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Compare home equity loan rates in Vermont.
Key Points
• Home equity loans provide homeowners with access to funds by leveraging the accumulated value of their homes.
• Home equity loan interest rates are influenced by factors such as credit score, loan-to-value ratio, and lender policies.
• Home equity loans offer fixed interest rates, providing stability and predictability in monthly payments.
• Closing costs and fees associated with home equity loans can vary and should be considered when budgeting.
• Home equity loan interest may be tax-deductible if used for specific purposes, such as significantly improving a home.
Introduction to Home Equity Loan Rates
A home equity loan is a way to take advantage of the equity you’ve built up in your home to fund other projects you might want to spend money on. In this article, we’ll take an in-depth look at Vermont home equity loan rates. By the time you’re done reading, you’ll have a solid understanding of how home equity loan rates work in Vermont and how to shop around for the best deal. We’ll cover the factors that influence your rate, what you need to qualify for the loan, and some alternatives to home equity loans in Vermont.
How Do Home Equity Loans Work?
A home equity loan uses your home as collateral — so taking out a home equity loan means having a second mortgage (assuming you are still paying off your first home loan). Home equity loans typically have lower interest rates than personal loans, which is one reason they are attractive. The interest rate is usually fixed, so monthly payments remain consistent.
To qualify for a home equity loan, most lenders require you to have at least 20% equity in your primary residence. Home equity loans can be used for a variety of expenses, such as home renovations, education costs, medical bills, and debt consolidation. If you’re looking for the best home equity loans in Vermont, it’s important to compare offers from different lenders to find the one that suits your needs.
It’s important not to confuse a home equity loan with a home equity line of credit (HELOC). We’ll dig into the differences below.
Recommended: HELOC Repayment Calculator
The Origin of Home Equity Loan Interest Rates
The interest rates on home equity loans start with Federal Reserve policy decisions, which in turn influence the prime rate — the rate that banks offer their most creditworthy clients. Your personal financial stats also play a role, but if you are keeping your eye on rate trends in the general market, you’ll have a sense of the kind of interest rate you might be offered on a home equity loan.
How Interest Rates Impact Home Equity Loan Affordability
When you’re looking at interest rates, think about how they’ll affect your monthly payments and the total cost of your loan. Even a small difference in interest rates can add up to big savings or costs over the life of a loan. Let’s say you borrow $75,000 and your home equity loan has a 20-year term. If your interest rate is 6.00%, the lifetime cost of interest on your loan is $53,958
At an interest rate of 7.00%, lifetime cost jumps to $64,554. That’s why it’s so important to find the best home equity loan rates in Vermont.
Home Equity Loan Rate Trends
The ebb and flow of the prime interest rate can be a crystal ball of sorts for those considering home equity loans in Vermont. By keeping an eye on these changes, you’re better equipped to pinpoint the right time to secure a home equity loan in Vermont. Take a look at how the average prime rate has shifted over time:
Historical Prime Interest Rates
| 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% |
Source: St. Louis Fed
Source: TradingView.com
Factors Influencing Home Equity Loan Rates
Watching general rates will only get you so far if you’re thinking about getting a home equity loan. There are several financial metrics that are specific to you that your lender will consider when evaluating you for a loan and assigning the interest rate you might be offered.
Credit Score
Your credit score is a big deal. It’s the number that tells lenders how responsible you are with your finances. The higher the number, the more attractive you are as a borrower. In Vermont and across the U.S., a credit score of 680 or above is generally the sweet spot for home equity loans, but if you can push that number to 700 or more, you’re in an even better position. This tells lenders that you’re a safe bet, and they’ll be more likely to offer you a loan with favorable terms.
Home Value
Lenders need to know the value of your home when you apply for a home equity loan, and most lenders will use an appraisal to determine the home’s value.
Loan-to-Value (LTV) Ratio
The appraised value of your home is important when it comes to calculating your combined loan-to-value (LTV) ratio, another key factor in determining your home equity loan eligibility. Combined LTV ratio is calculated by dividing the loan amount you’re seeking plus any remaining balance on your first mortgage by the appraised value of the home. The maximum combined LTV lenders typically allow for home equity loans is around 85%.
Home Value Stability
The stability of home values in your area may also impact the amount of your home equity loan and its interest rate. When home values are experiencing an upward trend, lenders may be more inclined to approve larger loan amounts, as the increasing value of the property mitigates some of the associated risk. The opposite is also true — if home values have ebbed, lenders may be more cautious.
Property Location
Living in an area with a high risk of natural disasters such as floods or wildfires can lead to higher interest rates because lenders are taking on extra risk.
Lender Policies
Lender policies can have a big impact on the interest rate you receive. To get the best deal, you should check out different lenders to compare interest rates, as well as fees and closing costs. This can help you make a more informed decision and potentially save money.
How to Qualify for the Lowest Rates
Demonstrating financial responsibility and stability to lenders is important. To qualify for the best home equity loan rates in Vermont, take these steps:
1. Build a Strong Credit Score
A higher credit score can get you better interest rates, as noted above. It can also lead to better terms and conditions, such as lower fees and more flexible repayment options. So make cultivating good credit a priority.
2. Manage Debt-to-Income Ratio
Here’s a key piece of the puzzle when applying for a home equity loan: your debt-to-income (DTI) ratio — that is, your monthly debts divided by your gross monthly income. This figure is a major factor in determining your loan eligibility. Lenders typically look for a DTI ratio between 36% and 50% for home equity loans. This range is a good indicator of your ability to take on the additional monthly payments that come with a home equity loan.
3. Obtain Adequate Property Insurance
When you own a home, having enough property insurance is a must. This is especially true if you live in an area that’s prone to flooding or other natural disasters. If you’re thinking about a Vermont home equity loan, make sure you have the right amount of insurance before submitting your application to a prospective lender.
4. Maintain Sufficient Home Equity
To be eligible for a home equity loan, you’ll need to keep at least 20% equity in your home. That equity is the key to unlocking the loan, so it’s essential to keep it in mind when you’re planning your financial moves. If you think your home has appreciated significantly since you purchased it, run the numbers to make sure you own 20% of your home’s value before you try to get equity out of your home.
Fixed vs. Variable Interest Rates
With a home equity loan, you’ll typically get a fixed interest rate. This means you’ll know what your monthly payments will be for the entire term of your loan. While this predictability is a plus, fixed rates can start out higher than variable rates. Variable rates, on the other hand, can be lower than fixed rates initially, but they can also increase over time, leading to higher monthly payments.
Tools & Calculators
Make use of a variety of online tools and calculators, such as a home equity loan calculator, that are designed to help you estimate home equity loan payments, compare interest rates, and determine affordability.
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
Home equity loans typically come with closing costs that range from 2% to 5% of the loan amount. Fees may be included for the appraisal, credit report, document preparation, origination, and title search, among other things. It’s a good idea to shop around and compare offers from different lenders, as fees can vary.
Tax Deductibility of Home Equity Loan Interest
Here’s a tip: Carefully document payments for any significant improvements you make on your home using your home equity loan. The interest on a home equity loan can be tax deductible if it’s used to “buy, build, or substantially improve” a home, according to the IRS. Couples filing joint tax returns can deduct interest paid on up to $750,000 of qualified home equity loans obtained after December 15, 2017, while single filers are permitted to deduct interest paid on loans of up to $375,000. To claim the deduction, you’ll need to itemize your deductions — so you may want to have professional help preparing your return.
Alternatives to Home Equity Loans
There are other ways to tap into your home’s equity, including a home equity line of credit (HELOC), a home equity conversion mortgage (HECM), and a cash-out refinance. Each of these options has its own unique features and requirements.
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is like a credit card with a lower interest rate. You open up a credit line with your home as collateral, but only pay interest on the money you actually borrow. When comparing HELOCs vs home equity loans, one consideration is that the interest rate on a HELOC is variable, so your interest charges could go up significantly if the interest rate increases. Here’s a rundown of how HELOCs and home equity loans 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; 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. |
Home Equity Conversion Mortgage (HECM)
Next up on the list of different types of home equity loans: An HECM is a government-backed reverse mortgage. It’s a good option available to homeowners aged 62 and older. An HECM enables you to receive payments from the lender based on your home’s value. The proceeds can be received as a lump sum, regular payments, or a line of credit. The beauty of it is, you don’t have to make payments until you leave your home, unlike Vermont home equity loans and HELOCs. Although HECMs typically have higher closing costs and longer processing times, they offer unique benefits worth considering. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
Cash-Out Refinance
Now, let’s talk about a cash-out refinance vs home equity line of credit. The cash-out refi, like any mortgage refinance, involves taking out a new mortgage. But in case of a cash-out refinance, the new mortgage is larger than your existing one. You’ll use the money you borrow to pay off the old loan, and you can pocket the remainder to use as you wish. Most lenders will let you borrow up to 85% of your home’s value, minus what you still owe on your current mortgage.
Recommended: HELOC Interest Only Calculator
The Takeaway
Understanding the ins and outs of Vermont home equity loan rates and what influences them is key to capitalizing on the equity you have in your home. By shopping around, keeping your credit score strong, and considering all the options for leveraging home equity, you can make the smartest loan choice and get the best rate and terms for you.
Unlock your home’s value with a home equity loan from SoFi.
FAQ
What would my monthly payment be on a $50,000 loan?
The monthly payment on a $50,000 home equity loan can vary significantly depending on the loan term and interest rate. A 10-year loan at 8.50% interest means a monthly payment of $620. At 7.50% interest you’re looking at a payment of $594.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 home equity line of credit (HELOC) can fluctuate based on the interest rate and how much of the credit line you’ve used. That’s why it’s helpful to bookmark a HELOC calculator. That said, if you have borrowed the entire $100,000 credit line and you are in a 10-year repayment period, you can expect to pay $1,240 per month if your annual percentage rate (APR) is 8.50%.
What is the payment on a $25,000 home equity loan?
When you’re mulling over a $25,000 home equity loan, the interest rate and loan term are the key players in calculating your monthly payment. For a precise estimate, a home equity loan calculator can be your best friend.
What would the payment be on a $30,000 home equity loan?
A $30,000 home equity loan with a 20-year term at a rate of 7.50% would cost you $242 per month. A different interest rate or loan term will change the monthly payment amount.
What could disqualify you from getting a home equity loan?
Having a history of bad credit, not having enough equity in your home, or carrying lots of other debts could all disqualify you from getting a home equity loan. Insufficient property insurance is another red flag for lenders.
What are the benefits of a HELOC?
A HELOC, or home equity line of credit, offers a number of advantages to homeowners looking for a flexible and cost-effective way to borrow money. These include the ability to borrow only the amount you need, lower interest rates than most credit cards, and the option to pay interest only on the part of the credit line you use.
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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.
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