Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners in Stockton to tap into their property’s value to borrow money.
• Rates are influenced by the prime rate, your credit score, and your debt-to-income (DTI) ratio.
• To qualify, you’ll need a minimum of 20% equity in your property.
• The fixed interest rates of home equity loans offer a consistent monthly payment experience.
• If you’re using the loan for significant home improvements, the interest may be tax-deductible.
Home equity loan rates are a key consideration when you’re thinking about how to get equity out of your home. We’ll help you understand what they are, how they can affect your finances, and how to find the best rate and loan type for your personal situation as a homeowner in Stockton, California.
First step? Make sure you understand what a home equity loan is and how it’s different from other methods of borrowing against your equity. By the time you’re through, you’ll be supremely prepared to determine if a home equity loan is the right financial move for you.First step? Make sure you understand what a home equity loan is and how it’s different from other methods of borrowing against your equity. By the time you’re through, you’ll be supremely prepared to determine if a home equity loan is the right financial move for you.
A home equity loan is a second mortgage — assuming you’re still paying off your first home loan. It uses your home as collateral for a lump-sum loan, which you begin to repay soon after you receive the funds. You’ll repay the loan in equal monthly installments over a term that typically ranges from five to 30 years. Because the loan is secured by your home, you can expect a lower interest rate than you would get with an unsecured loan.
To qualify, you generally need at least 20% equity in your home. A home equity loan calculator can help you determine how much you might be able to borrow based on your equity.
Recommended: HELOC vs. Home Equity Loan
Interest rates on different types of home equity loans are influenced by a variety of factors, both economic and personal. Federal Reserve policy has a big impact on the lending market because lenders typically base their rates on the prime rate, which follows the Fed. Your credit score and debt-to-income (DTI) ratio are also key factors. The amount of the loan and the repayment term will affect the rate. Lender competition and business models also play a role in the rates they offer.
It’s worth having some background in how interest rates are decided, because your interest rate will play a starring role in the affordability of your home equity loan. Even a fraction of a percentage point can lead to a significant difference in the amount you’ll pay in interest over the life of the loan. Consider this chart, which shows how loan amount, loan term, and interest rate weave together to dictate monthly payments. Of note: While longer loan terms usually mean lower monthly payments, they result in more interest paid 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 |
When you begin to think about borrowing money, you might find yourself more interested in the prime rate than ever before. Predicting interest rate movements is not an exact science, especially for amateurs. But having a sense of the history of the prime rate, as shown in this graphic and chart, can be helpful as it will educate you on what might be a “good” rate. Some borrowers will try to wait for a dip in rates, but it’s not always doable. When you need funds to renovate, pay for education expenses or consolidate debt, you can’t always wait for a super-low number.
| 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 qualify for the best home equity loan rates in Stockton, there are a few things you should look into before filing your first loan application. By paying attention to these factors, you can improve your chances of getting a home equity loan with a lower interest rate.
To qualify for a home equity loan, you need to have at least 20% equity in your home. Calculating your equity is straightforward: Just subtract your mortgage balance from your home’s current value. For instance, if your mortgage balance is $400,000 and your home is estimated to be worth $550,000, your equity is $150,000. Divide that equity number by the estimated value to arrive at a percentage of equity. Most lenders allow you to borrow up to 85% of your $150,000 in equity, which in this case would be $127,500.
To ensure you are offered the most attractive home equity loan rates, aim for a credit score of 700 or higher. Some lenders are okay with 680, but in general, the higher the score, the more it speaks to your financial finesse. Want to give your score some love? Focus on paying your bills on time, whittling down credit card balances, and resisting new debt. Oh, and don’t forget to give your credit report a once-over for any errors that need disputing.
Your DTI ratio is a key piece of the puzzle when it comes to qualifying for a home equity loan. Lenders typically look for a DTI ratio that’s below 50%, but ideally, they’d like to see it under 36%. This ratio is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI ratio suggests you’re better equipped to handle more debt, which could translate to more attractive home equity loan rates. To boost your DTI, think about chipping away at your existing debts, finding ways to increase your income, or doing both.
Property insurance is a must for most home equity loans, as it is for mortgages generally. It protects both you and the lender by covering potential damage to the property. Make sure you have enough coverage for the standard risks such as fire or theft, as well as any specific hazards in your area.
Online tools and calculators can help you understand your loan rates and terms, and plan for the future. These are a few of our favorites.
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, though you’ll want to get quotes from different lenders and look carefully at whether the lack of fees is reflected in a higher interest rate.
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.
While home equity loans are a popular choice, there are other two options to consider: a home equity line of credit (HELOC) and a cash-out refinance. HELOCs offer more flexibility by allowing you to draw funds as needed up to a set limit. A cash-out refinance replaces your existing mortgage with a new one. Let’s take a closer look:
A home equity loan gives you a lump sum in one payment. A HELOC, on the other hand, is more like a credit card. It gives you a credit limit, and you can borrow as much as you need (up to that limit) whenever you need it. You only pay interest on the amount you actually borrow, and during the loan’s initial draw period (often 10 years), you usually don’t have to repay the principal. (A HELOC interest-only calculator can help you see what you might owe depending on how much of the credit line you use.) After the draw period, a repayment period begins. You’ll repay what you owe plus interest. (This is when a HELOC repayment calculator is useful.)
HELOCs usually have variable interest rates. To qualify, you’ll typically need a credit score of 680 or higher (700 is better) and a DTI of 50% or less (36% is the ideal). HELOCs are a good choice if you’re not sure how much you’ll need to borrow. Many lenders let you borrow up to 90% of your home’s equity.
Here’s a quick look at how the two compare:
| 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 |
A cash-out mortgage refinance gives you a new, larger mortgage and a lump sum of cash based on your home equity. You’ll need at least a 620 credit score and a maximum 43% debt-to-income ratio for this option. Your loan will either be a fixed or adjustable-rate mortgage. An adjustable rate might give you a lower rate and more cash, but your rate could go up later.
As you think about a cash-out refinance vs. a home equity line of credit or a home equity loan, there are some considerations. A refi means a brand-new loan. You’ll want to make sure you aren’t sacrificing a sweet interest rate when you give up your old loan. Compare all the costs. For some people, having one payment with a refinance instead of two (an original mortgage plus a home equity loan) is a benefit. Others are fine managing two payments.
As you consider a home equity loan in Stockton, take a moment to assess your financial landscape. Make sure you have at least 20% equity and have cultivated a robust credit score. Do what you can to minimize your DTI ratio. These are key stepping stones to securing your most favorable home equity loan rate. Consider loan options from multiple lenders and remember to look at closing costs and fees as well as interest 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 are a versatile financial tool. The money you borrow with a home equity loan can be used for home improvements, educational expenses, medical bills, or debt consolidation. These loans provide a lump sum of money with fixed-rate interest, which can make budgeting for repayment easier. In some cases, the interest on a home equity loan may be tax deductible if the funds are used for home improvements.
The monthly payment on a $100,000 HELOC will depend on how much of your credit line you’ve used. During the draw period, which is often a decade, you’re only paying interest on the amount you’ve borrowed. For example, if you take out the full $100,000 at an interest rate of 5.50%, your monthly interest payment would be around $458. Once the draw period ends, you enter the repayment period, which is usually 20 years, and you’ll be paying back both the principal and interest. At that point, if the interest rate is still 5.50%, the monthly payment would be $688.
The monthly payment on a $25,000 home equity loan varies with the rate and term. For instance, at an 8.00% interest rate over a 15-year term, the monthly payment would be about $239. Extending the term to 20 years would lower the payment to $209. This makes it more affordable, but keep in mind that it would also increase the total interest paid over the life of the loan.
There are a few things that could keep you from securing a home equity loan. Lenders generally look for a minimum credit score of 680 and a debt-to-income (DTI) ratio under 50%. Falling short on either of these could mean you don’t qualify for the most competitive home equity loan rates, or don’t qualify at all. You’ll also need to have at least 20% equity in your home. And if you live in an area that’s prone to natural disasters, having insufficient property insurance could be a dealbreaker.
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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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