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Compare home equity loan rates in Tennessee.
Key Points
• Home equity loans allow homeowners to borrow against the equity they’ve built up in their homes.
• Home equity loan interest rates are influenced by the borrower’s credit score and loan-to-value ratio, and by lender policies.
• Fixed interest rates can provide stability and predictability in monthly payments.
• Closing costs and fees associated with home equity loans can add 2% to 5% to the overall cost.
• Alternatives to home equity loans include HELOCs, HECMs, and cash-out refinancing.
Introduction to Home Equity Loan Rates
In this guide to Tennessee home equity loan rates, we’ll cover what a home equity loan is and how your interest rate affects the affordability of your loan. We’ll also provide tips on how to compare rates, understand rate trends, and qualify for the lowest home equity loan rate in your corner of Tennessee. By the end, you’ll feel more confident in your decision to make your home equity work for you.
How Do Home Equity Loans Work?
Home equity loans are like a second mortgage, secured by your home. They typically offer lower, fixed interest rates compared to unsecured financing (think personal loans).
Lenders determine the maximum loan amount based on your combined loan-to-value ratio (CLTV). You can estimate your CLTV easily: Add your current mortgage balance to your proposed home equity loan. Divide the total by your appraised home value. If the CLTV is below 85%, you’re in a good position to obtain your desired loan. A home equity loan calculator can help you do the math.
To qualify, you should have at least 20% equity in your primary residence. Once you’re approved, the funds can be used for a variety of expenses, such as home improvements, education, medical bills, or debt consolidation.
Where Do Home Equity Loan Interest Rates Come From?
Home equity loan interest rates are tied to a variety of economic indicators, starting with the prime rate. This is the rate that banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates can also have an impact on home equity loan rates.
By paying attention to news on interest rates and understanding the factors that influence rates, you can be better prepared to anticipate rate changes and make informed decisions about home equity loan in Tennessee.
How Interest Rates Impact Home Equity Loan Affordability
The interest rate you lock in can affect how comfortably you manage your home loan payments. You probably know that a one-percentage-point difference in the interest rate can translate to a higher monthly payment. But that one percentage point makes a much bigger difference in the total interest you pay over the life of the loan.
You can see below how a one- or two-percentage-point difference in interest rate affects the monthly payment and total interest paid on a $60,000 home equity loan that is repaid over 15 years.
• At 6.00% interest: Your monthly payment is $506; total interest paid is $31,137.
• At 7.00% interest: Your monthly payment is $539; total interest paid is $37,073.
• At 8.00% interest: Your monthly payment is $573; total interest paid is $43,210.
Now you see why it’s so important to shop around for the best home equity loan rates in Tennessee.
Home Equity Loan Rate Trends
We mentioned the prime rate above. The prime rate is a key benchmark in the world of interest rates, influencing what you pay on your mortgage, auto loans, and credit cards. The prime rate fluctuates over time, which in turn causes home equity loan rates to climb or fall. Following trends in the prime rate will give you an indication of what’s to come in home equity loan rates.
Historical Prime Interest Rates
Since 2018, the prime rate has fluctuated quite a bit, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023.
| Date | Prime Rate |
|---|---|
| 9/17/2026 | 7.00% |
| 12/11/2025 | 6.75% |
| 9/17/2025 | 7.25% |
| 12/20/2024 | 7.50% |
| 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 | 5.5% |
| 9/27/2018 | 5.25% |
Source: St. Louis Fed
Source: TradingView.com
Factors Influencing Home Equity Loan Rates
Other influences on interest rates have to do with the borrower’s financial profile and the Tennessee housing market. Your credit score, loan-to-value ratio, home value, home value stability, and property location all go into the lender’s calculation of your interest rate whether you’re shopping for a home equity loan or a HELOC.
Credit Score
If you’re the kind of person who’s diligent about making timely payments, you’re in for a treat. Lenders often favor those with a credit score of 680 or higher, but many are really looking for scores of 700 and above.
Home Value
In Tennessee, as in most states, lenders require an independent appraisal to determine a home’s value and set a loan limit. This appraisal is used to calculate the equity position of a homeowner and to determine the maximum loan amount that a lender will approve. The valuation process is a critical step in the loan process and ensures that a homeowner is not over-leveraged and that the lender is not over-exposed.
Loan-to-Value (LTV) Ratio
Most lenders will allow you to borrow up to 85% of your available equity, although it’s important to remember that the lower your percentage, the better your interest rate and loan terms will be. You can estimate your LTV by adding your mortgage balance to your hoped-for home equity loan amount and dividing the total by your appraised home value.
For example, if you have a home valued at $400,000, owe $250,000 on your mortgage, and are looking for a home equity loan of $50,000, your LTV is 75%: $250,000 + $50,000 / $400,000 = .75. That’s well within the acceptable range.
Home Value Stability
The stability of home values in your area of Tennessee is a big deal. It can significantly impact the amount of equity you can access and use. When home values are on the rise, lenders are more likely to approve larger loan amounts. That’s because the increasing value of the property helps offset some of the risk for the lender. But when home values are falling, lenders may get more cautious. They might tighten up their lending criteria and offer smaller loan amounts.
Property Location
Living in a part of Tennessee that’s considered high-risk can mean you’ll pay more for insurance. That’s because insurance companies see these areas as more likely to file claims due to natural disasters and extreme weather. These areas can include those prone to hurricanes, floods, earthquakes, and wildfires.
Lender Policies
Interest rates can vary a bit from lender to lender. Borrowers should compare interest rates, fees, and closing costs from a handful of lenders while shopping around for a home equity loan.
How to Qualify for the Lowest Rates
If you’re looking for the best home equity loan rates in Tennessee, you’ll want to make sure you have a good credit score, a low debt-to-income ratio, adequate property insurance, and a good amount of home equity. These factors will help you qualify for the most competitive loan terms. When you’re exploring how to get equity out of your home, your To Do list will typically look like this:
Build a Strong Credit Score
When it comes to your personal finances, a strong credit score can be a game changer. People with higher credit scores often qualify for lower interest rates, which can add up to significant savings over the life of the loan.
Manage Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is a critical number for lenders. It’s calculated by taking your monthly debt obligations (mortgage, car loan, student loans) and dividing them by your monthly gross income. For a home equity loan, you generally need a DTI below 36% — though some lenders will approve a DTI up to 50%.
Obtain Adequate Property Insurance
It’s standard practice for lenders to require you to have adequate property insurance, especially if you live in a flood-prone area. These insurance policies are designed to protect you and your lender from potential losses to your property in the event of an emergency.
Maintain Sufficient Home Equity
You need to have at least 20% equity in your home to get a home equity loan. This is a good thing — it means you’re not borrowing more than you can afford to pay back.
Fixed vs. Variable Interest Rates
Home equity loans in Tennessee often come with fixed interest rates. This means you can plan for the same monthly payment over the life of the loan. While fixed rates offer predictability, they can also start off higher than variable rates. Variable rates fluctuate over time, but they often start lower than fixed rates. A home equity loan can be a great option if you need a set amount of money for a specific purpose, like a home improvement project or consolidating debt.
Tools & Calculators
Online tools and calculators can help you estimate home equity loan payments, compare interest rates, and understand the impact of different loan repayment terms. These tools can provide valuable insights and help you make informed decisions regarding your home equity loan options. Below you’ll also find a HELOC monthly payment calculator as well as a HELOC interest only calculator.
Run the numbers on your home equity loan.
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Home Equity Loan Calculator
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment Calculator
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only Calculator
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 and Fees
When it comes to home equity loan closing costs, you’re typically looking at 2%-5% of the loan amount. These fees can include charges for an appraisal, credit report, document preparation, origination, notary, title search, and title insurance.
Origination fees can be around 0.5%-1% of the loan amount or a flat fee. Title insurance might run you 0.5%-1% of the loan balance, with title search fees typically ranging from $100 to $250. Appraisals can cost anywhere from $300 to $500, and credit report fees usually fall between $50 and $100. Document preparation and attorney fees can vary.
Tax Deductibility of Home Equity Loan Interest
The interest on your home equity loan is deductible if you’re using the funds for home improvements. For joint filers, you can deduct the interest on up to $750,000, and for single filers, it’s $375,000. To get this benefit, you’ll need to itemize your deductions. It’s a smart move to chat with a tax advisor to ensure you’re making the most of these potential tax savings.
Alternatives to Home Equity Loans
There are different types of home equity loans and lines of credit. Home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances all have their own special benefits and eligibility requirements. It’s important to consider your financial situation and goals before choosing the one that’s right for you.
Home Equity Line of Credit (HELOC)
What is a home equity line of credit? It works much like a credit card. You can borrow up to a certain limit and make monthly payments to pay down your balance. With a HELOC, you only pay interest on the amount you borrow, although you may be required to pay down a portion of the principal over time.
Recommended: HELOC vs Home Equity Loans
Home Equity Conversion Mortgage (HECM)
An HECM, a government-insured reverse mortgage, is a fantastic option for those 62 and older. It allows you to receive payments from the lender based on your home’s value. You can receive the funds as a lump sum, regular payments, or a line of credit. The best part? You don’t need to repay the loan until you leave the home. This is quite different from home equity loans and HELOCs, which require regular payments.
Cash-Out Refinance
A cash-out refinance, a type of mortgage refinance, is a bit like hitting the reset button on your mortgage. You take out a new loan, pay off the existing one, and pocket the difference. Lenders typically allow you to borrow up to 80% of your home’s value.
Recommended: Cash-Out Refinance vs Home Equity Line of Credit
The Takeaway
Understanding current home equity rates and the many factors that influence them can help Tennessee homeowners make more informed borrowing decisions. By comparing lenders, maintaining a good credit score, and managing debt, homeowners can increase their chances of getting the best rates available.
SoFi now offers home equity loans. Access up to 85%, or $750,000, 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.
FAQ
What’s the monthly payment on a $50,000 home equity loan?
When you’re considering a $50,000 home equity loan, you need to think about the interest rate and loan term, because they’ll impact how much you’ll pay each month. At 8.50% interest repaid over 10 years, your monthly payment would be about $620. Over a 20 year term, your payment would be just $434 — but you’d pay a lot more in interest over time. To get a good idea of what your monthly payments might be, use a home equity loan calculator.
What is the monthly payment on a $100,000 HELOC?
With a home equity line of credit (HELOC), your monthly payment varies based on the interest rate and how much of the credit line you’ve used. Assuming you draw the full amount and make interest-only payments during the draw period, at 8.50% interest and a 20-year term, the payment would be $868.
How about a $25,000 home equity loan?
When you’re considering a $25,000 home equity loan, it’s important to think about how the interest rate and loan term will impact your payment. For a loan with an 8.00% interest rate and 10-year term, the monthly payment would be $303. To get a better idea of what your monthly payments might look like, use a home equity loan calculator. This can help you plan your budget and decide if a home equity loan is the right choice for you.
How about a $30,000 home equity loan?
When you’re contemplating a $30,000 home equity loan, it’s important to consider how the interest rate and loan term will affect your monthly payments. For example, a $30,000 loan at 8.00% repaid over 7 years gives you a monthly payment of $468. The same loan amount and interest rate repaid over 15 years lowers the monthly payment to $287 but increases the total interest paid.
What could disqualify you from getting a home equity loan?
There are several key factors that could lead to disqualification for a home equity loan. These include having a poor credit history, insufficient home equity, a high debt-to-income ratio, and inadequate property insurance coverage.
What are the benefits of a HELOC?
HELOCs are a type of revolving credit, which means you have a lot of flexibility when it comes to borrowing and repaying. They typically have lower interest rates than credit cards, which can make them an attractive option for homeowners who want to complete home improvement projects, consolidate debt, or cover unexpected expenses.
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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.
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.All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
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More home equity resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare