Compare home equity loan rates in New Jersey.

Introduction to Home Equity Loan Rates

If you’re wondering how to get equity out of your home in New Jersey, you’ve come to the right place. Our guide makes it easier to understand interest rates, shop for the best loan terms, and make the right borrowing decisions for your situation. We’ll cover what determines home equity loan rates in New Jersey, tips for getting the best available home equity loan rates, and how to qualify for a home equity loan.

But first, we’ll answer the obvious question, what is a home equity loan?

How Do Home Equity Loans Work?

A home equity loan is a second mortgage that uses your home as collateral. The funds are disbursed in a lump sum and repaid in equal monthly installments over a period of 5 to 30 years. These loans often come with lower interest rates than unsecured personal loans, and the rates are typically fixed, unlike some other home loans.

To qualify, you’ll generally need to have at least 20% equity in your home. In New Jersey, home equity rates can be particularly competitive, making them an attractive option for homeowners in the state. Home equity loans can be used for a variety of purposes, including home renovations, education, medical bills, and debt consolidation.

Reccommended: What Is a Home Equity Line of Credit?

The Origin of Home Equity Loan Interest Rates

The interest rates on home equity loans in New Jersey are influenced by a variety of economic factors, including the prime lending rate set by banks and the Federal Reserve’s monetary policies. By understanding these factors, you can better predict how interest rates might change and make more informed decisions about the best home equity loans in New Jersey.

How Interest Rates Impact Home Equity Loan Affordability

Interest rates can make or break the affordability of a home equity loan. For example, over a 20-year loan term, a 1% variance in interest rate could translate to a higher monthly payment and an extra $11,000 in interest over the loan’s lifetime. That’s no drop in the bucket.

It’s a weighty financial consideration, and one that underscores the importance of scrutinizing home equity rates in New Jersey before you commit. The table below shows how your monthly payment will change based on three factors: your loan amount, interest rate, and loan term.

New Jersey Home Equity Loan Rate Trends

New Jersey home equity loan rates are closely tied to the prime rate, which can fluctuate up and down. When the prime rate moves, it can have a big impact on the direction of home equity loan rates. That’s why it’s important to keep an eye on the prime rate if you’re thinking about taking out a home equity loan or home equity line of credit (HELOC).

Historical Prime Interest Rates

Since 2018, the prime rate has fluctuated significantly, with a low of 3.25% in 2020 and a high of 8.50% in 2023. These changes have had a big impact on the economy and financial markets, influencing interest rates, borrowing costs, and investment decisions. They have also affected the terms and conditions of home equity loans.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates in New Jersey

In New Jersey, a variety of factors can sway home equity loan interest rates, from your credit score to the loan-to-value ratio, and even the stability of your home’s value. Lender policies and property location also come into play. Each of these elements is one piece of the puzzle, and lenders carefully consider them all to establish the right interest rate for you.

Credit Score

Lenders see borrowers with higher credit scores (above 680) as less risky to lend to. In many cases, the lender will prefer a credit score of 700 or higher. That’s why it’s so important to keep your credit history in good shape. A higher credit score can help you qualify for better terms and conditions when you apply for a home equity loan.

Home Value

To make sure you aren’t borrowing more than your home is worth, lenders will order an independent appraisal. This will help determine the amount of equity in your home and set a borrowing limit. The appraisal process is a key part of the home equity loan approval process. It helps protect you and the lender from borrowing or lending too much.

Loan-to-Value (LTV) Ratio

Lenders use your loan-to-value (LTV) ratio to assess risk and determine your interest rate and loan terms. It’s calculated by dividing the sum of your mortgage balance plus your loan amount by the appraised value of the property. The maximum LTV for a home equity loan is typically 85%, which means you could potentially borrow up to 85% of your home’s equity.

Home Value Stability

The stability of home values directly impacts the amount of equity that homeowners can tap into. Rising home values may allow homeowners to secure larger loan amounts. Conversely, falling values increase the risk for lenders, potentially leading to tighter lending criteria or higher interest rates.

Property Location

If you’re in a region of the Garden State that’s no stranger to extreme weather or natural disasters — think floods or wildfires — lenders might quote you higher interest rates. It’s not personal; they’re just factoring in the added risk of lending in these areas.

Lender Policies

Lenders have a big say in the interest rate you’ll get for a home mortgage. By shopping around with different lenders, you can get a good idea of the interest rates, fees, and closing costs you might have to pay. This can help you make a more informed decision and find the best loan for you.

How to Qualify for the Lowest Rates

To get the best home equity loan rates in New Jersey, you’ll want to focus on a few key areas. First, work on your credit score by paying your bills on time and in full. Then, manage your debt-to-income ratio by paying down your debts. You’ll also want to get comprehensive insurance for your property to protect your investment. Finally, keep your home equity high by making extra payments on your mortgage if you can. Let’s look at this To Do list in detail:

Build a Strong Credit Score

Your credit score can make a big difference in the interest rate you’ll be offered for a home equity loan. It pays to work on your credit score by paying bills on time, checking your credit reports for errors on the reg, and paying down credit card debt. This is especially important when you’re looking at the current home equity rates in New Jersey.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio, which is the comparison of your monthly income to your monthly debt obligations, is a key metric that lenders consider when determining your eligibility for a loan. A DTI of less than 36% is ideal, but many lenders will approve you for a home equity loan in which your DTI is up to 50%. To improve your DTI, you’ll need to pay off as much debt as you can.

Obtain Adequate Property Insurance

Having the right property insurance is a must if you want to secure a home equity loan in New Jersey. This is especially true if you live in a flood-prone area. It can give you peace of mind and help you protect the valuable assets you’ve worked so hard to acquire.

Maintain Sufficient Home Equity

It’s recommended that homeowners keep at least 20% equity in their home if they’re thinking about getting a New Jersey home equity loan. That’s a good thing because it helps you avoid overextending yourself with debt. Plus, it’s a way to protect both you and the lender.

Fixed vs. Variable Interest Rates

Home equity loans in New Jersey typically offer a fixed interest rate. This means that you will have the same interest rate and monthly payment for the life of the loan. While the interest rate on a fixed rate loan may be slightly higher than the starting interest rate on a variable rate loan, you will have the peace of mind of knowing that your interest rate will never increase.

Tools & Calculators

Homeowners have access to a variety of tools and calculators that can help them determine their home equity loan payments. These tools can provide you with the information you need to make a decision about whether or not a home equity loan is right for you. Below you’ll also find a HELOC monthly payment calculator and a HELOC interest only calculator.

Closing Costs and Fees

When it comes to closing costs, you’re looking at a range of 2% to 5% of your loan amount. These typically cover expenses like appraisals, credit reports, document preparation, and title insurance. Origination fees can vary from 0.5% to 1% of your loan amount, and title insurance can cost 0.5% to 1% of your loan balance, with additional title search fees ranging from $100 to $250.

Tax Deductibility of Home Equity Loan Interest

Here’s a tip that could save you some cash: The interest on your home equity loan could be tax-deductible if you used it to buy, build, or improve your home. If you’re married and filing jointly, you could deduct interest on up to $750,000 in home equity loans. Single filers can deduct the interest on up to $375,000.

Alternatives to Home Equity Loans

There are different types of home equity loans and lines of credit for borrowing against your home’s equity. These include HELOCs, home equity conversion mortgages (HECMs), and cash-out refinances. Each of these options has its own features and eligibility requirements, so it’s important to understand how they work before you decide which one is right for you.

Home Equity Line of Credit (HELOC)

A HELOC works much like a credit card, allowing you to borrow up to a certain limit on an as-needed basis and pay interest only on the amount you borrow. But remember, the interest rates on HELOCs are variable and can rise, which could increase the cost of your borrowing. Our HELOC vs home equity loan chart below spells out the differences at a glance.

Home Equity Conversion Mortgage (HECM)

An HECM is a government-backed reverse mortgage that allows homeowners aged 62 and older to receive payments from the lender based on their home’s value. You can choose to receive the proceeds from an HECM as a lump sum, regular payments, or a line of credit. The beauty of an HECM is that you don’t have to make payments until you leave the home, which sets it apart from home equity loans and HELOCs.

Keep in mind that HECMs generally have higher closing costs and longer processing times than other options. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

This version of a mortgage refinance means you take out a new mortgage to pay off the old one and pocket the difference. Lenders usually allow you to borrow up to 85% of your home’s equity. A cash-out refinance only makes sense, however, if you can secure a lower interest rate than on your original mortgage.

Our Guide to Cash-Out Refinance vs Home Equity Line of Credit has more details.

The Takeaway

Understanding New Jersey home equity loan rates and the factors that influence them is important. By comparing lenders, using online tools and calculators, considering other financing options, and seeking advice from financial professionals, you can find the best loan for your needs and financial goals.

FAQ

What’s the monthly payment on a $50,000 home equity loan?

The monthly payment on a $50,000 home equity loan depends on two key factors: the interest rate and the loan term. 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. To get an idea of what your monthly payment might be, you can use a home equity loan calculator.

What is the monthly payment on a $100,000 HELOC?

The interest rate and the amount of the credit line you use have a big impact on your payment. 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.

What is the payment on a $25,000 home equity loan?

The monthly payment on a $25,000 home equity loan is determined by the interest rate and the loan term. To get an estimate, you can use a home equity loan calculator. But to give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment.

What would the payment be on a $30,000 home equity loan?

The monthly payment on a $30,000 home equity loan can vary depending on the interest rate and how long you have to pay it back. But if you had a 7.00% interest rate and repaid the loan over 10 years, you’d pay about $348 per month.

What could disqualify you from getting a home equity loan?

There are a few things that might prevent you from getting a home equity loan. These include not having enough equity in your home, having a poor credit history, a high debt-to-income ratio, or not having enough property insurance coverage. These factors can make it difficult to get a home equity loan, so it’s important to consider them before applying.

What are the benefits of a HELOC?

HELOCs are a popular financial tool for a number of reasons. They offer flexible borrowing options, lower interest rates than most credit cards, and the ability to only pay interest on the amount of money you’ve actually used. Just keep in mind that variable interest rates change with the markets, so your costs could go up unexpectedly.

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.

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.

SOHL-Q324-090

Compare home equity loan rates in West Virginia.

Introduction to Home Equity Loan Rates

Welcome to your comprehensive guide to home equity loan rates in West Virginia. Here, we’ll provide you with the information you need to secure the best available rates in the Mountain State. We’ll cover what is a home equity loan, the factors that affect your interest rate, and tips for finding the right lender for you. Armed with this information, you’ll be ready to make the best decision for your financial future.

How Do Home Equity Loans Work?

A home equity loan uses your home as collateral, which allows for lower interest rates than with unsecured loans. The interest rate is usually fixed, which is great if you like to know exactly what your payments will be each month.

Lenders determine your maximum loan amount based on the combined loan-to-value ratio (CLTV). You can estimate your CLTV easily: Add your current mortgage balance to your proposed home equity loan. Divide the total by your appraised home value. If the CLTV is below 85%, you’re in a good position to obtain your desired loan. A home equity loan calculator can help you do the math.

Where Do Home Equity Loan Rates in West Virginia Come From?

To qualify for a home equity loan in West Virginia, you’ll need to have at least 20% equity in your primary residence. Home equity loans can be used for a variety of expenses, including home improvements, education expenses, medical bills, and debt consolidation.

Recommended: What Is a Home Equity Line of Credit?

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you secure can have a significant impact on your ability to afford a loan over its term. A 1% difference in the interest rate can mean a higher monthly payment. More significantly, this seemingly small difference could result in paying tens of thousands in additional interest over the duration of the loan. The table below shows you how the monthly payment will change based on three factors: your loan amount, interest rate, and loan term.

Home Equity Loan Rate Trends

Once you understand how critically important your interest rate is, you’ll probably start wondering how to get the best rate. Having a basic understanding of the prime rate’s fluctuations is a first step, because it will give you a sense of what kind of movement in the rate that you might be able to expect.

Historical Prime Interest Rates

Since 2018, the U.S. prime rate has seen its fair share of ups and downs, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023. This prime rate is more than just a number — it’s a key player in the financial world.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

Your credit score, loan-to-value ratio, home value, property location, and lender policies all play a role in determining the rate you’ll be offered. Lenders consider these factors carefully to assess your financial situation, the property’s value and stability, and the risk they’re taking on by loaning you the money. The more favorable these factors are, the better your rate is likely to be.

Credit Score

Lenders look favorably on those who manage their finances wisely, and a good credit score is a strong indicator. If you have a credit score of 680 or higher, you’re in a good position to secure a home equity loan. In fact, many lenders prefer a credit score of 700 or higher. A high credit score shows lenders that you’re responsible with your finances and that you’re a good candidate for a loan.

Home Value

Lenders often use independent appraisals to get a full picture of a home’s market value. This helps them set appropriate loan limits. Appraisals are also key in determining how much equity you have in your home. The more equity you have, the more you may be able to borrow.

Loan-to-Value (LTV) Ratio

The LTV ratio is what you get when you divide the sum of your mortgage balance and your loan amount by the estimated value of your property. For home equity loans, most lenders in West Virginia cap the LTV at 85%. Let’s say you currently owe $600,000 on your mortgage and you want to borrow $60,000 for a renovation project. Your home is appraised at $800,000:

At 82.5% CLTV, there is a good chance a lender will approve a home equity loan.

Home Value Stability

The steadiness of your home’s worth is a big deal. When home values seem to be trending upward, lenders approve larger loan amounts. On the flip side, a drop in home values can make lenders a bit more cautious, which could mean stricter criteria for you.

Property Location

Exactly where in West Virginia your home is located can also affect your rate. If you live in a high-risk area, such as a place prone to extreme weather or natural disasters, you might see higher interest rates. Lenders may adjust rates to account for the increased risk of lending in these areas.

Lender Policies

When you’re looking for home equity loans, it’s essential to consider how lenders’ policies can affect the interest rates they offer. To make the best decision, shop around and compare interest rates, fees, and closing costs from a few different lenders. By doing your homework and comparing your options, you could find better terms and save money in the long run.

How to Qualify for the Lowest Rates

By prioritizing the establishment of an impeccable credit score, managing your debt-to-income ratio, securing robust property insurance coverage, and maintaining an ample amount of home equity, you will significantly enhance your eligibility for the most favorable West Virginia home equity loans rates. These strategic measures will position you for potential success in obtaining the financing you require to achieve your homeownership aspirations. Let’s take a look at each of these to-dos in more detail:

Build a Strong Credit Score

It’s no secret that a robust credit score can open doors to the best home equity loans in West Virginia. Lenders see higher scores as a sign of reliability, and that can translate to more attractive rates and terms for you. So make sure to keep an eye on your credit and take steps to improve it if needed.

Manage Debt-to-Income Ratio

When you’re ready to apply for a home equity loan, your debt-to-income (DTI) ratio is a key metric. It’s a financial snapshot that compares your monthly income to your monthly debt obligations. Most lenders look for a DTI ratio below 36% for home equity loans. This number tells them you can handle your current debts and take on the additional monthly payments a home equity loan requires.

Obtain Adequate Property Insurance

Most major lenders will require you to have property insurance in place before they approve a home equity loan. This is especially true if you live in an area that’s at high risk for flooding, hurricanes, or earthquakes. This insurance is designed to protect both you and the lender in the event of property damage or loss.

Maintain Sufficient Home Equity

If you’re thinking about how to get out equity of your home, you’ll need to have at least 20% equity in your home. If you have less than that, you probably won’t qualify for a home equity loan.

Fixed vs. Variable Interest Rates

Home equity loans typically come with fixed interest rates, which means you’ll know exactly how much your monthly payments will be over the life of the loan. While fixed rates offer stability, they can also mean higher initial rates than variable-interest loans, which often start with lower rates.

Tools & Calculators

Take full advantage of our online tools and calculators to help you estimate your home equity loan payments, compare interest rates, and understand how different repayment terms can impact your financial situation. This will help you make informed decisions and make your home equity loan experience a smooth and successful one. Below you’ll also find a HELOC monthly payment calculator as well as a HELOC interest only calculator.

Closing Costs and Fees

Closing costs for a home equity loan typically range from 2-5% of the loan amount. These may include fees for services such as appraisals, credit reports, document preparation, origination, notary, title search, and title insurance. Loan origination fees can be 0.5-1% of the loan amount or a flat fee. Title insurance typically ranges from 0.5-1% of the loan balance, with title search fees averaging $100-$250. Appraisals generally cost between $300-$500, and credit report costs can be around $50-$100. Document preparation and attorney fees can vary widely, from $500-$2,000. Be sure to compare offers from multiple lenders, as fees can vary.

Tax Deductibility of Home Equity Loan Interest

Here’s a tip: The interest you pay on a home equity loan used for home improvements may be tax deductible. Joint filers can deduct interest on loans up to $750,000, and single filers up to $375,000, provided you itemize your deductions. The same goes for interest on a home equity line of credit (HELOC).

Alternatives to Home Equity Loans

Beyond the classic home equity loan, there are different types of home equity loans and lines of credit open to you as a homeowner. You might consider a home equity lines of credit (HELOC), home equity conversion mortgage (HECM), or cash-out refinance. Each of these options has its own unique features and qualifying criteria, so weigh the pros and cons of each carefully before making a choice.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is like a credit card, but one that’s backed by your home. It allows you to borrow up to a certain limit, and you pay interest only on the amount you actually use. However, the interest rate on a HELOC is variable, meaning it can go up and down with the market. This could lead to increased costs for you if rates start to climb. For more on the topic, our guide to HELOCs vs Home Equity Loans could be helpful.

Home Equity Conversion Mortgage (HECM)

The HECM, a government-insured reverse mortgage, is tailor-made for those 62 and older. It allows you to receive payments from the lender based on your home’s value. You can opt for a lump sum, regular payments, or a line of credit. The beauty of the HECM is that you don’t need to make payments until you leave your home, unlike home equity loans or HELOCs. Keep in mind, though, that HECMs generally come with higher closing costs and longer processing times than other options.

Cash-Out Refinance

With a cash-out refinance, you take out a new mortgage that’s larger than your existing one. You can then take the difference in cash. Most lenders will let you borrow up to 85% of your home’s value in total. As with any mortgage refinance, it’s only advantageous if you can secure a lower interest rate than your current mortgage.

Recommended: Cash-Out Refinance vs Home Equity Line of Credit

The Takeaway

If you’re a homeowner in West Virginia, it’s important to understand home equity loan rates and the factors that influence them. By shopping around, improving your credit, and considering all your options, you can make an informed decision about how to use your home equity to meet your financial goals.

FAQ

What will your monthly payment be on a $50,000 home equity loan?

The monthly payment on a $50,000 home equity loan can vary depending on the interest rate and the loan term. At 8.50% interest repaid over 10 years, your monthly payment would be about $620. Over a 20 year term, your payment would be just $434 — but you’d pay a lot more in interest over time. To get an estimate of your monthly payment, use a home equity loan calculator.

What is the monthly payment on a $100,000 HELOC?

The beauty of a home equity line of credit (HELOC) is its flexibility. Your monthly payment can fluctuate based on the current interest rate and how much of the credit line you’ve used. Assuming you draw the full amount and make interest-only payments during the draw period, at 8.50% interest and a 20-year term, the payment would be $868.

What is the payment on a $25,000 home equity loan?

The monthly payment on a $25,000 home equity loan is determined by the interest rate and the loan term. For a loan with an 8.00% interest rate and 10-year term, the monthly payment would be $303. A loan calculator will show you a breakdown of your monthly payments, the total interest you’ll pay, and the total cost of the loan.

Wondering about a $30,000 home equity loan payment?

When it comes to a $30,000 home equity loan, the interest rate and loan term are the main factors that determine the payment amount. For example, a $30,000 loan at 8.00% repaid over 7 years gives you a monthly payment of $468. The same loan amount and interest rate repaid over 15 years lowers the monthly payment to $287 but increases the total interest paid. To get an accurate estimate of your payments, you can use a home equity loan calculator.

What could disqualify you from getting a home equity loan?

There are several factors that can make you ineligible for a home equity loan, including a poor credit history, not enough equity in your home, a high debt-to-income ratio, and insufficient insurance coverage on your property. A history of bankruptcies, foreclosures, or late payments can also disqualify you.

What are the benefits of a HELOC?

A home equity line of credit is a versatile financial tool that offers homeowners a range of benefits, including flexible borrowing options, reduced interest rates compared to credit cards, and the convenience of paying interest only on the withdrawn amount. These features make HELOCs an attractive choice for homeowners seeking to leverage their home’s equity and access funds for various purposes, such as home renovations, debt consolidation, or education expenses.

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.

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.

SOHL-Q424-108

Compare home equity loan rates in Virginia.

Introduction to Home Equity Loan Rates

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.

How Do Home Equity Loans 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 Source of Home Equity Loan Interest Rates

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.

How Interest Rates Impact Home Equity Loan Affordability

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.

Home Equity Loan Rate Trends

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.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

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.

Credit Score

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.

Home Value

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).

Loan-to-Value (LTV) Ratio

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.

Home Value Stability

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.

Property Location

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.

Lender Policies

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.

How to Qualify for the Lowest Rates

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.

Build a Strong Credit Score

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.

Manage Debt-to-Income Ratio

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.

Obtain Adequate Property Insurance

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.

Maintain Sufficient Home Equity

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.

Fixed vs. Variable Interest Rates

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.

Tools & Calculators

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.

Closing Costs and Fees

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.

Tax Deductibility of Home Equity Loan Interest

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.

Alternatives to Home Equity Loans

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.

Home Equity Line of Credit (HELOC)

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.

Home Equity Conversion Mortgage (HECM)

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.)

Cash-Out Refinance

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.

The Takeaway

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.

FAQ

What will the monthly payment be on a $50,000 home equity loan?

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.

What is the monthly payment on a $100,000 HELOC?

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.

What’s the monthly payment on a $25,000 home equity loan?

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).

What’s the monthly payment on a $30,000 home equity loan?

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.

What could disqualify you from getting a home equity loan?

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.

What are the benefits of a HELOC?

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.

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.

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.

SOHL-Q424-106

Compare home equity loan rates in Ohio.

Introduction to Home Equity Loan Rates

A home equity loan allows you to get equity out of your home, and because it uses your home as collateral, it will likely offer a lower interest rate than an unsecured personal loan. In this guide, we’ll cover all you need to know about home equity loan rates in Ohio. We’ll examine how rates are set and provide the lowdown on how you can qualify for the best available rate on a home equity loan.

But first, let’s make sure we cover what is a home equity loan so you can understand how it’s different from other types of loans.

How Do Home Equity Loans Work?

A home equity loan is a loan that uses your home as collateral, which typically results in a lower interest rate than most personal loans. The interest rate is usually fixed, which means your payments will be consistent from month to month.

To qualify for a home equity loan, most lenders will require you to have at least 20% equity in your primary residence. Home equity loans can be used for a variety of expenses including home renovations, education, medical bills, and debt consolidation.

Where Do Home Equity Loan Interest Rates Originate?

Home equity loan interest rates, like home loan rates, are a product of various economic factors, including the prime rate. This rate is what banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates also play a part in influencing home equity loan rates. Understanding rate fluctuations can help you make informed decisions about home equity loans.

How Interest Rates Impact Home Equity Loan Affordability

Your interest rate is a key player in the affordability of your loan. Over a 20-year term, even a 1% difference in interest rates can mean a significant difference in interest paid. For example, on a $60,000 home equity loan with a 10-year term, a 1% difference in the interest rate (from 7.00% to 8.00%) equals an extra $31 per month and an additional $3,758 in interest paid over the life of the loan.

Home Equity Loan Rate Trends

Watching for changes in the prime rate can give you a sense of when the time might be right to apply for a home equity loan. The chart below shows the average prime rate in the U.S. in recent years, from a modest 3.25% in 2020 to a high of 8.50% in 2023. You can also see how the rate has shifted across more than 50 years in the graph below.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

In Ohio, a variety of factors come into play when determining your home equity loan interest rate. Your credit score, loan-to-value ratio, the stability and location of your home, and the policies of your lender are all in the mix. Let’s look at each of these in more detail:

Credit Score

If you have a strong credit score of 680 or higher, you’re in a position to get a good home equity loan rate. Still, lenders may look for a score of 700 or higher to give you the best rate. They may also offer better terms, like a lower origination fee or more flexibility with loan terms, to borrowers with the sparkling score.

Home Value

Lenders rely on independent appraisals to assess home values and set borrowing limits. This valuation process determines the maximum loan amount that a lender is willing to approve for your property. While you’re waiting for an appraisal, you can use online tools to estimate your home’s market value.

Loan-to-Value (LTV) Ratio

The LTV ratio is a key factor in determining your loan terms and interest rate. Most lenders cap the LTV at 85%. Your combined LTV ratio is calculated by adding the loan amount you’re seeking to any remaining balance on your first mortgage, then dividing by the appraised value of the home. For example, let’s say you currently owe $400,000 on your mortgage and you want to borrow $75,000 for a renovation project. Your home is appraised at $800,000:

Home Value Stability

The stability of home values in your corner of Ohio is a big deal. Rising property values can make a lender comfortable giving you a larger loan. On the flip side, if area home values are dropping, lenders might be risk-averse, which could make it harder to qualify for a home equity loan or HELOC.

Property Location

If your property is in a high-risk area of Ohio — like a flood zone, or an area prone to tornadoes — your interest rate might be higher. That’s because lenders see these areas as riskier, and they might need to adjust their lending practices to account for potential losses.

Lender Policies

Lenders’ policies have a big impact on the interest rate you’ll pay for a home equity loan in Ohio. Get estimates from several lenders, so you can compare interest rates, fees, and closing costs.

How to Qualify for the Lowest Rates

To qualify for the best Ohio home equity loan rates, you should focus on a few key areas. Following the guidelines below can help you get the best terms for your needs.

Build a Strong Credit Score

You probably know that a higher credit score can land you better interest rates when you’re in the market for a home equity loan. This link between your credit score and the rates you’re offered highlights the importance of maintaining a solid credit history. In addition to paying your bills on time (of course), you’ll want to periodically check your credit report and correct any inaccuracies. And avoid using the maximum credit line on your existing credit accounts in the time leading up to your loan process.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a critical number that lenders look at when you apply for a home equity loan. This figure, which compares your monthly income to your monthly debt obligations, is an indicator of your financial health. Most lenders in Ohio require a DTI ratio below 36%, though some may allow up to 50%. Keep in mind that your total debt, including credit card balances, student loans, and other monthly payments, will be factored in. Add up your monthly debts and divide by your gross monthly income to reveal your DTI ratio.

Obtain Adequate Property Insurance

Adequate property insurance is a prerequisite for Ohio home equity loans, particularly in areas with a history of flooding or other natural disasters. The goal is to protect both you and the lender from the financial fallout of property damage or loss.

Maintain Sufficient Home Equity

In Ohio, as elsewhere, homeowners looking to secure a home equity loan must maintain at least 20% equity in their home’s value. This equity is an important qualifier in determining your eligibility for the loan.

Fixed vs. Variable Interest Rates

Fixed interest rates are just that — fixed. They don’t change over the life of the loan, which means you’ll have predictable, consistent monthly payments. While that’s a benefit, it can mean slightly higher initial rates than variable interest loans, which start with lower rates that could increase over time. A home equity line of credit (HELOC) tends to have a variable interest rate. More on that below.

Tools & Calculators

Using online tools and calculators to run the numbers on different home equity loan scenarios can help you determine your potential eligibility for a home equity loan, understand the maximum loan amount you may be able to borrow, and get a sense of what monthly payments could be. Here are three of our favorites:

Closing Costs and Fees

When it comes to closing costs, you’re typically looking at 2% to 5% of the loan amount. These costs can include an appraisal fee, credit report fee, document preparation, origination fee, notary fee, title search, and title insurance. It’s important to shop around and compare both fees and interest rates from multiple lenders when considering an Ohio home equity loan.

Tax Deductibility of Home Equity Loan Interest

Here’s the scoop on the tax benefits: If you’re using your home equity loan for significant home improvements, the interest is tax-deductible. Joint filers can deduct interest on the first $750,000 of a loan; for single filers the number is $375,000. To claim this benefit, you’ll need to itemize your deductions. It’s always a smart move to chat with a tax advisor to ensure you’re maximizing your benefits.

Alternatives to Home Equity Loans

In addition to a traditional home equity loan, you have different types of home equity loans or financing methods to consider. Each of these options has its own features and eligibility requirements.

Home Equity Line of Credit (HELOC)

We’ve mentioned HELOCs a few times so if you’re wondering what is a home equity line of credit, here are the basics: A HELOC is like a credit card in that it allows you to borrow up to a certain limit and only pay interest on the amount you actually use. However, it’s like a home equity loan because the collateral for the line of credit is your home.

Another factor in the HELOC vs home equity loan comparison: HELOCs have variable interest rates, which can mean increased costs if rates rise. When you’re looking for the best home equity loan or HELOC in Ohio, it’s important to consider the terms and conditions to make sure they fit your financial needs.

Home Equity Conversion Mortgage (HECM)

A HECM is a government-insured reverse mortgage, exclusively for those 62 and older, that allows you to receive payments from the lender based on your home’s value. You can opt for a lump sum, regular payments, or a line of credit.

The beauty of an HECM is that you don’t have to make payments until you leave your home, unlike traditional home mortgage loans and HELOCs. Just a heads up, though — HECMs usually come with higher closing costs and longer processing times. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

With this special type of mortgage refinance, you’ll take out a new mortgage that’s more than your old one, paying off your first loan and pocketing the difference to use as you wish. As you think about a cash-out refinance vs a home equity line of credit or home equity loan, the big thing to consider is that the refinance gets you a new interest rate and term. So you’ll want to run the numbers to make sure your new interest rate isn’t wildly more costly over the long haul.

The Takeaway

Understanding the factors that influence home equity loan rates can help you make the most of your borrowing options as an Ohio homeowner. Comparing rates from different lenders and maintaining a strong financial profile can help you secure the best rates you can qualify for.

FAQ

What’s the monthly payment on a $50,000 home equity loan?

Borrowing $50,000 at a 7.50% interest rate with a 10-year term would equal a monthly payment of $594. But the exact monthly payment on a $50,000 home equity loan can vary depending on the interest rate and your repayment schedule. To get a better estimate of what your monthly payment could be, consider using a home equity loan calculator.

What is the monthly payment on a $100,000 HELOC?

The monthly payment on a home equity line of credit (HELOC) of $100,000, will depend on how much of the credit line you have used. But if you draw the full $100,000 and repay the amount with interest over 20 years, the monthly payment at 7.00% would be $775.

What is the payment on a $25,000 home equity loan?

When considering a $25,000 home equity loan, the interest rate and loan term are the two most significant factors that will affect your payment amount. To get a better idea of what your payment will be, it’s a good idea to use a loan calculator that takes into account these factors and gives you a more accurate payment amount.

What would the payment be on a $30,000 home equity loan?

The monthly payment on a $30,000 home equity loan will differ according to the interest rate and loan term. Here are examples based on a 20-year term: At 8.00% interest the monthly payment would be $251 and the total interest paid would be $30,224. At 7.00% interest the monthly payment would be $233 and the total interest paid would be $25,822. At 6.00% interest the monthly payment would be $215 and the total interest paid would be $21,583.

What might disqualify you from getting a home equity loan?

There are a number of things that can stop you from getting a home equity loan. If you have a bad credit history, lack adequate equity in your home, have a high debt-to-income ratio, or don’t have enough insurance on your property, you might not be able to get a home equity loan.

What are the benefits of a HELOC?

A home equity line of credit (HELOC) offers a number of distinct advantages, including flexible borrowing options, lower interest rates when compared to traditional credit cards, and the convenience of only paying interest on the amount of credit drawn. HELOCs provide homeowners with a versatile financial tool that can be tailored to their specific needs and circumstances.

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.

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.

SOHL-Q424-095