Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are influenced by Federal Reserve policy and borrower creditworthiness.
• Even a small difference in the rate can lead to a big difference in the total interest paid.
• Home equity loans usually come with fixed interest rates, which can make monthly payments predictable.
• To snag the best rates, aim for a stellar credit score, a low debt-to-income ratio, and at least 20% equity in your home.
• Interest on home equity loans might be tax-deductible if used for home improvements.
Welcome to our guide on home equity loan rates in San Francisco. In this article, we’ll explore the current rates, share the factors that determine what rate you, personally, will be offered, and cover the steps you can take to qualify for the best terms. Whether you’re looking to fund home renovations, consolidate debt, or cover other significant expenses, understanding home equity loan rates is essential for making informed financial decisions.
A home equity loan is a second mortgage that uses your home as collateral. Funds are disbursed in a lump sum and typically repaid in equal monthly installments over five to 30 years. Using home equity to secure the loan results in a lower interest rate than borrowers would get with an unsecured loan. And interest rates are typically fixed, which is why the monthly payments are predictable.
Borrowers need at least 20% equity in their primary residence to qualify for a home equity loan. (Your equity is the home’s estimated market value minus your current home loan balance.) Lenders often allow borrowing up to 85% of available equity. These loans can be used for any purpose; borrowers often cover home improvements, education, medical bills, or use the funds to pay off higher-interest debts.
Home equity loan interest rates are influenced by a variety of economic and personal factors. Lenders set home equity loan rates based on the prime rate, which in turn is driven largely by policies of the Federal Reserve. (So when the Fed shifts its rates, home equity loan rates usually shift, too.) Lenders also adjust their rate offer up or down for each borrower based on the credit score, debt-to-income (DTI) ratio, income, and amount of equity that each individual has in their home.
Interest rates play a pivotal role in the affordability of home equity loans. Even the slightest variation can translate to significant differences in the total interest you will pay over the life of the loan. For instance, on a $100,000 loan with a 20-year term, an 8.00% rate means $100,746 in interest, while 9.00% jumps to $115,934 — that’s a $15,000 gap. That’s why it pays to weigh your options and secure the most cost-effective home equity loan.
Recommended: Home Equity Loan Calculator
While no one has a crystal ball for interest rates, a look at the past can provide some perspective on the current market. The prime rate, which is a key benchmark for home equity loan rates, has been all over the place in the last few years. In 2020, it was as low as 3.25%. By 2023, it had climbed to 8.50%.
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% |
To snag the most favorable home equity loan rates, there are a few things you should focus on. Here are four items to tick off your to-do list:
As you’re learning what is a home equity loan, you’re also making your mortgage payments and building equity. You typically need to have at least 20% equity in your home. To calculate your equity, look up your home’s estimated value on a real estate site. Then subtract your mortgage balance from your current home value. Divide the answer by your current home value to get a percentage. For example, if your home is valued at $550,000 and your mortgage balance is $400,000, your home equity would be $150,000. Divide $150,000 by $550,000 and you get 0.27, or 27%.
generally look for scores of 680 or higher. A higher credit score is a testament to your financial responsibility and can translate to more attractive loan terms. To nurture your credit score, concentrate on paying bills on time, keeping credit card balances in check, and steering clear of new debt.
Your debt-to-income (DTI) ratio is a crucial piece of the puzzle when it comes to qualifying for a home equity loan with favorable rates. Lenders typically look for a DTI ratio below 50%, with 36% or lower being the sweet spot. (To compute your DTI ratio, add up all your monthly debt payments and divide by your gross monthly income.) To manage your DTI ratio, consider paying down some existing debt, finding ways to boost your income, or both.
Property insurance is a common prerequisite for home equity loans, especially in areas susceptible to natural disasters like floods. This insurance is a safety net for both you and the lender. Before you apply for a home equity loan, ask a lender if there are any specific insurance requirements and ensure your policy meets those standards.
An online calculator can be a big help in comparing home equity loan rates and terms. And it’s not the only calculator you’ll find helpful during your home equity loan process:
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.
Closing costs for home equity loans typically range from 2% to 5% of the loan amount. These fees can include an appraisal, credit report, and title insurance. Some lenders waive these fees.
Recommended: What Is a Home Equity Line of Credit?
Here’s a tip: The interest on home equity loans could be tax-deductible if the funds are used to purchase, build, or make significant improvements to your home. This tax break is currently set to last through 2025 and interest on home loans may continue to be deductible in 2026, depending on how tax policy is set. (A tax advisor can provide personalized advice. You may need professional help to claim this deduction, as you’ll have to itemize your deductions on your tax return.) 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.
Home equity loans are a popular choice, but they’re not your only option. You might also consider different types of home equity loans such as a home equity line of credit (HELOC) or a cash-out refinance. Each of these options has its own features and eligibility requirements. The basics:
A HELOC works much like a credit card, but with lower interest rates. It gives homeowners the flexibility to borrow what they need as they need it, up to a predetermined limit. As you consider a HELOC vs. a home equity loan, understand this: With a HELOC, you only pay interest on the amount of the credit line that you actually use. After an initial “draw” period (often 10 years) when you can use the credit line, you begin to repay the principal plus interest. To see what payments might be like during the draw period, use a HELOC interest-only calculator. The interest rate on a HELOC is variable and can change over time, which means your costs could go up if rates rise. A HELOC repayment calculator can help you see what payments would be like at different interest rates.
To qualify for a HELOC, you typically need a credit score of at least 680, but a score of 700 or higher is preferred, and a debt-to-income (DTI) ratio no higher than 50%, with 36% or less being ideal. HELOCs can be a good option for homeowners who want to borrow up to 90% of their home’s equity and pay for expenses over time.
A cash-out refinance is a type of mortgage refinance that replaces your existing mortgage with a larger one, unlocking cash based on your home equity. Most lenders will consider lending up to 80% of your equity. You’ll typically need a credit score of at least 620 and a debt-to-income ratio below 43%. Because this is a new mortgage, you’ll need to choose between fixed and variable rates. You’ll also need to choose a loan term. As you think about a cash-out refinance vs. a home equity line of credit consider this: With a refi, there’s just one monthly payment to keep track of instead of the two loan payments you would have with a home equity loan or a HELOC.
Here’s a look at the three ways you can borrow by getting equity out of your home and how they compare:
| 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 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) |
When you’re ready to consider a home equity loan, make sure you’re in the best financial shape possible. That means building a strong credit score, keeping your debt-to-income ratio in check, and getting the right property insurance. These factors can all affect the rate and terms you’re offered. You can also use tools and calculators to help you estimate costs and compare offers from different lenders. With a little planning and research, you’re sure to find the best possible rate for you.
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 smart way to borrow for big home renovation projects. It can also be used for other large expenses, such as medical bills or college tuition. There are no restrictions on how you use the funds. However, in 2025, how you use the money will affect whether the interest you pay on the loan is tax-deductible. (Consult a tax advisor.)
The monthly payment on a $25,000 home equity loan varies depending on the interest rate and term. For example, at 7.00% over 10 years, you’d be looking at around $290 a month. But if the interest rate is 8.00% and the term is 20 years, your monthly payment could be closer to $209.
There are a few things that might prevent you from qualifying for a home equity loan. Most lenders look for a credit score of at least 680 and a debt-to-income ratio below 50% (with even lower being ideal). You’ll also need to have at least 20% equity in your home. If your home’s value has dropped, or if you have significant other debt already, you might not qualify.
Home equity loans offer a fixed interest rate, which means the monthly payment amount is nicely predictable. And because a home equity loan is secured by your home, it will typically have a lower interest rate than a personal loan, which is unsecured.
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