Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• In Tampa, home equity loan rates are influenced by factors like the prime rate and the borrower’s credit score.
• To take out a home equity loan, you’ll need to have at least 20% equity in your home.
• Online calculators can help you assess and compare different loans quickly and easily.
• If you want a home equity loan, property insurance is a must, especially in areas that are prone to hurricanes or flooding.
• In addition to home equity loans, home equity lines of credit (HELOCs) and cash-out refinances also let you draw on your home equity to get a loan.
Welcome to our comprehensive guide to home equity loan rates in Tampa, Florida. We’re here to help you, as a homeowner, understand the various factors that can influence your loan rates and how to position yourself for the best possible terms. In this guide, we’ll discuss the factors that can influence the rates you’re offered, the significance of your credit score and debt-to-income (DTI) ratio, and the importance of property insurance.
We’ll also explore the distinctions among different types of home equity loans, including HELOCs and cash-out refinances, and provide you with tips on using financial tools and calculators to estimate your monthly payments and total interest. Our goal is to ensure that you can make the best-informed decision possible and find the financial solution that’s right for you.
First things first: What is a home equity loan? A home equity loan is a second mortgage. It lets you tap your home equity to borrow a lump sum, which you then repay, generally in fixed monthly installments over five to 30 years. Your home secures the loan, which means you may get a lower interest rate than you’d get with an unsecured personal loan.
Typically, lenders want you to have a minimum of 20% equity in your home to qualify. If you’ve been paying your mortgage for a while and now you’re wondering how to get equity out of your home, a home equity loan could potentially be a good fit for you.
The interest rate you secure can make a big difference in the affordability of a home equity loan over time. Even a seemingly small variation in the rate can have a significant impact on what you’ll ultimately pay over the life of your loan.
Let’s look at the chart below, which shows a $75,000 home equity loan with a 20-year repayment term. At an 8.00% interest rate, your monthly payment is $627, and your total interest over the life of the loan is $75,559. But if your rate is just one percentage point lower, at 7.00%, your monthly payment is $581 and your total interest drops to $64,554. That’s $11,005 in interest charges that you could keep with the lower rate.
| 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 typically come with fixed interest rates, but lenders may sometimes offer them with adjustable rates so it’s worth considering what would work better for you. Fixed interest rates are reliable. You pay the same amount every month. That predictability can help make budgeting more manageable.
HELOCs typically have adjustable rates. These may begin at a lower rate for a defined period and then adjust with the market as it changes. Once they start adjusting, the rates and your payments may rise. If you’re pondering what kind of rate is right for you, consider how flexible your budget is likely to be while you’re paying off the loan and also what your tolerance for unpredictability is.
Predicting interest rate movements is a bit of a guessing game, given how many factors are involved. But if you check recent history, you may be able to get a sense of what you can expect.
Let’s look at the prime rate, which banks use to set home equity loan rates. It’s been all over the place in recent years. In 2020, during the Covid-19 pandemic, it reached a low of 3.25%, but by July 2023, it had risen to 8.50%.
| 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% |
Staying in the know about how the prime rate and other factors are currently trending and timing your application to sync with favorable economic conditions could help you unlock more favorable rates.
To be offered the most favorable home equity loan rates, it’s essential to present a strong financial profile. This includes a robust credit score, a good debt-to-income ratio, and sufficient equity.
Let’s look at some strategies to strengthen your qualifications. Even if you haven’t decided yet on a HELOC vs. a home equity loan or cash-out refi, the tactics are much the same to boost your chances of getting the most competitive interest rates and loan terms.
To be eligible for a home equity loan, homeowners must maintain at least 20% equity in their property. Calculating your equity is simple: Just subtract your outstanding mortgage balance from your current home value. For example, if your mortgage balance is $400,000 and your home is valued at $550,000, your equity would be $150,000. Home equity loan lenders will typically let you borrow up to 85% of your equity.
Lenders usually want to see a credit score of at least 680 or higher for homeowners seeking home equity loans, with many asking for 700 or more. A good credit score is an indicator of financial responsibility, which is why it may influence lenders to offer you more favorable home equity loan rates.
To keep your credit score in good shape, pay your bills on time, maintain low credit card balances, and avoid new debt. Reviewing your credit report for errors and disputing them can also be beneficial. By maintaining a high credit score, you’re boosting your chances of securing a lower interest rate.
Your debt-to-income (DTI) ratio – how much you owe for various payments each month divided by how much money you have coming in – helps determine your loan eligibility. The DTI ratio usually required by lenders for a home equity loan is less than 50%, and ideally below 36%. A lower DTI ratio indicates that your debt is under control and suggests you’ll be able to manage monthly payments, which can convince lenders to offer you more competitive home equity loan rates.
The two most direct ways to improve your DTI ratio are paying down your existing debts and increasing your regular monthly income, whether it’s through developing a side hustle or getting a raise at work.
If you want a home equity loan, property insurance is a necessity, particularly in flood- and hurricane-prone areas. This insurance provides a safety net for both you and your lender. Make sure your insurance covers not just the structure you live in, but also your personal belongings.
By using financial tools and calculators, you can get an idea of how much you can borrow, among other essential pieces of information. Calculators are also useful when you want to compare different loan scenarios to see how they might affect your monthly payment and total interest.
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.
Home equity loans come with closing costs, and these typically range from 2% to 5% of the loan amount. The chart below shows some of the most common expenses and what they typically cost.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 (may also be billed on an hourly basis if an attorney is involved or be built into the loan origination fee) |
| 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 |
Here’s a potential bonus: The interest on your home equity loan might be tax-deductible if it’s used to improve your home. 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. But you will have to itemize if you want to claim this deduction. It’s a good idea (as it always is) to consult with a tax advisor to get the most recent information.
If you decide that a home equity loan isn’t the perfect fit for you, you have other options to consider that also allow you to draw on your home equity: home equity lines of credit (HELOCs) and cash-out refinances, a type of mortgage refinance. Depending on your financial situation, one of these options might work better for you. Let’s take a closer look at both.
What is a home equity line of credit? Think of it this way: Having a home equity line of credit (HELOC) is like having a credit card that’s secured by the equity you have in your home. You can borrow what you need, up to a certain limit, during the “draw” period (usually 10 years), often paying only interest on what you’ve taken out until the repayment period, when you’ll pay off the balance and any remaining interest. HELOCs let you borrow up to 90% of your home’s equity, and interest rates are variable, which means they can change over time.
To qualify for a HELOC, you’ll need a good credit score (at least 680, but 700 is preferred) and a debt-to-income ratio of 50% or less (36% or less is ideal). HELOCs are a good option if you need to borrow money over a longer period of time for home improvements or college expenses.
If you’re wondering how much the monthly payments for a HELOC would cost, you might consider using a HELOC monthly payment calculator calculator. And if you’d like to calculate how much interest you’d have to pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
With a cash-out refinance, your original mortgage is replaced with a new home loan that’s larger than the amount you still owe, and you get the difference as a lump sum. If you’re thinking about a cash-out vs. a home equity line of credit, one possible plus is the fact that requirements for borrowing tend to be different. Qualifying for a cash-out refi is typically easier than it is for a HELOC or home equity loan. For a cash-out refinance, lenders usually want to see a minimum credit score of 620 and a DTI ratio of 43% or less. These refis can have either fixed or variable interest rates, with variable rates sometimes offering more equity access.
When you’re ready to explore a home equity loan in Tampa, remember that a robust credit score, a balanced debt-to-income ratio, and the right property insurance can tip the scales in your favor. These are the building blocks of a solid financial profile that can open doors to favorable rates and terms. Whether you choose a home equity loan, a HELOC, or a cash-out refinance, getting the best interest terms that you can will go a long way toward helping you achieve your financial goals.
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Unlock your home’s value with a home equity loan from SoFi.
Home equity loans may be a good choice if you need a large sum of money, whether it’s for home improvements, a big purchase, or debt consolidation. If you’re remodeling your kitchen or helping your child pay for college, for instance, a home equity loan can provide the funds you need, typically at a lower interest rate than an unsecured personal loan. Just be sure you can afford the monthly payments since you’re using your home for collateral.
The monthly payment on a $50,000 home equity loan will depend on the loan term and interest rate of the loan. For instance, at a 7.00% interest over 15 years, the monthly payment will be about $449. At an 8.00% interest rate over 15 years, the payment will be about $478. A loan calculator can help you determine the payment that corresponds to your particular loan terms.
What the payment will be doesn’t just depend on the loan amount – it’s also influenced by the loan term and interest rate. If the interest rate is 8.00% and the term is 20 years, the monthly payment would be about $836. If the rate is 9.00% and the term is 15 years, the monthly payment is around $1,014. That’s why it’s important to get the best interest rate you can and a loan term that will ensure that the payments work with your budget.
Home equity loans can have a number of benefits for homeowners. You receive a lump sum of money, typically at a fixed interest rate that’s lower than one you’d get for an unsecured personal loan. Some or all of the interest you pay on these loans may be tax-deductible if used for home improvements. And, if you’re using a home equity loan to pay off higher-interest debt, you have the chance to consolidate and simplify your payments.
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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 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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