Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Your credit score and debt-to-income (DTI) ratio usually influence the home equity loan rates you’re offered.
• What different lenders will offer you can vary, so it’s wise to shop around to find the best repayment term and interest rate on a home equity loan.
• With fixed interest rates, you’ll make the same payments every month, which can make budgeting easier.
• Specialized online calculators can help you figure out how much your monthly payments and overall interest would be for different home equity loans.
• If you want to leverage your home equity, you can also consider a HELOC or a cash-out refinance instead of a home equity loan.
Home equity loans can be a powerful financial resource for homeowners. What is a home equity loan? Simply put, it’s a way you can borrow money by tapping the equity you already have in your home. The cash can be used for major expenditures like home renovations, a child’s college education, or paying down high-interest debt. And the better the interest rate you get on your loan, the better it will be for your finances.
From watching the trends to prepping for your home equity loan application, you’ll find out everything you need to know about home equity loans and their interest rates here. This guide will explore Williamsville home equity loan rates, detailing how they’re affected by broad economic factors as well as your personal financial information. We’ll discuss lenders’ typical requirements for borrowers and the potential advantages and drawbacks of these loans. We’ll also take a look at the different types of home equity loans, including home equity lines of credit (HELOCs) and cash-out refinances.
A home equity loan is one way a homeowner can borrow money against the equity in their home. If you’re not sure how much equity you have in your house, it’s easy to calculate: It’s the market value of your home minus the balance of your existing mortgage.
For example, if your house is worth $250,000 and you still owe $200,000 on your mortgage, you have $50,000 in equity. In general, lenders will loan you up to 85% or sometimes 90% of your home’s equity. In this example, you might be able to borrow up to $45,000. You can use a home equity loan calculator to help you determine your home equity and maximum loan amount.
Since home equity loans are secured by your home, their interest rates tend to be lower than rates for unsecured personal loans. Home equity loans usually have a term between five and 30 years, and the rates are most commonly fixed, which keeps your payments predictable. If you’ve been wondering how to get equity out of your home, a home equity loan could be an answer.
Williamsville home equity loan interest rates, like rates nationally, are influenced by many different factors, some relating to the economic situation and some to your personal financial details.
For example, the Federal Reserve’s monetary policy, particularly changes to the federal funds rate, has a significant impact on the broader lending market. Lenders often set their base interest rates by adding a margin to the prime rate, which tends to follow the federal funds rate. If the prime rate increases, you’ll probably see rates for different types of home equity loans, including home equity loans, rise as well.
In addition, your credit score and debt-to-income (DTI) ratio influence the rate you’re offered. A higher credit score and a lower debt-to-income ratio will typically get you more favorable terms. Understanding these factors can help you make the best choice for your situation.
One of the most important elements in determining the overall affordability of a home equity loan is the interest rate. A seemingly small difference in rates can have a major effect on your finances. Say you’re thinking about a $100,000 home equity loan with a 15-year repayment term. At an 8.50% interest rate, your monthly payment would be approximately $986, with total interest over the loan’s life adding up to $77,253.
But if that rate were just one percentage point higher, at 9.50%, your monthly payment would increase to around $1,044, and the total interest you’d pay would rise to about $87,960. That’s more than $10,700 extra you’d pay over those 15 years if you get the higher rate.
The chart below shows more about how changes in your loan amount, interest rate, and term interact to result in different monthly payments.
| 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 |
Home equity loans usually have fixed interest rates, meaning that your payments are exactly the same every month during the duration of the loan. This predictability is a plus for budgeting and long-term financial planning.
However, occasionally, these loans can come with adjustable rates. Adjustable rates may start off at a relatively low rate, but after a set initial period, the loan’s rate can change with the market. The rate’s adjustments create the potential for higher payments down the road – and a sense of unpredictability.
As you weigh your options, think about your financial situation and how you’d handle potential rate adjustments as well as your tolerance for uncertainty.
Predicting interest rate movements with absolute certainty is impossible given the multitude of factors at play. However, by examining recent and historical patterns, we can glean some insights.
The prime rate is, as we’ve mentioned, guides home equity loan rates in Williamsville and across the nation, and it has seen its fair share of fluctuations in the past few years, shifting from a low of 3.25% in 2020 to a high of 8.50% in 2023.
Since 2018, the prime rate has seen its share of ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Take a look at the history of the prime rate to get a sense of how high or low it may go this year.
Source: TradingView.comSince 2018, the prime rate has seen its share of ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. Take a look at the history of the prime rate to get a sense of how high or low it may go this year.
| 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% |
Being aware of historical fluctuations and staying attuned to economic shifts can help you time your application as strategically as possible.
While you can’t control the prime rate, there is a lot you can do to secure the most favorable home equity loan rates in Williamsville. What you want to deliver to lenders, ideally, is a credit score of 700 or higher, a debt-to-income (DTI) ratio of no more than 50% (or better yet, 36% or less), a stable home value, and good home insurance.
Even if you haven’t decided yet on a HELOC vs. a home equity loan or even a cash-out refinance, the same strategies apply if you want to secure the most competitive interest rates and loan terms.
In general, if you want a home equity loan, you’ll need to keep at least 20% equity in your home. If you’re not sure how much equity you have, it’s easy to calculate. Simply subtract your mortgage balance from your current home value. For instance, if you owe $200,000 on your mortgage but your home is valued at $250,000, you’ve got $50,000 in equity.
Most lenders will loan you up to 85% or 90% of your available equity. In this example, that translates to a loan for as much as $45,000.
A home equity loan calculator can help you assess how much you may be able to borrow.
To help you get the most favorable home equity loan rates, you’ll want a credit score of 680 or higher, with many lenders favoring an even more robust 700+. The better your score, the more it speaks to your financial prudence and the more likely it is to potentially lead to more favorable loan terms.
You can work to elevate your credit standing by being diligent about making payments on time, keeping credit card balances low, and avoiding new debt. Regularly perusing your credit report for inaccuracies and disputing any mistakes you find can also work in your favor. By maintaining a solid credit score, you can put yourself on the fast track to qualifying for lower home equity loan rates and more appealing loan terms.
Your debt-to-income (DTI) ratio is a key factor when it comes to securing a home equity loan with favorable rates. Lenders typically look for a DTI ratio below 50%, but the sweet spot is even lower, at 36% or less. You can calculate your DTI ratio for yourself by dividing your total monthly debt payments by your gross monthly income.
If you need to improve your DTI ratio, focus on paying down your debts, increasing your income, or, if you can, both. A lower DTI shows lenders that you have managed debt well and can handle more. It can make you a more appealing borrower and potentially convince lenders to offer you better rates and terms on your home equity loan.
Property insurance is a necessity for home equity loans, especially in areas susceptible to natural calamities, like tornados, earthquakes, or floods. Lenders need to be certain that the property you’re using as collateral is safeguarded. Not only will it protect you in case of disaster, securing comprehensive property insurance may also help you snag more favorable home equity loan rates.
It’s a good idea to explore different insurance options to find the best rates and coverage, but be sure you’re including everything your potential lenders want to see covered.
Using online resources like these can empower you to make sound decisions about home equity loan rates and terms. A home equity loan calculator, for instance, can show you what your monthly payments would be based on the loan amount, interest rate, and term. By using online tools to weigh and compare various scenarios, you’re better equipped to pinpoint the best home equity loan rates and terms that align with your budget and financial situation.
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. Ain payments shown depend on the accuracy of the information provided.
When you get a home equity loan, you can expect the closing costs to run somewhere between 2% and 5% of the loan amount. The table below shows some typical closing costs.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 |
| 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 |
While some lenders offer no-closing-cost loans, they often come with higher rates.
Here’s a tip: The interest on your home equity loan might just be tax-deductible. For single filers, interest is deductible on the first $375,000 of loan debt. Married couples filing jointly can deduct the interest on up to $750,000 of debt. But remember that you can’t take the standard deduction if you want to claim this – you’ll need to itemize.
To get the most up-to-date information, talk to a qualified tax advisor, who can help you figure out what will make the most sense for your situation.
While a home equity loan can be a solid choice, there are other options to explore that also allow you to tap your home’s equity. Two of these are home equity lines of credit (HELOCs) and cash-out refinances, a kind of mortgage refinance.
What is a home equity line of credit? A HELOC is like a credit card, but it’s backed by your home equity. It offers a flexible way to borrow funds up to a set limit, with interest payments required only on the amount you use. In the initial “draw” period, you may only need to pay interest on what you withdraw; during the repayment period, you’ll pay back the principal and any additional interest. HELOCs do typically come with variable interest rates, which can be challenging to work into your budget.
Lenders typically want to see a credit score of 680 or higher (700 is even better) and a debt-to-income ratio below 50% (though 36% or less is the sweet spot). They generally allow you to borrow up to 90% of your home equity.
If you’re comfortable with the ebb and flow of variable rates, a HELOC could be a good choice. To see what your monthly payments for a HELOC would be, consider using a HELOC monthly payment calculator. And to learn how much interest you pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
A cash-out refinance could also be a strategic way to use your home equity to access cash. You replace your existing mortgage with a new that’s larger than what you owe, and take the difference as a lump sum.
If you’re comparing the benefits of a cash-out refinance vs. a home equity line of credit, consider the fact that requirements for borrowing tend to be different. It’s typically easier to qualify for a cash-out refi than for a home equity loan or a HELOC. Cash-out refinances usually require a minimum credit score of 620 and a DTI ratio of 43% or less. They can have either fixed or variable interest rates, with variable rates sometimes offering more equity access.
And remember: A cash-out refi means you have one single monthly payment, which can make it easier to budget.
When you’re contemplating a home equity loan in Williamsville, it’s essential to understand the factors that influence home equity loan rates. Building a robust credit score, managing your debt effectively, and ensuring you have adequate property insurance are all key steps to securing the most favorable rates. Alternatives like HELOCs and cash-out refinances offer different features and requirements, so it’s a good idea to compare them with home equity loans, too, to find the most suitable option for your financial goals.
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 versatile tools that can be used for a variety of purposes, from large purchases to home renovations, educational expenses, medical bills, and even debt consolidation. They provide a lump sum that you repay in fixed payments over a set term. Before you take out a home equity loan, be sure it aligns with your financial goals and that you understand the risks involved, such as potential foreclosure if you can’t make the payments.
Your monthly payment on a $50,000 home equity loan depends on the loan term and interest rate. For example, with a loan at a 7.00% interest rate over 15 years, the monthly payment will be about $449. At an 8.50% interest rate over 15 years, the payment will be around $492. You can use an online loan calculator to help you figure out what payments might result from different loan terms.
There are several reasons that you might not be approved for a home equity loan. For one, most lenders require a minimum credit score of 680 (700 or higher for the most competitive rates), so a low credit score could be a dealbreaker. A high debt-to-income ratio, typically more than 50%, could also be a problem. And you’ll need to have a healthy amount of home equity, usually at least 20%. If you can, it’s smart to spend a little time assessing your financial position, working on your credit score, and paying down your debts before applying.
Home equity loans can have a number of perks. You get a lump sum that you usually pay back at a fixed interest rate, which means you have a predictable monthly payment to make and can plan your budget effectively. Since your home secures the loan, you’ll generally get a lower interest rate than you might with an unsecured personal loan. And the interest may be tax-deductible.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
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.SOHL-Q225-296
