Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are determined by your credit score, your debt-to-income ratio, and other factors.
• To land the best rates available, you’ll want to aim for a credit score of about 700 and a debt-to-income (DTI) ratio under 36%.
• The rates lenders may offer you are impacted by your personal financial profile as well as the prime rate and Federal Reserve policy.
• Even a tiny difference in home equity loan rates have potential to add up to substantial savings over the life of the loan.
• Home equity loan interest could be tax-deductible if you’re using the money to fund home improvements.
• Alternative options, like HELOCs and cash-out refinances, come with their own perks and pitfalls.
Welcome to our guide to home equity loan rates in Salem, Oregon. We’ll dive deep into home equity loans and explain how they work, what factors influence their interest rates, and how you can qualify for the best rates around. It doesn’t matter whether you’re looking to fund improvements to your property, consolidate accumulated debt, or take care of another big expense. Understanding home equity loan interest rates can help you make good decisions.
Before applying, you should peruse a primer on what a home equity loan is. It’s a second mortgage using your home as collateral, giving you a lump sum of money to use for any purpose. You will begin to repay it immediately in equal monthly installments over a fixed term between five and 30 years. Because your home secures the loan, you generally get a lower interest rate than you would with an unsecured personal loan. (This means your home is at risk if you miss payments, so keep that in mind.) Most home equity loans have a fixed interest rate, making payments predictable.
To qualify, you’ll need at least 20% accrued equity in your home. Some lenders might allow you to borrow 85% of that equity, but that’s usually the maximum. A home equity loan calculator can help you figure out your home equity and how much you might be able to borrow.
Interst rates on different types of home equity loans are often influenced by both the economic environment and your financial situation. Federal Reserve policy — for instance, changes to the federal funds rate — can send vibrations through the lending market that ultimately impact the prime rate. When the prime rate moves up or down, home equity loan rates do, too.
As was the case when you applied for your original home loan, your credit score and debt-to-income (DTI) ratio will drive the rates you’re offered. The loan amount and repayment term affect your interest rate, too. Competition among lenders can also lead to rate reductions.
Understand these factors and you will be prepared to make informed decisions when you look at options for how to get equity out of your home.
That little interest rate can be a real game-changer when it comes to the cost of a loan in the long term. Let’s say you secure a $100,000 home equity loan with a 15-year term. At an 8.50% interest rate, you’d have a $984 monthly payment and pay $77,253 in interest by the time you pay it off. Bump the interest rate up to 9.50%, and you’ll be looking at a $1,044 monthly payment and $87,961 in total interest. That’s $10,700 in additional interest for a one-percentage-point rate difference!
Here are more examples of how your term and interest rate could affect the long-term affordability of your 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 |
Thinking about how to tap your home equity, you’ll probably consider how you can time your loan application. Is there a perfect moment to move so you can achieve the lowest possible rate? Unfortunately, predicting the prime rate is like trying to forecast the weather — not every borrower has that kind of intuition, or the time to wait for a desirable turn.
If you can’t hold off on applying until rates are at their lowest, don’t beat yourself up. If a loan is what you need, start comparing offers from different lenders so you can get the best possible 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% |
The answer is, a lot — when you look at its fluctuations over several decades. The prime rate has seen ups and downs, as you can see from the graphic and the chart. But it’s not particularly predictable, and a plunge in the near future is hard to see coming.
To secure the most competitive home equity loan rates in Salem, keep a few factors in mind and take the following steps before you begin the application process. You’ll be better positioned to land a home equity loan with a favorable, and hopefully manageable, rate and term.
This is a pretty easy equation: 20% or more equity in your home will generally qualify you for a home equity loan. To figure out how much equity you’ve got, subtract your outstanding mortgage balance from the estimated value of your home, then divide your answer by the estimated home value. You’ll arrive at your percentage of equity. The higher, the better.
A good credit score is needed to get the best available rate. Home equity loan lenders often look for a 680 or higher score, and many may require a score above 700. Higher credit scores signal financial savvy. They tend to open doors to favorable loan offerings. Focus on making payments on time, reducing credit card balances, and avoiding new debt to increase your chances of qualifying for a home equity loan with a lower interest rate.
DTI ratio is an important factor when it comes to your chances of qualifying for a home equity loan and getting a low rate. Lenders typically want to confirm a borrower’s DTI ratio at 50% or less, and 36% or lower can bring the very best interest rates. Make efforts to manage your DTI effectively. That means, work on paying down your existing debt, increasing your income, or achieving a combination of these things.
Insurance on your property is a must-have for a home equity loan. The homeowners’ insurance safety-net protects both you and the lender should you encounter damages. Make sure your coverage is both active and adequate.
Before taking steps to borrow against your home, you might want to do some math. Specialized calculators can help you understand what borrowing options are available to you, and how much you might need to spend on loan payments. A home equity loan calculator and other online calculators can make that math 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.
When it comes to the closing costs on your home equity loan, you’ll end up paying a ballpark figure of 2% to 5% of the loan amount. This table shows some typical closing costs that borrowers encounter, and the amounts they may pay for 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 |
Sometimes lenders offer no-closing-cost loans, but these frequently come with higher rates. Don’t forget to calculate what you’ll pay over the loan’s life before you sign up.
Interest you pay on a home equity loan may be tax-deductible, but usually only if you put the funds toward improving your home. Single filers can deduct interest on their first $375,000 in loan debt. Married couples who file jointly can deduct interest on as much as $750,000 in debt. You’ll need to itemize on your tax return, though — save your receipts and invoices to take advantage of this option. A tax advisor can help you figure out what makes sense for you.
A home equity loan isn’t the only way to leverage the value of your property. You can consider a cash-out refinance or a home equity line of credit (HELOC) as well. With a cash-out refi, you take out a new mortgage for a larger amount than what you owe on your home loan now. The difference comes to you as a lump sum, and you use it as you wish. With a HELOC, you apply for a credit limit, secured by your home, that you then can borrow against as needed and pay interest only on the cash you draw out.
You can learn more about cash-out refinance vs. hoem equity line of credit similarities and differences so you can understand the options and make the best choice.
What is a home equity line of credit? A HELOC is a lot like a credit card, in that it offers homeowners freedom to borrow up to a set limit, and then pay interest only on what they use. Usually, you can pull out funds during an initial “draw” period, followed by a repayment period when you must repay both the principal and the interest.
The rates on a HELOC are generally adjustable. Unlike a home equity loan, a HELOC is about flexibility. But keep in mind that adjustable interest rates mean your rate and payments can fluctuate, potentially impacting your costs later.
What are the similarities when it comes to a HELOC vs. a home equity loan? Qualifying for a HELOC also likely requires a credit score of 680 or higher (700-plus is even better) and a DTI ratio below 50% (below 36% is best). With a HELOC, you may be able to borrow a bit more — up to 90% of your accrued home equity.
Curious about how much the monthly payments would be on your hypothetical HELOC? Try running figures through a HELOC repayment calculator. You can plug in different interest rates and terms to find out how they would affect your payments, and just how much of a loan you can afford. And if you’d like to calculate how much interest you’d have to pay during the HELOC “draw” period, try out a HELOC interest-only calculator.
A cash-out refinance is a strategic mortgage refinance. Swapping your original mortgage for one that’s larger than the amount you owe, you then receive the difference as a lump sum. Cash-out refi interest rates may be fixed or adjustable. Lenders have different standards, but often cash-out refis require a 620 minimum credit score and a DTI ratio that is 43% or less.
Keep in mind that it’s usually easier to qualify for a cash-out refi than it is for a home equity loan or a HELOC.
If you’re considering applying for a home equity loan in Salem, developing an understanding of interest rates will help you navigate the process and negotiate the best available terms. Your credit score, DTI ratio, and equity level will all play a role. Just shopping around can go a long way as you try to get yourself the best rate possible. And if a home equity loan isn’t a fit, a HELOC or a cash-out refinance will have its own advantages.
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, and many people use them to borrow cash to finance major expenses, pay for home improvements, or consolidate their high-interest debt. You’ll want to use the funds wisely and consider how the loan fits into your bigger financial picture.
Your payment on a $50,000 home equity loan each month is going to depend on both the interest rate and the loan term. Note that if you got your loan at a 7.00% interest rate over 15 years, your monthly payment would be about $449. At a 9.00% rate over 15 years, the payment would be close to $507. A loan calculator will help you figure out monthly payments easily, whatever the variables and terms.
A number of factors could get in your way when you try to secure a home equity loan. First would be if you don’t have the minimum credit score of around 680 that lenders typically require. A high debt-to-income (DTI) ratio -– usually above 50% -– might get in the way of your loan, too. If you’ve got less than 20% equity in your home, that could put off lenders, as could signs that your home’s value is unstable or that your property insurance plan is insufficient. Qualifications vary by lender, but these are common dealbreakers for borrowers.
Home equity loans often have fixed interest rates, and therefore predictable monthly payments, which can make budgeting easier. They usually have lower rates than unsecured personal loans, and that makes them cost effective for one-time, significant expenses such as home improvements or high-interest debt consolidation. You should always balance benefits like these with the potential risks, including the threat of foreclosure if you happen to 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.
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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.
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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