Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• The most competitive home equity loan rates in San Jose go to borrowers with the best credit and a low debt-to-income ratio.
• The prime rate has an influence on home equity loan rates.
• Fixed rates mean monthly payments on home equity loans are consistent over the long haul.
• Interest could be tax-deductible if borrowed funds are used for significant home improvements.
• Closing costs usually range from 2% to 5% of your loan amount.
Home equity loan interest rates are a key consideration when you’re thinking about how to get equity out of your home in San Jose. Here, we’ll help you understand what determines rates, how they can affect your finances, and how to find the best rate and loan type for your personal situation as a homeowner. First step? Make sure you understand what is a home equity loan and how it differs from other ways of borrowing against your home’s equity.
A home equity loan is a type of second mortgage — assuming you are still paying off your primary home loan. It uses your home as collateral, and provides you with a lump sum of money to use for any purpose you like. The funds are disbursed all at once and you immediately begin repaying the money in equal monthly installments over a term ranging from five to 30 years. (The interest rate is usually fixed, offering a consistent and predictable repayment structure.)
Because the loan is secured by your home, home equity loan interest rates are typically lower than those for unsecured personal loans. To qualify, homeowners should have at least 20% equity in their primary residence, which is calculated by subtracting the outstanding mortgage balance from the home’s current market value. You can figure out roughly how much you might be able to borrow with a home equity loan by using a home equity loan calculator.
The interest rates for different types of home equity loans are a product of various economic and personal factors. The Federal Reserve’s monetary policy has a significant impact on the broader lending market. Lenders set their base interest rates by adding a margin to the prime rate, which is influenced by Fed policy. A borrower’s financial profile, including their credit score and debt-to-income (DTI) ratio, also plays a role in determining the home equity loan rate they are offered. Higher credit scores and lower DTIs generally lead to more favorable rates. The precise rate offered to a borrower will differ from lender to lender, so it pays to shop around when looking for a home equity loan.
Your interest rate is a key player in the affordability of your home equity loan. Even a fraction of a percentage point down or up can mean significant savings or added costs over the loan’s life. For instance, a $100,000 home equity loan with a 15-year repayment term at 8.50% interest would mean a monthly payment of $984 and a total interest of $77,253. Bump that rate up to 9.50%, and the payment jumps to $1,044, with a total interest of $87,961. The loan term is also a factor, with longer terms generally meaning more interest paid over the life of the loan. Check out examples in this chart.
| 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 ebb and flow, and you certainly can’t control the prime rate, but it’s helpful to have a sense of the recent history — it can provide valuable perspective. The prime rate was a mere 3.25% in 2020 and then rose to 8.50% in 2023. Some borrowers try to time their application for a home equity loan to coincide with favorable economic conditions, but it’s not always possible to do so.
| 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 San Jose’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.
To access the lowest available home equity loan rates, you’ll want to present a robust financial profile. These are some steps to take before you apply:
Homeowners need a minimum of 20% equity in their home to qualify for a home equity loan. Calculating your home equity is a simple matter of subtracting your current mortgage balance from the appraised value of your home (you can use an online estimate from a real estate web site to get an initial number; once you pursue the loan a lender will usually require an appraisal).
For instance, if your mortgage balance is $800,000 and your home is valued at $1,100,000, your home equity would be $300,000. Divide your equity by your home value to arrive at your percentage of equity (in this case, 27%). The more equity you have, the greater assurance to the lender of your financial stability — and the more favorable your loan terms will likely be.
A credit score of 680 is often the starting point for a home equity loan, but the higher, the better. A robust credit score is a sign of financial prudence and can translate to more favorable loan rates. Those with a history of timely payments, low credit balances, and a diverse credit portfolio are more likely to secure favorable 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 yours, add up all your monthly debts — car payment, credit card payment, student loan, etc. — and divide by your gross monthly income.) The lower your DTI, the more likely a lender is to see you as a good candidate. Most lenders look for a DTI below 50%, but the lower the better. A DTI below 36% is considered ideal. If your DTI is higher than you’d like, try to pay down some existing debt or find ways to increase your income before applying for a home equity loan or its cousin, a home equity line of credit.
Property insurance is a must-have from a lender’s perspective, particularly in flood-prone areas. This insurance safeguards both you and the lender in the event of damage. Before the loan is disbursed, lenders may ask for proof of insurance, and should you fail to maintain coverage, the lender might impose their own policy, which could be pricier.
Using online calculators, you can easily estimate the maximum loan amount and monthly payments for a home equity loan. In fact, you might find all three of these calculators useful as you are thinking about how to get equity out of your home.
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. The list of line items includes charges for an appraisal, credit reports, document preparation, loan origination, notary services, title searches, and title insurance. Lender fees do vary, so factor these in as you compare offers from different lenders.
You’ll be happy to learn that the interest on a home equity loan could be tax-deductible if the funds are used to buy, build, or significantly improve your home. As of 2025, those filing jointly can deduct interest on up to $750,000 of qualified home equity loans, and single filers can claim up to $375,000. To take this deduction, you need to itemize your tax return. Chat with a tax advisor to see how this deduction could play out in your situation.
A home equity loan isn’t your only borrowing option once you’ve built up at least 20% equity in your home. A home equity line of credit (HELOC) and a cash-out refinance are also worth considering.
A HELOC uses your home as collateral, but in practical use it feels more like a credit card. You’ll be given a credit limit based on your equity, and during the HELOC’s “draw” period, you can borrow up to that line in any increment you like. During this time, you will likely only need to pay interest on the amount you owe in any given month (a HELOC interest-only calculator can be a useful tool to estimate oncoming bills).
After the draw period comes the repayment period (and — you guessed it — there’s a HELOC repayment calculator for that). Over 5, 10 or 20 years you’ll repay all that you owe with interest. Most HELOCs have variable interest rates, which means your payments could change as the interest rate changes. To qualify for a HELOC, you generally need a credit score of 680 or higher (700 is preferred) and a debt-to-income ratio of less than 50% (36% is ideal).
As you think about the difference between a HELOC vs. a home equity loan, one consideration is timing. If you know you need a big lump sum, a home equity loan is probably your pick. But if you aren’t sure how much you need to borrow, or you’re renovating over a long span of time, a HELOC could be better suited to your situation.
A cash-out refinance is a true mortgage refinance. You’ll come away with a brand new loan that is larger than what you currently owe, but you’ll be able to pocket the difference between old loan principal and new principal as cash. You can use the money for any purpose.
The amount you can borrow is typically capped at 80% of your home’s value, based on your equity. Lenders generally look for a minimum 620 credit score and a debt-to-income ratio of under 43%. You can choose between a fixed or variable interest rate. As you think about a cash-out refinance vs. a home equity line of credit or home equity loan keep in mind the interest rate on your original home loan. You’ll want to make sure letting go of that rate is a good move, as rates could be higher now. One benefit of a cash-out refi is that you’ll have one monthly payment to make vs. the two you would have with a HELOC or home equity loan.
Here’s a quick look at how the three borrowing options 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 (a HELOC interest-only calculator is useful then). Then there is 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) |
If you’re thinking about a home equity loan in San Jose, you’ll want to start watching interest rates and give your credit score, DTI ratio, and home insurance coverage a checkup. While you’re at it, make sure you have at least 20% equity in your home. Get interest rate and term quotes from multiple lenders, and don’t forget to compare closing costs and fees in addition to rates. In short order, you’ll be able to make the most of your home equity and free up cash to use as you wish.
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 $50,000 home equity loan can vary greatly based on the loan term and the interest rate. For example, a 15-year loan with a 7.00% interest rate would have a monthly payment of $449. But if you extend the term to 30 years, the monthly payment would drop to $300. This illustrates how the loan term can affect your monthly payments. Remember, though, that while a shorter term will lead to higher payments it also means less interest paid over time. With a longer term, total interest paid will be greater.
A $100,000 home equity line of credit (HELOC) typically has a variable interest rate, so the monthly payment can fluctuate based on market conditions as well as on how much of the credit line (in this case $100,000) you’ve used. For this reason, the best way to compute the monthly payment on a HELOC of any size is to use an online calculator.
There are a few things that could prevent you from getting a home equity loan. A credit score below 680 is one. A 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.
Home equity loans tend to offer lower interest rates than credit cards or personal loans because your home serves as collateral on the loan. They also allow borrowers to obtain substantial amounts of money for any purpose. The funds come in a lump sum, with predictable, fixed-rate payments that can be made over a long term.
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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.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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