Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners to borrow against the equity in their homes for large expenses like home renovations, education, or debt consolidation.
• Home equity loan interest rates are influenced by the prime rate and prevailing economic conditions.
• Other factors influencing home equity loan rates include credit score, loan-to-value ratio, home value stability, lender policies, and property location.
• Qualifying for the lowest rates involves establishing a strong credit score, managing debt-to-income ratio, obtaining adequate property insurance, and maintaining sufficient home equity.
• Alternatives to home equity loans include home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances, each with distinct features and eligibility requirements.
A home loan likely helped you to purchase your home, and if you’ve been paying your mortgage for a while now, you may be wondering how to get equity out of your home. In this guide, you’ll find the most comprehensive information available on Virginia home equity loan rates. We’ll cover the factors that affect home equity loan rates. By the end of this guide, you’ll know how to compare lenders, use loan calculators and other tools, and understand the benefits and potential drawbacks of home equity loans.
Let’s start at the very beginning, with what is a home equity loan and how they work.
A home equity loan uses your home as collateral. If you are currently paying off your home mortgage, then a home equity loan would be a second mortgage. Because the loan is secured by your home, it typically offers a lower interest rate than a personal loan. And the interest rate is usually fixed, which can be helpful if you like a predictable monthly repayment structure.
To qualify for a home equity loan (or a home equity line of credit, or HELOC, which is also secured by your home), you will need to have at least 20% equity in your primary residence. Once you have the funds, you can use them for all sorts of things, like home renovations, education costs, medical bills, or debt consolidation.
The interest rates on home equity loans are a product of several economic factors, including the prime rate. This is the rate at which banks lend to their most creditworthy clients. Federal Reserve decisions on interest rates can affect the prime rate and thus have a ripple effect on home equity loans in Virginia. By familiarizing yourself with movements in the prime rate and the Fed’s activities, you can make better-informed decisions about the different types of home equity loans in your state.
The interest rate you obtain from your lender can have a major impact on the affordability of the loan over the long term. When considering a 20-year mortgage, a seemingly minor 1% difference in the interest rate can mean a substantially greater amount of interest paid. Have a look at this example, assuming you borrow $60,000 with a 20-year term:
• At 6.00% interest, monthly payments would be $430 and the total interest paid would be $43,166.
• At 7.00% interest monthly payments would be $465 and the total interest paid would be $51,643.
• At 8.00% interest monthly payments would be $502 and the total interest paid would be $60,447.
The prime rate is a good barometer for what you can expect for your home equity loan rate. As you can see from the chart below, since 2018, the prime rate has seen some significant ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. These fluctuations have a direct impact on home equity rates in Virginia.
| 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% |
In Virginia, several factors come into play when determining your home equity loan rates. Each of the factors below is carefully weighed to determine the level of risk associated with your loan application, which in turn affects the interest rate you’re offered.
Here’s a tip: Be the kind of person lenders love by keeping up with your payments. It’s a surefire way to better your chances of getting attractive interest rates. Most lenders in Virginia look for a credit score of 680 or higher when it comes to home equity loans, but many prefer to see 700 or above. The rates might fluctuate, but a solid credit score will always be your best friend.
You can expect a lender to require a home appraisal if you apply for a home equity loan, as your home’s market value will determine how much equity you have (again, most lenders will require you have 20% equity).
Your home value is also important for figuring out your loan-to-value (LTV) ratio, which helps determine how much you’ll be allowed to borrow. You can compute your personal number by adding the amount you wish to borrow to the amount you currently owe on your mortgage. Then divide that total by the appraised value of your home. Multiply the result by 100 and you’ll have what’s called a “combined LTV,” or CLTV. The maximum LTV most lenders will allow for a home equity loan is typically 85%. A home equity loan calculator can help you quickly see what your borrowing capacity might be.
The ebb and flow of home values in Virginia affects the equity you can leverage. When values are rising, lenders are more inclined to give the okay to larger loans, as the lower risk of default is tied to your home’s increased worth. When values dip, lenders are more cautious. Here’s where understanding the homebuying climate in Virginia — and especially in the area where you live — may come in handy.
If your property is in a high-risk area, such as one prone to flooding, you might be offered a higher interest rate. Lenders worry about the potential for property damage or loss of home value.
Each lender has its own policies, and the differences between them may influence the interest rates offered on home equity loans. That’s why it’s recommended that you shop around and compare interest rates, fees, and closing costs among multiple lenders.
To qualify for Virginia’s best home equity loan rates, you’ll want to build a strong credit score, manage your level of debt, get adequate property insurance, and maintain your home equity. Doing all this will put you in a better position to get the most favorable loan terms possible.
A carefully tended credit score is your passport to the best home equity loans in Virginia, potentially allowing you a better interest rate. Make your debts payments on time and periodically check your credit reports to ensure they are accurate. Also avoid maxing out every line of credit you have.
Your debt-to-income (DTI) ratio will be important when you apply for a home equity loan. This financial metric compares your monthly income to your monthly debt obligations and is a key factor in determining your loan eligibility. Lenders typically look for a DTI ratio below 36% for home equity loans, though some may allow up to 50%. A lower number is a signal that you can manage debt responsibly.
Home equity loans usually require borrowers to have sufficient property insurance. By ensuring your property is well-covered, you’re not only meeting the loan’s requirements but also potentially qualifying for more favorable terms. This, in turn, can bolster your financial standing as well as your peace of mind. The same goes for a HELOC — having enough insurance can protect the lender’s interests and may lead to better terms for you.
In Virginia, you’ll need 20% equity to qualify for a home equity loan. Once you meet this criterion, you’re free to leverage your home’s equity for a range of financial needs, from a kitchen overhaul to a college education.
Home equity loans in Virginia often come with fixed interest rates, which means you’ll have the same monthly payment for the life of the loan. While fixed rates offer predictability, they can also start out higher than variable rates, which have the potential to start lower. (HELOCs, on the other hand, usually have variable rates.) When you’re looking for the best home equity loan in Virginia, it’s important to consider these factors to find the right fit.
When you’re considering a home equity loan, it’s important to take a good look at your financial situation. Use the tools and calculators below to figure out what loan amount or line of credit you might be eligible for and what your monthly payments might be if you borrow.
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 a home equity loan typically fall between 2% to 5% of the loan amount, but as noted above, each lender has its own policies, and that extends to fees and closing costs. So when you are comparing offers from different lenders, don’t just look at the interest rate. Consider closing costs, too.
The interest on your home equity loan is tax-deductible, but only if you’re using it to significantly improve your home. If you’re filing jointly, you can claim interest costs on the first $750,000 of a loan (for single filers, the number is $375,000). Just be sure to itemize your deductions to snag this benefit (and save your receipts). A quick chat with a tax advisor can help you make the most of this perk.
As you mull over alternative financing options to home equity loans, it’s important to grasp the differences between HELOCs, HECMs, and cash-out refinances. Each of these options has its own unique features and specific eligibility requirements that should be carefully weighed to determine the best fit for your individual financial circumstances.
Let’s get more deeply into what is a home equity line of credit, as we have mentioned HELOCs a couple times already. A HELOC is a bit like a credit card, but the balance you’re borrowing against is your home’s equity. You can borrow up to a certain preapproved amount, and you’ll only pay interest on the amount of the credit line that you actually use. HELOCs typically have variable interest rates, which means your payments could go up if interest rates rise.
Here’s a quick look at HELOCs vs. home equity loans.
| 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. |
A government-insured reverse mortgage, the HECM is an option for those 62 and older to receive payments based on their home’s value. You can choose to receive the proceeds as a lump sum, regular payments, or a line of credit. The beauty of an HECM is that you don’t need to make payments until you leave your home, unlike home equity loans or HELOCs. While they may have higher closing costs and longer processing times, they are a solid option for many homeowners. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
This special type of mortgage refinance involves taking out a new mortgage to replace your existing one and pocketing the difference in cash. As you are considering a cash-out refinance vs. a home equity line of credit or a home equity loan, one big question is: Are interest rates lower now than they were when you got your first mortgage? If not, it might not be the best idea to refinance. Run the numbers in a home loan calculator to see what refinancing does to your payments.
Home equity loans allow homeowners to use their property’s value to meet a wide range of financial goals. But, there’s a lot to learn when it comes to current interest rates, the different types of loans, and the many factors that influence what interest rate you will be offered. Using online calculators and comparing offers from multiple lenders can help you get the loan that’s right for you.
Unlock your home’s value with a home equity loan from SoFi.
The monthly payment on a $50,000 home equity loan (or any home equity loan) depends on two primary factors: the interest rate and the loan term. If you borrowed $50,000 at 8.00% interest and repaid it over 20 years, your monthly payment would be $418. If you instead snagged a 6.50% interest rate, the payment would be $373.
When you’re looking at a $100,000 HELOC, keep in mind that your monthly payment can fluctuate based on the current interest rate and how much of your credit line you’ve actually used. For an estimate, it’s a good idea to use a HELOC calculator. This tool will take these variables into account and give you a better sense of what to expect.
The monthly payment on a $25,000 home equity loan could range from around $150 to $500 depending on your interest rate (6.00% to 8.00%) and loan term (5 years to 30 years).
At a 7.00% interest rate, a $30,000 home equity loan would cost $348 per month if you repaid the loan with interest over 10 years. If the interest rate or loan term changes, the payment amount will change, too.
There are a number of factors that could lead to disqualification, such as a poor credit history, insufficient equity in your home, a high debt-to-income ratio, or inadequate property insurance. These are just a few examples, and there are other factors that could potentially impact your eligibility.
HELOCs, or home equity lines of credit, offer several advantages, such as flexible borrowing and interest rates that are generally more favorable than those of credit cards. Moreover, you have the option to pay interest solely on the amount you’ve borrowed, making HELOCs a versatile financial tool for addressing a wide array of expenses and financial needs.
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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.
