Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners to borrow against their home’s equity for high-cost projects, such as home renovations, education, and debt consolidation.
• Home equity loan interest rates are influenced by the prime rate, the borrower’s creditworthiness, and overall market conditions.
• To qualify for the lowest rates, it’s important to build a strong credit score, manage debt-to-income ratio, obtain adequate property insurance, and maintain sufficient home equity.
• Home equity loans typically have fixed interest rates, ensuring consistent monthly payments throughout the loan tenure.
• Alternatives to home equity loans include HELOCs, HECMs, and cash-out refinances, each with its own features and eligibility criteria.
Welcome to our guide on Wisconsin home equity loan rates. We’re here to help you understand how to leverage the equity in your home, the interest rates you can expect, and tips on how to get the best deal. We’ll also discuss some alternatives to home equity loans that might be a good fit for your needs.
To begin, let’s look at what is a home equity loan.
Home equity loans can be a smart financial move: By using your home as collateral, homeowners secure lower interest rates than on personal loans. If you’re still paying off your first home loan, a home equity loan is considered a second mortgage. These loans come with fixed interest rates and flexible repayment terms, typically ranging from 5 to 30 years.
To qualify, homeowners need at least 20% equity in their property. If you’re approved, the funds can cover an array of expenses, from renovations to education, medical bills, and debt consolidation.
Recommended: Cash-Out Refinance vs Home Equity Line of Credit
Home equity loan interest rates are a product of multiple economic factors, with the prime rate playing a significant role. The prime rate is what banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates can also sway home equity loan rates. By understanding these influences, homeowners can better anticipate rate shifts and make well-informed decisions about the timing of your home equity options.
The interest rate you secure can have a significant impact on your ability to afford a loan over its full term. Over a standard 20-year home equity loan, for example, a 1% difference in the interest rate can mean a higher monthly payment. Even more significant, that seemingly small difference can add up to an extra $11,000 in interest paid over the life of the loan, as illustrated in the chart below.
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.00% | $627 | $75,559 |
| 7.50% | $604 | $70,007 |
| 7.00% | $581 | $64,554 |
The prime interest rate is a moving target, and its fluctuations are a crystal ball of sorts for predicting the future of home equity loan rates. By keeping a close eye on the prime rate, you can gain valuable insights into what the future holds for your borrowing options. This knowledge can empower you to make more informed financial decisions.
Since 2018, the prime rate has dipped to a low of 3.25% in 2020 and peaked at 8.50% in 2023. This fluctuation is a reflection of the ever-changing economic climate and the Federal Reserve’s continuous efforts to keep things steady. These tweaks have a ripple effect, influencing the rates of adjustable-rate mortgages, credit cards, corporate loans, and various home equity options.
| 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% |
The graphic below shows that the prime rate has not been above 10% since the 1980s.
Besides the prime rate, a variety of other factors help determine your home equity loan rate, such as your credit score, loan-to-value ratio, home value, home value stability, property location, and lender policies. Lenders carefully consider these elements when setting the interest rate and terms of a home equity loan, as they provide a comprehensive view of your financial standing, the value of your property as collateral, and the overall risk of the loan.
These same factors also influence the rates and terms of a HELOC (home equity line of credit), which is another way to get equity out of your home.
The better your credit score, the more favorable your interest rates. Lenders often look for a minimum of 680, but many prefer 700 or higher. Why? Because a higher score means you’re less likely to default, which makes you a more attractive candidate for a loan.
Lenders often use independent appraisals to help determine the value of a home and the amount of equity a homeowner has. This helps them set appropriate loan limits. The more equity you have, the more you may be able to borrow.
The LTV ratio is a critical factor in determining the maximum loan lenders will permit. In Wisconsin, most lenders cap your combined LTV (your mortgage balance plus loan amount divided by your home value) at around 85%.
Let’s say you currently owe $300,000 on your mortgage and you want to borrow $75,000 for a renovation project. Your home is appraised at $450,000:
$300,000 + $75,000 = $350,000
$375,000 / $450,000 = 83%
At 83% combined LTV, there is a good chance a lender will approve a home equity loan.
The ups and downs of home values impact the equity you’ve built in your home. When the housing market is on the upswing, lenders are often more willing to approve larger loans, as the increasing value of your property can act as a safety net. But when home values dip, lenders might tighten their belts, leading to more stringent criteria and potentially smaller loan amounts.
Living in an area with a high risk of natural disasters or other hazards can lead to higher interest rates. Lenders may charge more in interest to offset the risk of lending in these areas. High-risk areas can include places that are prone to natural disasters, such as hurricanes, floods, and wildfires.
When you’re looking at home equity options in Wisconsin, it’s important to consider lender policies. They can have a big impact on the interest rate you’re offered. To make sure you’re getting the best deal, compare interest rates, fees, and closing costs from several lenders. Do your homework, and you can get the most favorable terms for your home equity options in Wisconsin.
To qualify for the best home equity loan rates in Wisconsin, you’ll need to have a strong credit score, a low debt-to-income ratio, adequate property insurance, and a good amount of equity in your home. By making sure you meet these qualifications, you’ll be able to get the best loan terms for your needs and enjoy the financial flexibility and peace of mind that come with homeownership.
A robust credit score is your ticket to more attractive interest rates on home equity loans. On the flip side, a lower credit score might mean higher rates or even a rejection. That’s why it’s key to keep your credit score in tip-top shape by paying your bills on time, checking your credit report regularly, and not maxing out your credit cards.
Your DTI ratio is a crucial factor in determining your eligibility for a home equity loan. This ratio, which compares your gross monthly income to your monthly debt payments (auto loan, student loan, personal loan, etc), gives lenders a clear picture of your financial health. Most lenders require a DTI of 36% or less to approve a home equity loan. However, some lenders may offer home equity loans to borrowers with a DTI between 36% and 50%, but charge higher rates and fees.
It’s standard practice for home equity lenders in Wisconsin to require property insurance, especially in areas prone to flooding. These policies are designed to protect you and your lender from potential financial losses due to damage or destruction of your property. It’s a good idea to review your coverage before applying for a home equity loan or HELOC.
To qualify for a home equity loan in Wisconsin, you’ll need to have at least 20% equity in your home. The 20% equity requirement is in place to protect borrowers from taking on more debt than they can handle and to protect lenders from the risk of default. A home equity loan calculator can help you determine your equity level.
Home equity loans typically come with fixed interest rates, which means you can count on steady, predictable monthly payments for the life of the loan. While fixed rates offer peace of mind, they often start out higher than variable rates, which can be more affordable at the outset. This is something to consider if you’re looking for a home equity loan in Wisconsin and want to know exactly what your payments will be.
Use the helpful tools and calculators to find out how much you can borrow and what your payments will be, and to compare different loan options. Here, in addition to the home equity loan calculator, you’ll find a HELOC repayment calculator and a HELOC interest only calculator.
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 loan closing costs typically range from 2% to 5% of the loan amount. These include a variety of fees such as the appraisal, credit report, document preparation, origination, notary, title search, and insurance.
Loan origination fees may be around 0.5% to 1% of the loan amount, or a flat fee. Title insurance is another cost, typically 0.5% to 1% of the loan balance, with title search fees ranging from $100 to $250. Appraisal fees can be between $300 and $500, and credit report fees are usually $50 to $100. Make sure to factor these into your calculations when determining the cost of your home equity loan.
Good news: The interest you pay on a home equity loan can be tax-deductible if it’s used for home improvements. If you’re married and filing jointly, you can deduct interest on loans up to $750,000. Single filers can deduct interest on loans up to $375,000. Just remember, you’ll need to itemize your deductions to claim this benefit.
There are a few 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 unique features and requirements. Each option has its own pros and cons, so it’s important to consider your specific financial situation and needs.
A home equity line of credit (HELOC) can be another smart financial move. You can borrow up to a certain limit and pay interest only on the amount you use. During the draw period, you can pay down the principal balance, making more money available to borrow. One drawback: Variable interest rates can change, so your monthly payments may go up. Here’s a HELOC vs home equity loan comparison at a glance:
| 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 |
Recommended: What Is a Home Equity Line of Credit?
An HECM, a government-insured reverse mortgage, is an option for those 62 and older to receive payments from the lender based on their home’s value. The funds can be received in various ways: a lump sum, regular payments, or a line of credit. Unlike Wisconsin home equity options and HELOCs, HECMs don’t require monthly payments, only becoming due when you leave the home. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
A type of mortgage refinance, cash-out refinance is a new mortgage that pays off your old one and lets you pocket the difference. Most lenders will let you borrow up to 80-85% of your home’s equity. Wisconsin home equity options and HELOCs require at least 20% equity, while reverse mortgages have no equity requirement but do have an age stipulation.
In Wisconsin, home equity loans are a great way to leverage the equity in your home for a variety of financial needs. Understanding how home equity loans work and how to get the best interest rates are key to making a smart decision that’s right for your financial situation. Shopping around to compare rates, fees, and closing costs can also be enlightening and ensure you get the best available deal.
Unlock your home’s value with a home equity loan from SoFi.
With a $50,000 home equity loan, you have to consider the interest rate and loan term, as these will greatly affect how much you’ll pay each month. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month.
The monthly payment on a $100,000 HELOC will depend on the current market interest rate and how much of the line you have used. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month. To get a rough estimate of your monthly payment, you can use the calculator shown above.
When considering a home equity loan, it’s important to consider the current interest rate and the term of the loan, as they will affect your monthly payment. To give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment.
When you’re thinking about a $30,000 home equity loan, it’s important to consider how the interest rate and loan term will affect your monthly payment. But if you had a 7.00% interest rate and repaid the loan over 10 years, you’d pay about $348 per month.
There are a few things that can prevent you from getting a home equity loan, including having a poor credit history, not having enough equity in your home, having a high debt-to-income ratio, and not having enough insurance on your home. These factors can make it harder for you to get a home equity loan, so it’s important to consider them before you apply.
Home equity lines of credit, or HELOCs, are a great way to access the equity in your home. They offer flexibility in borrowing, lower interest rates than most credit cards, and the option to pay interest only on the money you actually borrow. These features make HELOCs a popular choice for homeowners looking for a cost-effective way to borrow.
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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.
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