Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates are impacted by the Federal Reserve’s monetary policy, along with aspects of the borrower’s creditworthiness.
• Compare rates from multiple lenders in order to find the best deal and terms.
• Boost your credit score and reduce your debt-to-income (DTI) ratio, and you’ll most likely see the rates you’re offered drop.
• You will need 20% equity in your home, or more, to qualify for a home equity loan.
• Choose fixed rates for predictable monthly payments. Adjustable rates can offer you more flexibility.
• Interest on home equity loans may be tax-deductible, but in 2025 you’ll need to use the funds to pay for home-related expenses.
What is a home equity lon? First off, it’s a great way for homeowners to access the value they have built in their homes. It’s an option that many people with strong equity use to relieve pressure when they need cash.
In this article, we’ll cover everything you need to know about home equity loans. We’ll discuss factors affecting loan rates and offer you some tips on getting the best rates possible. We’ll also explain some different types of home equity loans, including home equity lines of credit (HELOCs) and cash-out refinances, so you can be aware of alternatives, and the pros and cons of each.
Whether you want to pay for a home renovation, make a major purchase, or consolidate your high-interest debt, understanding home equity loan rates in Springfield can help you make smart financial decisions and set you up for a stable economic future.
Assuming you’re still paying off your original mortgage, a home equity loan would be considered a second mortgage. It will let you tap into your home’s equity and receive a lump sum of cash, which you immediately begin to repay in fixed monthly installments, usually over five to 30 years. The loan is secured by your home, so you’ll have access to lower interest rates than an unsecured personal loan would offer you.
One important thing you should not forget: In order to draw on your home equity, you have to actually have equity in your home. You can still be working to pay off your mortgage, but the money you owe now shouldn’t be more than your house is worth. Lenders typically want you to have a minimum of 20% equity in your home, and without that, you may not qualify.
A HELOC vs. home equity loan is where many homeowners begin their comparisons in search of the right loan to pull equity from their home. Here’s how these two types of loans compare. A home equity loan’s interest rate is often fixed, giving you the peace of mind of predictable payments.
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow plus interest; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment |
| Disbursement | Charge only the amount you need | Lump sum |
If you have been paying down your mortgage diligently and keep wondering just how to get equity out of your home, a home equity loan could be the perfect option for you.
Rates you might be offered when shopping for a home equity loan are a product of many influences, from your personal financial standing to the broad economic landscape.
Federal Reserve policy — including U.S. federal funds rate changes — can send ripples through the lending market, causing changes that may impact the prime rate. When the prime rate moves up or down, home equity loan rates do, too. Keep an eye on these factors and you’ll be better prepared to anticipate rate shifts and make an informed call on when to pursue a home equity loan.
Your credit score and DTI ratio also drive the rates you’re quoted when you shop around as a potential borrower. Whether you know it or not, you have more control over these things, so be prepared. You will have a better outcome applying for a home equity loan if you’ve spent time and effort working to improve them.
The interest rate you receive on your home equity loan can make a huge difference in how affordable it will be as you’re paying it down. What do you need to know? Even a seemingly small reduction in rate — a half of a percentage point truly matters — can lead to significant savings, or additional cost in the case of a rate increase.
To demonstrate how much an interest rate will impact the cost of your loan, the chart below shows both monthly payment amounts and total interest on a $75,000 home equity loan with a 20-year repayment term. We’ve calculated the monthly payment and the total interest you would pay at a few rates for easy comparison.
At an 8.00% interest rate, your monthly payment would be approximately $627, and the total interest you would pay over the loan’s term would add up to $75,559. If the interest rate on your loan was one percentage point lower, at 7.00%, the monthly payment would be about $581, and interest would total $64,554. You did the math right: The lower rate could save you $11,005 in interest over the entire loan term.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
Home equity loans most often come with fixed interest rates. But some Springfield lenders may also offer adjustable rates, and different home equity financing such as home equity lines of credit (HELOCs) and cash-out refinances also offer adjustable rates. That’s why it’s a good idea to stop and consider which you prefer.
A fixed rate never changes throughout the loan’s life, giving you the assurance of consistent monthly payments as you pay it off. Such predictability is a great tool for budgeting and financial planning over the long term.
Adjustable rates are often advertised, and start off, a bit lower than fixed rates. But after an initial period, these variable rates change in accordance with the market. These fluctuations can lead to higher payments for you. They can also create uncertainty about what you can expect over the life of the loan.
When you think about home equity loan rates, it’s wise to consider the merits of fixed rates versus adjustable rates. The variety of rate you choose should take into account your financial standing and your comfort with risk.
Predicting interest rate movement is like a day at the races – it’s impossible to know what will happen with real certainty. But if you look at trends in recent history, they can give you a better sense of how rates move, and help you assess what may be coming.
Let’s look at the prime rate, which is a pivotal driver of home equity loan rates. Its recent timeline shows you just how changeable it can be. As you can see in the chart below, it dropped to 3.25% in 2020, then steadily rose to 8.50% in 2023 before dropping again in 2024.
| 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% |
As we have mentioned, fluctuations like this impact the rates you may encounter in Springfield. Staying in the know about developing financial trends and working on your financial standing may help you time your application to sync with favorable economic conditions, even though they are reliably unpredictable. With luck, you may be able to score competitive rates.
To grab the most competitive home equity loan rates offered by Springfield lenders, you’ll want to keep a few factors in mind. Take these steps before beginning the application process, and you may be able to position yourself to land an interest rate that is favorable and manageable.
If you want to qualify for a home equity loan, you’ll need at least 20% equity in your home. To figure out your level of equity, simply subtract the outstanding balance on your mortgage from the estimated value of your home, then divide the answer by the same estimated value figure to arrive at your percentage of equity. The higher that percentage is, the better shape you’re in.
To land the very best home equity loan rates available, you’ll need a robust credit score. Lenders tend to look for a score of 680 or higher — and many require a score over 700 to get their most favorable rates. Higher scores are viewed by lenders as signs of financial competence. They can open doors to favorable loan terms. Make timely payments on your bills, reduce credit card balances, and steer clear of new debt to boost both your credit score and your chance of qualifying for a home equity loan with a lower interest rate.
Your DTI ratio is important, too, when it comes to qualifying for a home equity loan and getting a great rate. Lenders prefer to see a DTI ratio of 50% or less, and if yours is 36% or lower, you may qualify for lower rates. How can you manage your DTI effectively in Springfield? Make efforts to pay down your debt, increase your income, or a combination of the two.
Property insurance is a must if you’re trying to qualify for a home equity loan. Insurance gives both you and the lender a safety net should your home suffer damages of any kind, so make sure your coverage is comprehensive.
A variety of online tools and calculators exist to ease your search for the best home equity loan rates. They make calculations and budgeting simple. You’ve got multiple tools to choose from.
Here’s one you can explore: A home equity loan calculator shows you just how big a loan you might qualify for. This nifty tool can give you a clear picture of what to expect, and help you ensure you won’t overextend yourself financially.
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 cost of closing on a home equity loan, you should expect to pay 2% to 5% of the loan amount. The table below shows you some typical prices on the menu, with approximate costs.
| 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 |
While some lenders may offer no-closing-cost loans, they often come with higher rates, which are likely to add to your total interest paid over the life of the loan.
Interest you pay on your home equity loan may be tax-deductible, but you’ll need to use the funds to improve your home. For single filers, interest paid on the first $375,000 of loan debt is deductible. Married couples filing jointly can deduct interest on up to $750,000 of loan debt. Plan ahead! You’ll need to itemize expenses if you want to take advantage of this option, so save your receipts. A tax advisor can help you figure out what works best for your situation.
A home equity loan isn’t the only way to leverage your home’s value. You can also consider a cash-out refinance or a home equity line of credit (HELOC). A cash-out refinance involves taking out a new mortgage for a larger sum than your existing home loan. You receive the difference as a lump sum. A HELOC lets you apply for a credit limit, secured by your home, and borrow against it as needed. You will pay interest only on the cash you draw.
Here you can learn more about cash-out refinance vs. home equity line of credit similarities and differences. If you’re well-informed, you can understand the options and make the best choice.
A cash-out refinance is a strategic mortgage refinance, in which you swap your original mortgage for one in an amount larger than what you currently owe — and receive the difference in a lump sum. Rates on cash-out refis might be fixed or adjustable. Usually it’s easier to qualify for a cash-out refi than for a home equity loan or a HELOC. Lenders’ standards vary, but cash-out refis often require a 620 minimum credit score and a DTI ratio of 43% or less.
What is a home equity line of credit? A HELOC is like a credit card. It offers homeowners the freedom to borrow up to a set limit and pay interest just on what they use. You can sometimes pull funds out during an initial “draw” period, followed by a repayment period when you must repay both the principal and interest. HELOC rates are generally adjustable. Unlike a home equity loan, a HELOC is about flexibility. And adjustable interest rates mean rate and payments can fluctuate, most likely impacting your costs down the line.
Qualifying for a HELOC generally requires a credit score of 680 or higher (700 is even better) and a DTI ratio ideally below 36% (but not over 50%). A HELOC may let you borrow up to 90% of your home equity equity you have in your home. If you want a look at the loan and how it would look as you pay it down, put together some hypothetical numbers and plug them into a HELOC repayment calculator.
Just want to know how much the monthly payments would be on your hypothetical HELOC? Run some figures on a HELOC monthly payment calculator. You can play around with different interest rates and terms to find out how they might affect your payments, and 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 “draw” period of a HELOC, try out a HELOC interest-only calculator.
Recommended: HELOC Repayment Calculator
If you’re thinking about applying for a home equity loan in Springfield, it’s smart to build an understanding of key factors that are going to drive interest rates. Your credit score, DTI ratio, and equity level all play a role in the rate you’ll be trying to qualify for. Simply shopping around also goes a long way toward getting the best rate available. And if you decide that a home equity loan isn’t a fit, remember that HELOCs and cash-out refis have their own benefits.
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.
Popular reasons why people pursue home equity loans include wanting to pay for home improvements and consolidate high-interest debt. If you decide to apply for a home equity loan, think about whether the loan fits into your larger financial picture and use the funds responsibly.
Thinking of taking out a $50,000 home equity loan? The amount of your monthly payment may vary. It depends on the interest rate and the loan term. If you got a 7.00% interest rate on the loan and a term of 15 years, for example,your monthly payment would be about $449. A 9.00% interest rate loan over a 15-year term would require a payment of around $507 monthly. A loan calculator can help you figure out what monthly payments would be required — just plug in different variables.
A number of factors could stop you from securing a home equity loan. First, lenders typically want to see a minimum credit score, generally around 680; having a lower one may disqualify you. A high DTI ratio – usually over 50% – might also foil your loan. If you have less than 20% equity in your home, that could be a red flag for lenders, too. They will also look at how stable your home’s value is and how comprehensive your property insurance plan is. Qualifications vary from lender to lender, but these are common disqualifiers.
Home equity loans often come with fixed interest rates. That means they have predictable monthly payments, which makes budgeting easier. They also tend to have lower rates than unsecured personal loans, making them cost-effective for significant one-time expenses, like home improvements or debt consolidation. Be sure to balance the benefits with potential risks, including home foreclosure if you can’t make your 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.
SoFi Loan Products
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.
