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By Nicholas Wong |
1_Web_AtWork |
Comments Off on Introducing financial well-being benefits through SoFi at Work.
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SOFI AT WORK DASHBOARD
Financial well-being benefits—all in one place.
Your employees now have access to a suite of financial well-being benefits through their SoFi at Work Dashboard through Paychex Flex® Perks. It’s all there—financial education tools and content, student debt resources, and valuable lending discounts.
Learn more
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Financial well-being tools at their fingertips.
The SoFi at Work Dashboard puts financial well-being in your employees’ hands so they can get help—no matter where they are.
Financial well-being tools at their fingertips.
The SoFi at Work Dashboard puts financial well-being in your employees’ hands so they can get help—no matter where they are.
Financial health assessment.
Employees can get a 360-degree view on their spending, saving, investing, borrowing, and protecting habits.
Financial tools and calculators.
Whether it’s financial advice1, planning for college, estate planning2, or life insurance3, we can help.
Educational content.
Boost financial literacy with thousands of financial education articles available through SoFi Learn.
Financial well-being webinars.
Info-packed student loan webinars and hubs are available for your employees.
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Valuable discounts can help them save money.
You can help your employees lower their student loan payments or consolidate debt with these SoFi at Work discounts.
By Liz Young Thomas |
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Comments Off on Liz Looks at: AI Spending
Spending Bender
Every earnings season, investors wait with bated breath to hear how much the big tech companies plan to spend on AI-related initiatives. Stock prices seem to react more to the outlook on that than the earnings data itself. Needless to say, AI spending continues to be the focus and that doesn’t appear to be changing anytime soon.
Analysts expect capital expenditures (CapEx) for the hyperscalers (Amazon, Alphabet, Meta, and Microsoft) to grow 53.5% in 2025 and 19.4% in 2026. Translating that into dollar terms, $333 billion of CapEx is expected this year from just these four companies.
Hyperscaler CapEx Consensus
In absolute terms, these are eye-popping numbers. Skeptics will tell you the companies have already overspent and it could all come crashing down. Enthusiasts will tell you the companies have to invest in order to innovate, and this is just the beginning.
Off the Rails?
In theory, both could be right. But in order to arrive at an opinion of where we stand today, it’s worth exploring how this spending era compares to prior spending eras, namely the internet supercycle in the 90s and the railroad spending era of the industrial revolution. Both eras changed the way we lived, traveled, and conducted business, and many expect AI to do the same.
To level the dollar amounts over time, we’re looking at spending as a percentage of GDP in the applicable periods. Despite how enormous today’s absolute numbers sound, when we compare percentages, AI spending is only slightly above that of the internet era and well below that of the railroad period, which is surprising.
Infrastructure CapEx as a % of GDP, by Era
Since the railroads were so long ago and arguably a very different type of innovation, the next section excludes that era and focuses on the comparison between the internet era and today.
Blowing Bubbles
There’s been a lot of talk over the last week about the air possibly seeping out of the AI balloon as some of the big tech momentum stalls out. Many are drawing comparisons to the late 90s when the Nasdaq was near all-time highs and the Federal Reserve started cutting rates on the heels of economic jitters. Some concern over a potential repeat is predicated on the high spending rates and high valuations of a small number of names.
To put it in context, the chart below shows annual spending data as a percent of GDP for the internet era versus AI spending of today, including projections of AI spending from 2025 onward. We can see that the proportion of spending on data centers is higher than the spending on telecom was in the late 90s (though not perhaps alarmingly so until much further out.) If the hyperscalers are in fact overspending, those projections could change materially.
Dot-Com Era and Now: CapEx as a % of GDP
At present, this doesn’t seem like something that’s out of hand or off the rails. Not to mention that the companies doing this spending are stronger than many of those in the late 90s if you measure by business maturity and cash positions. It is, however, something to heed as investors — Markets tend to overshoot on both the upside and the downside. It’s possible, therefore, that markets have gotten a bit ahead of themselves and need this breather.
Resizing the Pie Slices
As we know, markets are not the economy, and in the next few weeks investors will be hyper-focused on economic data and messages from the Fed. A large driver of growth in the U.S. is consumer spending, which has been a topic of debate since pesky inflation began sending prices higher. Many feared that the consumer would eventually pull back and create a drag on GDP, but GDP has held up quite well.
Interestingly, consumer spending has slowed, but the spending on AI has likely made up for the shortfall. Our economy has actually gotten less reliant on the consumer and more reliant on business investment over recent quarters.
2-Quarter Contribution to GDP
That begs the question: Is that good or bad? Right now, I think it’s actually been a good thing. We have always been heavily reliant on consumer spending to drive our economy forward, and we will remain that way. The possibility that other sectors of the economy could start to drive growth is a positive, in my opinion.
If this is in fact a bubble of sorts, and enthusiasm wanes, the risk is that CapEx spending could evaporate quickly. That’s the nature of things though, isn’t it? We depend on sources of growth and know that those sources could dry up if circumstances change.
The increased worry right now stems from the speed and magnitude of this spending increase, and the possibility that it went too far too fast. But even if markets have gotten ahead of themselves — and companies spend more slowly than projected — that doesn’t mean the whole era ends and the theme dies. It would just mean a reset in expectations and an adjustment to the timeline.
Those adjustments can be painful if you’re overexposed to the market reactions, but if you can keep your eye on the long-term and diversify in the near-to-medium term, the stops and starts feel less turbulent.
Want more insights from Liz? The Important Part: Investing With Liz Thomas, a podcast from SoFi, takes listeners through today’s top-of-mind themes in investing and breaks them down into digestible and actionable pieces.
SoFi can’t guarantee future financial performance, and past performance is no indication of future success. This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Thomas is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Form ADV 2A is available at www.sofi.com/legal/adv.
• The rates you’ll be offered for a home equity line of credit are influenced by your home equity, credit score, and debt-to-income ratio.
• HELOCs are used a bit like a credit card, but the interest you pay on a HELOC may be tax deductible.
• HELOCS have variable rates that can change with the market, which might impact your monthly payments and the total interest you pay.
• Online calculators will help you estimate payments.
• You can use a HELOC for a variety of reasons, such as home improvements, personal expenses, and consolidating debt.
Introduction to HELOC Rates
If you’re a homeowner looking to borrow some money, this article will guide you through the process of securing a good home equity line of credit (HELOC) rate in Williamsville, Missouri. This comprehensive guide is designed to help you, the homeowner, understand the factors that influence these rates and how to qualify for the best terms. You’ll learn about the benefits and risks of HELOCs, how to compare different lenders, and the tools available to estimate your costs. By the end, you’ll be better equipped to decide if a HELOC is the right financial tool for you and to navigate the application process.
What Exactly is a HELOC?
A HELOC is a revolving credit line that uses your home’s equity (the difference between your home value and your home loan balance) as collateral. To qualify, most lenders will require you to have at least 15% equity in your home. You can typically borrow up to 90% of your equity. Remember that when your home is used as collateral, a lender can foreclose if you fail to make payments on schedule. HELOCs have two main phases: a draw period and a repayment period:
The Draw Period
During the draw period (often 10 years), you can withdraw funds as needed. At this time, you’ll have to pay interest on what you borrow, but most lenders won’t require you to make payments on the principal — although you can do so if you want to utilize the full credit line again. A HELOC interest-only calculator can help you find out how much you owe in interest.
The Repayment Period
After the draw period concludes, the repayment period begins. It might be 10 or 20 years. Monthly payments will increase as you begin to pay down the principal as well as the interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. A HELOC monthly payment calculator is useful at this stage.
The Origin of HELOC Interest Rates
HELOC interest rates are tied to the prime rate, which is influenced by the Federal Reserve’s actions. Each lender adds a margin to the prime rate, which is why HELOC rates can differ. Lenders also consider individual factors such as credit score, debt-to-income (DTI) ratio, income, and the amount of equity in your home. Understanding these factors can help you anticipate rate fluctuations and make informed decisions about the best time to apply for a HELOC.
How Interest Rates Impact HELOC Affordability
The interest rate on your HELOC can make a big difference in how much you pay over the life of the loan. Even a small increase in the interest rate can increase your monthly payments and the amount of interest you will pay over the life of the loan. For example, let’s say you borrow $50,000 with a HELOC and have a 10-year repayment term. If your interest rate was 8.00%, your monthly payment would be $607 and total interest paid would be $22,797. But if you instead had a 7.50% rate, your monthly payment would be $581 and total interest $19,665. The lower rate saves you more than $3,000 in interest!
As you are thinking about how to get equity out of your home, the prime rate may give you a sense of where interest rates are headed. It’s also helpful to understand the history of the rate: It has gone from a low of 3.25% in 2020 to a high of 8.50% in 2023. This can help put current interest rates in Williamsville into perspective. You may not be able to wait for a rate as low as 2020’s rock-bottom one, but there are things any HELOC applicant can do to get the best available rate. We’ll dig into that below.
Date
U.S. 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
5.5%
9/27/2018
5.25%
Source: U.S. Federal Reserve
Variable vs. Fixed Interest Rates
Whatever interest rate you might initially capture for your HELOC, you likely won’t have it for the duration of the line of credit. HELOCs usually have variable (also called adjustable) interest rates, which rise or fall with the market. How often they can change and how high or low they can go will be spelled out in your HELOC agreement. Understanding this and reading the fine print on rate changes is important if you’re obtaining a HELOC.
Helpful Tools & Calculators
Before you apply for a HELOC, use our online tools to estimate your monthly payments and interest costs. It’s an easy way to see if a HELOC fits with your budget and financial goals.
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.
How to Qualify for a Competitive HELOC Rate
Meeting the requirements for a competitive HELOC rate is within your grasp if you can spend some time cultivating a strong financial profile before you file your application. Verify that you have at least 15% equity in your home by subtracting your mortgage balance from your home’s estimated market value, then dividing the result by your home value. Then, work on your credit score and DTI ratio:
Improve Your Credit Score
To ensure you’re in the best position to secure a favorable HELOC rate in Williamsville, aim for a credit score of 700 or higher. Making timely payments and reducing your credit card balances will help your number rise. Setting up automatic payments can help you avoid late payments. Also check your credit report regularly for any inaccuracies, and avoid closing old credit cards or opening new ones in the months leading up to your HELOC application.
Calculate Your Debt-to-Income (DTI) Ratio
Your DTI ratio is a simple equation: Divide your total monthly debt payments by your gross monthly income. Most HELOC lenders prefer a DTI ratio below 50%, but below 36% will get you the best rates. To spruce up your DTI number, reduce your debts, increase your income, or do both.
Current HELOC rates by state.
Compare current HELOC interest rates by state and find a HELOC rate that suits your financial goals.
Select a state to view current rates:
Application Process for a HELOC in Williamsville
Streamline your application for a HELOC in Williamsville by prequalifying online. This lets you see potential HELOC rates and get a better idea of the terms you might qualify for before you start the full application. When you’re ready to apply, follow these steps:
Step 1: Run the Numbers
Make sure your equity level is 15%, your credit score is at least 640 (and ideally 700), and your DTI ratio is below 50% (hopefully well below) using the instructions above.
Step 2: Compare Lenders
Take a look at the rates available to you in Williamsville. Carefully compare qualification requirements, credit minimums and maximums, any associated fees, and the length of both the draw and repayment periods. Keep an eye out for lenders that offer competitive rates and flexible terms. Reading customer reviews and thoroughly checking lender reputations can also help you make a more informed decision.
Step 3: Submit Your Application
Gather your proof of identification, income verification documents, and property insurance information. For income verification, you’ll need to provide your most recent pay stubs, W-2 forms, and complete tax returns from the previous year. If you’re self-employed, you may also need to provide a profit-and-loss statement and your tax returns from the past two years. Additionally, you’ll need to provide a homeowners insurance declaration page as part of the property documentation. Once you have everything you need, you can submit your application online, over the phone, or in person.
Step 4: Get an Appraisal
An appraisal is an objective, professional analysis that determines the value of your home. This in turn helps establish whether you can qualify for a HELOC and how much you might be able to borrow, in addition to influencing the rate you are offered. The typical cost for an appraisal is between $300 and $600. An accurate appraisal is key to unlocking the equity in your home.
Step 5: Prepare for Closing
Before you can access the funds from your HELOC, you will need to sign all of the necessary documents and pay any fees. Many lenders will make the funds available to you by the third business day after the closing. Before you sign, be sure you understand the terms of the HELOC and have a repayment strategy in place.
Closing Costs and Fees
The good news is that HELOC closing costs are generally more affordable than those associated with a new home purchase or a refinance. The most significant expense is usually the appraisal fee. There may also be a title search fee (typically $100 to $450), an application fee, loan origination fee, and administrative fees. Some lenders may also charge a maintenance fee of up to $250 annually, as well as transaction fees for each withdrawal. Keep in mind that while some lenders may offer to reduce or waive certain closing costs, this could mean a higher interest rate for you.
Tax Benefits and Considerations
Homeowners have the opportunity to deduct HELOC interest on their 2025 taxes, but only if the borrowed funds are specifically used for the purpose of significantly improving their primary residence. Consult with a qualified tax advisor to confirm your individual eligibility for any deduction related to the HELOC, and to see how the IRS might look at HELOC interest in years to come.
While HELOCs are a popular choice for tapping into your home’s equity, there are other options to consider, including a home equity loan. If there’s any reason you’re unsure about a HELOC, or you just want to have all your options on the table, consider this list of alternatives:
Home Equity Loan
With a home equity loan, funds come all at once and you begin paying them back, with interest, immediately. The repayment term might be from 10 to 30 years and the interest rate will be fixed, so monthly payments will be nicely predictable. Usually, you can tap into 85% of your home equity. Lenders look for a credit score of 680 or more, but a score of 700+ could bring better rates. A home equity loan calculator can show you what size loan you might qualify for.
Cash-Out Refinance
A cash-out mortgage refinance replaces your existing mortgage with a new, larger one; you take the difference in cash. This might be the right option for you if you can score an interest rate that is an improvement on your current one (remember to factor in closing costs). To qualify, you need a 620 credit score and a DTI ratio under 43%. When comparing a cash-out refinance vs. a home equity line of credit, note that a refinance will leave you with a single monthly payment.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a term of two to seven years. The key advantage here is that your home is not on the line should you face financial challenges. Many lenders look for a credit score of 610 or more for a personal loan. While they are relatively quick to secure, do note that these loans often come with higher interest rates than either a HELOC or a home equity loan.
The Takeaway
When you’re pondering a HELOC, it’s wise to consider the benefits and potential pitfalls. A HELOC does often have a lower interest rate than a credit card or personal loan, and unlike a home equity loan, it provides the convenience of borrowing as you go. But remember, your home will be on the line if you fall behind on payments, just as it would be with a mortgage or home equity loan. Always take a moment to check in with your financial health and goals before making a decision. And if you opt for a HELOC, seek out rates from multiple lenders before locking in your choice.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
Whether a HELOC is a good fit for you at this moment depends on your personal finances. A HELOC is one of the more affordable ways to borrow money, and if you have ongoing expenses that are somewhat unpredictable, it might be the best solution for you, provided you have a clear understanding of the costs of a HELOC during both the draw and repayment period, and a plan in place to repay what you borrow.
How hard is it to get a HELOC?
Gaining approval for a HELOC is within reach if you meet the lender’s criteria. Lender requirements vary, but the basic prerequisites are a credit score of at least 620, a debt-to-income ratio below 50%, and a home equity level of 15%. The best interest rates go to those with a credit score of at least 680 and a DTI ratio of 36%. The application process includes submitting financial records and arranging for a home appraisal.
Will a HELOC impact your credit score?
The mere act of opening a HELOC can cause a slight dip in your credit score due to the necessary hard credit inquiry by a prospective lender. But use your HELOC responsibly — make timely payments and keep balances in check — and you may actually see an improvement in your score. On the flip side, missing payments or maxing out your HELOC can be detrimental.
Will you need an appraisal for a HELOC?
An appraisal will be key when applying for a HELOC. It helps your lender establish the current market value of your home, which in turn determines the amount of equity you can tap into. Most lenders set your HELOC limit at up to 85% of your equity. The lender will provide you with information about the appraisal process.
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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.
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