochester, New York, are determined, as well as how to qualify for the best rates. We’ll also discuss the potential risks and benefits of home equity loans and provide you with ideas for other ways to borrow by taking advantage of the equity you have in your home. By the end, you’ll have a clear understanding of how to leverage your home equity effectively.
Before you file a single loan application, make sure you understand what is a home equity loan in the first place. A home equity loan is a second mortgage that uses your home as collateral and provides a lump sum of money you can use for home improvements, education costs, debt consolidation, or any purpose you like. Home equity loans typically have fixed interest rates and a fixed loan term.
To qualify for a home equity loan, you’ll need to have at least 20% equity in your home. Many lenders will let you borrow up to 85% of that equity. A home equity loan calculator can help you find out your home equity and maximum loan amount. You’ll begin repaying what you borrowed, with interest, immediately after you borrow it; in that way, a home equity loan works much like your original home loan.
Lenders set home equity loan interest rates based on the prime rate, which is driven largely by the Fed’s policies. A borrower’s credit score and debt-to-income ratio are also important determinants of exactly what rate will be offered. Better scores mean better rates.
The interest rate you secure can have a significant impact on the cost of your home equity loan over time. Even a fraction of a percentage can add up to thousands of dollars in extra interest payments. Take a look at how different interest rates would affect the cost of a $75,000 loan over 20 years, below.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
The ebb and flow of home equity loan rates can be a bit like the weather — unpredictable. Influenced by a myriad of economic factors, the prime rate, a key player, has seen its fair share of ups and downs, as you can see from the graphic. Just look at the numbers: 3.25% in 2020 and a whopping 8.50% in 2023. By keeping an eye on rate trends and timing your application during the lows, when possible, you could snag a more budget-friendly loan.
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% |
Securing the most favorable home equity loan rates hinges on your financial standing. Lenders will scrutinize your credit score and debt-to-income ratio (DTI) to assess your application. Prepare for your application by taking these steps:
To be eligible for a home equity loan, you’ll need at least 20% equity in your home. Give yourself an equity checkup by subtracting your mortgage balance from your home’s current value. (Look up your home value on a real estate web site.) For instance, if your mortgage balance is $400,000 and your home is estimated to be worth $550,000, your equity would be $150,000. To determine the percentage, divide your equity by the home value — in this case, you have 27% equity.
To snag the most attractive home equity loan rates, a robust credit score is your ticket. Lenders usually favor scores of 680 or higher, with the 700 mark often being the sweet spot. The higher your score, the more financially prudent you appear, potentially translating to more appealing loan terms. If you have a track record of timely payments and judicious credit management, a lower interest rate could be in the cards. It’s a smart move to peruse your credit report for any glitches and address them before you apply.
Your debt-to-income (DTI) ratio is a critical piece of the home equity loan puzzle. Lenders generally look for a DTI below 50%, with 36% or lower being ideal. To calculate your DTI, divide your total monthly debt payments by your gross monthly income. The lower the ratio, the better your chances of securing a competitive rate. If your DTI is on the higher side, consider chipping away at existing debts or finding ways to boost your income. Not only will this improve your odds of approval, but it could also lead to a more favorable rate.
Property insurance is a must-have for most home equity loans, especially in areas with a history of natural disasters, such as flooding. This insurance shields both you and the lender in the event of property damage. When you’re out there looking for a home equity loan, lenders will want to see proof of property insurance. Making sure you have the right coverage can not only help you secure the loan but also potentially influence the rates you’re offered.
Utilizing the calculators below can be helpful in your decision-making process. By playing around with different figures, for example, you can determine what rate and loan term best align with your financial goals.
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 home equity loans in Rochester, you can expect closing costs to fall within 2% to 5% of your loan amount. These fees cover everything from appraisals to credit reports. You’ll also see charges for title insurance and searches, document preparation, and attorney fees, for example. Make sure you include closing costs and fees when you compare loan offers from different lenders.
Here’s a little-known perk: The interest on your home equity loan might be tax-deductible if you use it to buy, build, or improve your home. Those filing jointly can deduct interest on loans up to $750,000; for single filers, it’s up to $375,000. Just remember, this is when you itemize deductions instead of taking the standard deduction. The tax rules around home equity loans are set to change at the end of 2025, so consult a tax advisor if you’re thinking about this deduction.
While home equity loans are a popular choice, there are different types of home equity loans (or rather, ways to borrow based on your equity) to consider. A home equity line of credit (HELOC) and a cash-out refinance are two alternatives. HELOCs offer more flexibility by allowing you to draw funds as needed up to a set limit, with interest paid only on the amount borrowed. A cash-out refinance replaces your existing mortgage with a new one. Let’s take a closer look.
A home equity loan gives you a lump sum in one payment. A HELOC, on the other hand, is more like a credit card. It gives you a credit limit, and you can borrow as much as you need (up to that limit) whenever you need it. You only pay interest on the amount you actually borrow, and during the loan’s initial draw period (often 10 years) you usually don’t have to repay the principal. (A HELOC interest-only calculator can help you see what you might owe depending on how much of the credit line you use.) After the draw period, a repayment period begins. You’ll repay what you owe plus interest. (This is when a HELOC repayment calculator is useful.)
HELOCs usually have variable interest rates. To qualify, you’ll typically need a credit score of 680 or higher (700 is better) and a DTI of 50% or less (36% is the ideal). HELOCs are a good choice if you’re not sure how much you’ll need to borrow. Many lenders let you borrow up to 90% of your home’s equity.
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 |
A cash-out refinance is your other option if you want to get equity out of your home. This is a special type of mortgage refinance. You swap your existing mortgage for a larger one, pocketing the difference. Typically, you can borrow up to 80% of your home’s value, contingent on your equity. A credit score of at least 620 and a DTI ratio below 43% are the usual expectations. Interest rates may be fixed or variable, with the latter offering potential for more equity access. As you consider a cash-out refinance vs. a home equity line of credit or home equity loan, remember that with a refinance, you’ll be left with one monthly payment instead of two.
As you ponder a home equity loan, remember that a robust credit score, a healthy debt-to-income ratio, and the right property insurance are your allies in securing favorable rates. Leverage tools and calculators to forecast monthly payments and interest expenses, and don’t overlook the potential tax benefits of the interest you pay. Always weigh your choices, comparing multiple lenders to find the most favorable terms.
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.
You can use a home equity loan or a home equity line of credit (HELOC) for any purpose. Home equity loans deliver a lump sum and are a great option for making a large purchase, funding a home renovation, or consolidating high-interest debt. If you aren’t sure how much money you need and don’t need it all at once, a HELOC could be a better choice. Just be sure to align the loan’s terms with your financial goals and manage the monthly payments to avoid foreclosure.
The monthly payment for a $50,000 home equity loan varies with the interest rate and the term of the loan. At an 8.00% interest rate, for instance, a 10-year loan would have you paying $607 a month. Opt for a 20-year term, and that monthly commitment drops to approximately $418. Consider your budget and goals to pick the term that suits you best.
The payment on a $25,000 home equity loan is determined by the interest rate and the loan term. For example, at an 8.00% interest rate over a 20-year term, the monthly payment would be about $209. This fixed-rate loan means your monthly payment won’t change, which can be helpful for budgeting.
There are a few things that could prevent you from getting a home equity loan. A low credit score (below 680) is one. A high debt-to-income ratio (above 50%) is another. You’ll also need to have at least 20% equity in your home. If you don’t meet these criteria, you may need to work on improving your financial situation or consider other financing options.
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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 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.SOHL-Q225-206
