Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in San Antonio are influenced by a variety of factors, including economic conditions and your creditworthiness.
• If you have a credit score of 700 or higher and a debt-to-income ratio below 36%, you’re in prime position to snag a great rate.
• Fixed rates give you the peace of mind of knowing your monthly payments won’t change.
• The interest on home equity loans may be tax-deductible if you’re using it to significantly improve the property.
• A home equity line of credit or a cash-out refinance are other ways to borrow based on home equity.
Home equity loans are a smart way for homeowners to borrow money by tapping into the equity they have built up in their home. But before you take the first steps toward getting equity out of your home, it helps to understand the forces that impact what kind of home equity loan rate you’ll be offered. Here, we’ll break that down, explaining how current home equity loan rates are formed and what you can do to get your best possible rate in today’s market. Let’s start by looking more closely at what a home equity loan is in the first place.
A home equity loan is a loan guaranteed by your home. In fact, it’s a second mortgage (assuming you are still paying off your first home loan). You can get a lump sum of money based on the equity you have in your home. Common uses for a home equity loan include paying for home improvements and debt consolidation. The interest rates are typically lower than those of unsecured loans, but failure to repay can result in foreclosure. And you’ll begin repaying the loan immediately. These loans usually have a fixed interest rate, so monthly payments are the same for the life of the repayment term, which can be anywhere from five to 30 years.
Most lenders require borrowers to have at least 20% equity in their home to qualify. Some lenders may allow you to borrow up to 85% of your equity. A home equity loan calculator can help you get a sense for how much a lender might be willing to loan to you.
Recommended: What Is a Home Equity Line of Credit
The interest rates for different types of home equity loans are influenced by economic factors but also by each borrower’s personal profile. The Federal Reserve’s monetary policies have a ripple effect on lending rates. Lenders often adjust their rates according to the prime rate, which is a reflection of the Fed’s stance. Your credit score, debt-to-income (DTI) ratio, and credit history play a significant role, with higher credit scores typically translating to lower rates. Additionally, larger loan amounts and longer repayment terms may lead to higher rates due to the increased risk for the lender.
Interest rates play a huge role in how affordable your home equity loan will be over the long haul. A change of a fraction of a percentage point, up or down, can make a big difference in your monthly payments and the total you’ll pay in interest over the life of the loan. To get a sense of what that looks like, check out this chart showing different loan amounts, rates, and terms. (The longer the loan term, the lower your monthly payments — but the more interest you’ll pay over the life of the 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 |
Given that the prime rate underpins home equity loan rates, you’ll probably be paying close attention to the rate as you think about applying for a loan. Predicting the movement of interest rates is no easy feat, given the many economic variables at play, and the prime rate has seen quite a bit of fluctuation, as you can see from the graphic. Some borrowers will be tempted to try to time their application to coincide with a favorable prime rate. But if you aren’t able to wait out the market, remember that there are other things you can do to get the best available 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% |
To secure the most competitive home equity loan rates, take these steps to polish your financial profile before you file your first application:
To qualify for a home equity loan, homeowners are advised to have a minimum of 20% equity in their home. Calculating your home equity is a simple matter of subtracting your current mortgage balance from the appraised value of your home (use an online estimate from a real estate web site).
For instance, if your mortgage balance is $400,000 and your home is valued at $550,000, your home equity would be $150,000. Divide your equity by your home value to arrive at your percentage of equity (in this case, 27%). The more equity you have, the more confident a lender will feel about your financial stability — and the more favorable your loan terms will likely be.
When it comes to home equity loans, a credit score of 680 is often the starting point, but the higher, the better. Those with a history of timely payments, low credit balances, and a diverse credit portfolio are more likely to secure a favorable loan rate and terms. Focusing on your credit score before you apply for a home equity loan is a strategic move that can lead to long-term savings.
Your DTI ratio is a key number that lenders look at when you’re applying for a home equity loan. (To compute it, total your monthly debts — car payment, student loan, credit card payment, etc. — and divide by your gross monthly income.) Most lenders look for a DTI ratio that’s below 50%, but the lower the better. A DTI ratio below 36% is considered ideal. If your ratio is higher than you’d like, you may want to consider paying down some existing debt or finding ways to increase your income before applying for a home equity loan.
Property insurance is a must-have for home equity loans, particularly in flood-prone areas. This insurance safeguards both you and the lender in the event of property damage. Before the loan is disbursed, lenders may ask for proof of insurance.
Recommended: HELOC vs. Home Equity Loan
Our online tools and calculators can help you understand the financial implications of taking out a home equity loan. Here are three you may find handy at various times during your experience as a homeowner.
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, you’re looking at closing costs that typically range from 2-5% of the loan amount. The costs will likely include appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. There are “no-closing-cost” home equity loans available, but they often have higher interest rates.
Here’s a tax tip you might appreciate: The interest on your home equity loan could be tax-deductible if you’re using it to buy, build, or significantly improve your home. For those of you filing jointly, you can deduct interest on up to $750,000 of qualified home equity loans, and for single filers, up to $375,000. To claim this deduction, you’ll want to itemize your deductions on your tax returns so it could be a good idea to check in with a tax advisor.
Homeowners have a few options when it comes to tapping their home equity — a home equity loan isn’t the only solution. Here are two other options you might want to consider:
A HELOC provides you with a line of credit, secured by your home, to use when and how you need it. You’ll only pay interest on the portion of the credit line that you actually use. And during the HELOC’s “draw” period, usually 10 years, you likely won’t have to pay down the principal unless you wish to do so. (A HELOC interest-only calculator can help you see what it would be like to just pay interest during this period.)
After the draw period ends comes the repayment period. Then you’ll repay all that you owe, with interest. And here’s a difference between HELOCs and home equity loans: HELOCs tend to have a variable interest rate. So monthly payments can be a bit unpredictable, although putting your balance and a current rate into a HELOC monthly payment calculator will give you a sense of what you might owe.
To qualify for a HELOC, a credit score of 680 is a common benchmark, but aiming for 700 is even better. Keep your debt-to-income ratio under 50% — and ideally, under 36%. Most lenders will let you borrow up to 90% of your equity.
A cash-out refinance is a mortgage refinance that replaces your existing mortgage with a larger one, giving you the difference in cash to use however you please. The amount you can borrow depends on the equity you have in your home. Most lenders allow you to borrow up to 80% of your home’s value. You’ll need a credit score of 620 or higher and a debt-to-income ratio of 43% or less to qualify. You can choose between a fixed or adjustable interest rate. As you think about a cash-out refinance vs. a home equity line of credit or home equity loan, one difference is that a cash-out refi will leave you with one monthly payment instead of two.
When considering a home equity loan in San Antonio, it’s important to build a strong credit score, manage your DTI ratio, and obtain adequate property insurance. Utilize an online calculator to estimate monthly payments so that you can think about how that might fit into your budget. By obtaining quotes from multiple lenders and carefully evaluating rates and terms, you can secure the most favorable home equity loan rates in San Antonio.
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.
The monthly payment on a $100,000 home equity line of credit can vary greatly depending on how much of the credit line you have drawn, whether you are in the HELOC’s draw period (paying interest only) or its repayment period (paying both interest and principal), and what your interest rate is. Your best bet is to put your principal balance and interest rate into an online calculator to compute what you might owe.
The payment on a $30,000 home equity loan is determined by the interest rate and term. For example, at a 7.00% interest rate over 15 years, the monthly payment would be approximately $270. This fixed payment covers both principal and interest.
There are a few key factors that could prevent you from securing a home equity loan. Lenders often look for a minimum credit score of 680, a debt-to-income ratio of 50% or less, and at least 20% equity in your primary residence. In addition, insufficient property insurance, particularly in flood zones, could also be a disqualifying factor.
Home equity loans come with fixed interest rates and predictable monthly payments. They’re perfect for those big, one-time expenses like home improvements, education costs, or consolidating debt. Given that your home is used as collateral, you’ll often get a lower interest rate with a home equity loan than you would with a personal loan. Tax policy can change from year to year, but through 2025, if you use a home equity loan to significantly improve your home, some or all of the interest could be deductible.
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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.
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