Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Sarasota are influenced by a borrower’s credit score and debt-to-income ratio.
• Interest rates can vary significantly among lenders, so it pays to shop around for the best offers.
• Fixed rates mean your monthly payments stay the same over the loan’s repayment term.
• Property insurance is often a must, particularly in areas prone to hurricanes.
• Financial tools and calculators are available to help estimate costs and make informed
• Home-equity loan interest may be tax deductible if used for home improvements.
Home equity loans can be a great way to get the cash you need to make major home improvements or pay down high-interest debt. But if you’re thinking about borrowing with a home equity loan, you’ll want to make sure you’re getting the best rate possible and that you understand what a home equity loan is and how it works.
In this article, we’ll take a look at some of the factors that can influence home equity loan rates in Sarasota, Florida, and give you tips on how to get the best deal. By the time you’re done reading, you’ll have a better understanding of what to expect and how to make the best choice for your situation.
A home equity loan is a second mortgage that uses your home as collateral for a lump sum of money. It’s a great option for when you need a large amount of money. Home equity loans typically come with a fixed interest rate and a repayment term of five to 30 years, similar to many home loans. To qualify, you’ll need to have at least 20% equity in your home (equity is the value of your home minus what you owe on your mortgage).
For example, if your home is worth $500,000 and you have a mortgage balance of $350,000, you have $150,000 in equity. Divide the equity dollar amount by your home value to arrive at a percentage of equity. You can use a home equity loan calculator to see how much you might be able to borrow based on your equity.
Recommended: Different Types of Home Equity Loans
Home equity loan interest rates are a product of both macroeconomic trends and your individual financial profile. The Federal Reserve’s policies, especially changes to the federal funds rate, can influence the prime rate, which is a key reference point for home equity loan rates. Lenders then add a margin to the prime rate, which can vary based on market conditions and the lender’s policies.
Your credit score and debt-to-income (DTI) ratio also play a role. Generally, the higher your credit score and the lower your DTI, the more favorable your interest rate will be. Understanding these factors can help you make informed borrowing decisions.
As you think about how to get equity out of your home with a home equity loan, you’ll probably start to pay more attention to the prime rate. Your interest rate plays a major role in how affordable your loan will be over time. Even a seemingly small variation in rates can translate to significant savings or added costs. For example, a $100,000 home equity loan at an 8.50% interest rate with a 15-year repayment period would mean a monthly payment of $984, with total interest of $77,253. But at 9.50%, that monthly payment jumps to $1,044, and the total interest paid rises to $87,961. That’s a $10,700 difference in interest over the loan’s life for the borrower with the higher rate.
Here are other examples of how loan term and interest rate affect loans of different sizes.
| 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 |
Predicting the ebb and flow of interest rates is no easy feat, given the many economic variables at play. The prime rate dropped to 3.25% in 2020 and then hit 8.50% in 2023. Such changes have a direct impact on home equity loan rates. Staying abreast of economic indicators and comparing offers from multiple lenders can help you secure the most favorable terms for your home equity loan. Some borrowers try to time the market, applying for a loan when the prime rate dips. But it’s not always possible to wait. If you need to borrow, focus on the factors you can control: your equity level, credit score, and DTI ratio.
| 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% |
So what can you do to put your best foot forward where a lender is concerned? Take these four steps before filing your home equity loan applications.
As noted, you need to have at least 20% equity in your home. Crunch the numbers to ensure you meet this threshold (home value minus mortgage balance, then divide the answer by your home value). If you’re near 20% but not quite there, make some more mortgage payments or consider paying down the principal to reach your goal.
Lenders generally look for a credit score of 680 or more when considering home equity loans, with many favoring scores of 700 and beyond. A robust credit score is a testament to your financial acumen and can translate to more attractive loan rates. To elevate your score, focus on timely payments, keep credit card balances in check, and steer clear of opening new credit lines in the months before your loan application. Regularly reviewing your credit report for inaccuracies and addressing them can also give your score a lift.
Your DTI ratio is a critical piece of the home equity loan puzzle. Most lenders look for a DTI ratio under 50%, with 36% or less being the sweet spot. 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 loan rate. To improve your DTI, focus on paying down your existing debts, boosting your income, or a combination of both.
Property insurance is a must-have for home equity loans, especially in areas that face the threat of natural disasters. This insurance is not only a safety net for you but also a shield for the lender. The cost of insurance can fluctuate based on your property’s location and the coverage you need. While it may seem like an added financial burden, it’s a vital piece of the puzzle to secure your loan and protect your home sweet home.
Recommended: What Is a Home Equity Line of Credit?
Financial tools and calculators can help you gain a better understanding of the costs and benefits of a home equity loan. These are three of our favorites. You may find yourself coming back to them again and again.
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 you’re considering a home equity loan, it’s important to factor in closing costs, which typically range from 2% to 5% of the loan amount. These fees cover essentials like the appraisal, credit reports, origination, title insurance, and more. You might also encounter document preparation and attorney fees. While “no-closing-cost” loans are an option, they often come with higher rates.
Here’s a tip that could save you some money: The interest on home equity loans may be tax-deductible if used to improve your home. For those filing jointly, you can deduct interest on up to $750,000 in loans; single filers can deduct interest on up to $375,000 in loans. It’s a matter of itemizing your deductions, which could be well worth it. A quick chat with a tax advisor can help you figure out how to make the most of this and keep you abreast of any changes in tax law for 2026 and beyond.
While home equity loans are a common choice in Sarasota, you may want to consider other options, such as a home equity line of credit (HELOC) or a cash-out refinance, which is a special type of mortgage refinance. Each of these options comes with its own set of benefits and risks.
A HELOC is kind of like a credit card, but one that is secured by the equity in your home. As you consider a HELOC vs. a home equity loan, here are some points of difference: HELOCs allow you to borrow money as you need it, vs. all at once, and you only pay interest on the amount you borrow.
There is a draw period, during which most lenders only require you to pay interest. A HELOC interest-only calculator can help you see what those payments might look like. Then there is a repayment period when you’ll repay the principal plus interest. (That’s the time to use a HELOC repayment calculator.) HELOC interest rates are variable, so it may be hard to precisely predict payment amounts. To qualify, you’ll need a credit score of 680 (but 700 is better) and a debt-to-income ratio of no more than 50% (but 36% is ideal).
A cash-out refinance gives you a lump sum based on your home equity. You can use the money to pay off higher-interest debts or cover renovation costs, for example. Lenders typically allow you to borrow up to 80% of your equity, although some may go higher. Most require a minimum credit score of 620 and a maximum DTI ratio of 43%. You can choose between a fixed or adjustable interest rate.
When thinking about a cash-out refinance vs. a home equity line of credit, remember that the former is a completely new mortgage — so you’ll want to look carefully at how mortgage interest rates now compare to the rate on your original loan. Here’s a quick reference guide to the three options:
| 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 mulling over a home equity loan in Sarasota, remember to keep your credit score robust, your DTI ratio in check, and your property insurance up to par. These elements can significantly sway your eligibility and the rates you’re offered. Always play the field by comparing multiple lenders to get the best terms and rates.
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.
Home equity loans provide borrowers with funds to cover major expenses, home improvements, or to pay off high-interest debt. The adaptability of these loans makes them a valuable resource for homeowners who need a substantial sum but who don’t want to sell their property.
The monthly cost of a $50,000 home equity loan depends on the loan term and interest rate. For instance, a 15-year fixed-rate loan at 7.50% would mean a monthly bill of about $464. Opting for a 30-year term at the same rate would lower the monthly payment to roughly $350. The amount of interest paid over the life of the loan is usually higher with a longer term.
The payment on a $30,000 home equity loan is based on the interest rate and loan term. For a 20-year fixed-rate loan at 8.00%, for instance, the monthly payment would be approximately $251.
There are a few things that might stop you from getting a home equity loan, such as not having enough equity in your home, having a low credit score, or having a high debt-to-income (DTI) ratio. Most lenders will want you to have at least 20% equity in your home, and a credit score of 680 or higher. A DTI ratio over 50% can also make it hard to get a loan. Not having enough property insurance or having a history of missed credit or loan payments can also be a red flag for lenders.
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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 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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