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

Compare home equity loan rates in Minnesota.

Introduction to Home Equity Loan Rates

Welcome to our guide on home equity loan rates in Minnesota. We’re here to help you understand the factors that influence these rates and how to secure the best deal on a home equity loan. We’ll also cover how to get equity out of your home, and the different types of home equity loans and lines of credit. Armed with this knowledge, you’ll be ready to make a smart decision about home equity loans in the North Star State.

How Do Home Equity Loans Work?

What is a home equity loan? A home equity loan uses your home as collateral, which often translates to lower interest rates compared to unsecured personal loans. The interest rate is typically fixed, which means your payments will be consistent.

To qualify, homeowners should have at least 20% equity in their primary residence. Lenders determine the maximum loan amount based on the combined loan-to-value ratio (CLTV). You can estimate your CLTV easily:

•  Current mortgage balance + proposed home equity loan = X

•  X / appraised home value = CLTV

Here’s an example of how that looks for a home that appraised for $400,000. Let’s say the owner owes $250,000 on the existing mortgage and wants to borrow $75,000 with a home equity loan:

•  $250,000 + $75,000 = $325,000

•  $325,000 / $400,000 = 81%

With a CLTV of 81%, this owner is in a good position to obtain the desired $75,000 loan. The funds from home equity loans can be used for a variety of expenses, such as renovations, education, medical bills and debt consolidation.

Where Do Home Equity Loan Interest Rates in Minnesota Originate?

Home equity loan interest rates are not arbitrary. They’re influenced by a variety of economic factors, including the prime rate. The prime rate is the interest rate that banks charge their most creditworthy customers. Federal Reserve policy decisions regarding interest rates can also influence home equity loan rates. Understanding the factors that influence home equity rates can enable borrowers in Minnesota to anticipate rate fluctuations and make informed decisions about home equity loans.

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 the long term. When considering a 20-year home loan, a seemingly small 1% difference in the interest rate can translate to substantially higher costs: an additional $11,000 in interest, as illustrated in the chart below.

Home Equity Loan Rate Trends

The prime interest rate is a key indicator of the direction home equity loan rates are likely to take. By keeping an eye on the prime rate and how it moves, you can get a better understanding of what’s happening in the lending market and how the changes might affect you. This can help you make smarter decisions about when to apply for a home equity loan and what kind of terms to look for.

Historical Prime Interest Rates

Since 2018, the prime rate has fluctuated significantly. It hit a low of 3.25% in 2020 and a high of 8.50% in 2023. These fluctuations have a notable impact on a variety of financial products, including home equity loans in Minnesota.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

A variety of factors can affect your home equity loan rate, including your credit score, home value, home value stability, loan-to-value ratio, property location, and lender policies. Lenders analyze these metrics to determine the level of risk associated with each loan application, and that risk will directly affect the rates you’re offered.

Credit Score

If you have a history of making your payments on time and a good credit score, you might be able to score a lower interest rate on a home equity loan. Most lenders will want to see a credit score of 680 or higher, and many will prefer a score of 700 or above.

Home Value

Lenders often use independent appraisals to help them figure out a home’s market value, which in turn helps them set appropriate borrowing limits. The appraisal is also used to determine a homeowner’s equity position, which is the amount of the home’s value that the homeowner actually owns. The more equity you have, the more you can borrow.

Loan-to-Value (LTV) Ratio

As mentioned above, the loan-to-value (LTV) ratio is a key number that lenders use when you apply for a home equity loan. It’s calculated by dividing the loan amount by the appraised value of the property. Most lenders will let you borrow up to 85% of your home’s value. The LTV ratio helps lenders set your interest rate and loan terms. If you’re not sure how much you might be allowed to borrow, you can run the numbers with a home equity loan calculator.

Home Value Stability

The stability of home values can significantly impact the amount of equity homeowners can access and utilize. When home values experience an upward trend, lenders may be more inclined to approve larger loan amounts, as the increasing value of the property mitigates some of the associated risk. Conversely, if home values decline, the lender’s risk exposure increases, potentially leading to stricter lending criteria and lower loan amounts.

Property Location

If your property is in an area with a higher risk of natural disasters, you might have to pay a higher interest rate. That’s because things like severe storms, floods, and wildfires can cause a lot of damage and uncertainty, for homeowners and lenders alike.

Lender Policies

When you’re looking into home equity loans in Minnesota, don’t forget to check out the policies of the lenders you’re considering. They can have a big impact on the interest rates you’re offered. To make sure you’re getting the best deal, shop around and compare interest rates, fees, and closing costs from a few different lenders. It takes time, but it’s worth it to know you’re getting the most favorable terms.

How to Qualify for the Lowest Rates

To get the best home equity loan rates in Minnesota, you’ll need to have a strong credit score, a good debt-to-income ratio, adequate property insurance, and a good amount of equity in your home. If you can follow these guidelines, you should be able to secure a competitive home equity loan rate.

Build a Strong Credit Score

A robust credit score can open doors to more attractive interest rates on home equity loans. Typically, the higher your credit score, the better your chances of securing a lower rate. Lenders see a high credit score as a sign of reliability, which makes you a more appealing candidate. This can translate to significant savings over the loan’s lifetime.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a key metric in determining your eligibility for a home equity loan. This ratio compares your monthly income to your monthly debt obligations, which gives the lender a better understanding of your financial situation. Lenders typically want to see a DTI ratio below 36% — though some lenders will go as high as 50% — when considering you for a home equity loan. If you want to increase your chances of getting approved, focus on paying down your existing debt.

Obtain Adequate Property Insurance

When it comes to homeownership, having the right property insurance is a must, especially if you’re planning on taking out a home equity loan. This is especially important in areas where flooding is a concern. Having the right insurance can help protect your home and your finances, giving you peace of mind and helping you stay on track with your financial goals.

Maintain Sufficient Home Equity

In Minnesota, it’s recommended that homeowners maintain at least 20% equity in their home to qualify for a home equity loan. 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.

Fixed vs. Variable Interest Rates

Home equity loans in Minnesota typically come with fixed interest rates, which means you’ll know what your monthly payments will be for the life of the loan. While fixed rates offer predictability, they can also start off higher than variable rates, which may be lower at the outset.

Tools & Calculators

Our comprehensive tools and calculators help you determine your eligibility for a home equity loan and estimate your potential monthly payments. They’re designed to help you make well-informed decisions about your financial future and reach your financial goals. Here, in addition to the home equity loan calculator, you’ll find a HELOC repayment calculator and a HELOC interest only calculator.

Closing Costs and Fees

The closing costs for home equity loans typically range from 2% to 5% of the loan amount. These may include appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees.

Origination fees can be anywhere from 0.5% to 1% of the loan amount. Title insurance can cost 0.5%-1% of the loan balance. Since fees can vary so much from lender to lender, it’s important to compare them when looking for a Minnesota home equity loan.

Tax Deductibility of Home Equity Loan Interest

You may have heard about the tax benefits of a home equity loan. If you’re using the funds to improve your home, the interest you pay could be tax-deductible. For joint filers, you can deduct the interest on up to $750,000, and for single filers, it’s $375,000. To claim this benefit, you’ll need to itemize your deductions. It’s always a good idea to consult with a tax advisor to maximize your tax benefits.

Alternatives to Home Equity Loans

In Minnesota, homeowners have access to a variety of home equity and mortgage refinance products. Home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances are just a few. Each of these options comes with its own set of unique characteristics and eligibility criteria.

Home Equity Line of Credit (HELOC)

Now, let’s talk about the home equity line of credit, or HELOC. It’s like having a credit card that’s backed by your home, which translates to lower interest rates. With a HELOC, you can borrow up to a certain limit and you only pay interest on what you actually use. The interest rates on HELOCs are variable, which means they can change with the market. This could lead to increased costs if the rates go up, and you might see your payments increase during economic shifts.

The difference between HELOCs vs home equity loans can be hard to remember, so here’s an at-a-glance comparison:

Home Equity Conversion Mortgage (HECM)

If you’re 62 or older and want money to supplement your income or pay for health care expenses ,you may consider an HECM. It allows you to convert a portion of your home equity into cash. The loan becomes due, with interest, when you move, sell your home, or pass away.

Cash-Out Refinance

A cash-out refinance is a new mortgage that pays off your old one and lets you borrow extra cash. Lenders usually cap the amount you can borrow at 85% of your home’s equity. Unlike a home equity loan or HELOC, a cash-out refinance leaves you with only one monthly payment, not two.

Recommended: Cash Refinance vs Home Equity Line of Credit

The Takeaway

Understanding Minnesota home equity loan rates and the factors that influence them can help you make more informed financial decisions. By comparing rates from multiple lenders, keeping an eye on your credit score, and exploring other financing options, you can find the best home equity loan for your needs and financial goals.

FAQ

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

The interest rate and loan term will determine your monthly payment. 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.

What would a $100,000 HELOC look like in monthly payments?

The monthly payment on a $100,000 HELOC is influenced not only by the interest rate but also by the amount of the HELOC that is actually drawn. 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 better understanding of your potential monthly payments, consider using a HELOC calculator.

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

The two most important factors that will determine your monthly payment are the interest rate and the length of the loan. 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.

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

Interest rates and repayment terms play a big role in what you’ll owe each month, so a calculator tool can be an invaluable guide. 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 prevent you from securing a home equity loan?

There are a few things that could disqualify you from getting a home equity loan. A low credit score, not enough equity in your home, too much debt compared to your income, and not having enough insurance to protect your home are a few of the most common reasons.

What are the benefits of a HELOC?

A HELOC is a flexible borrowing option, with lower interest rates compared to credit cards, and you pay interest solely on the borrowed amount. Plus, the potential tax-deductibility of the interest paid on HELOCs adds to their appeal.

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-Q424-083

Compare home equity loan rates in Tennessee.

Introduction to Home Equity Loan Rates

In this guide to Tennessee home equity loan rates, we’ll cover what a home equity loan is and how your interest rate affects the affordability of your loan. We’ll also provide tips on how to compare rates, understand rate trends, and qualify for the lowest home equity loan rate in your corner of Tennessee. By the end, you’ll feel more confident in your decision to make your home equity work for you.

How Do Home Equity Loans Work?

Home equity loans are like a second mortgage, secured by your home. They typically offer lower, fixed interest rates compared to unsecured financing (think personal loans).

Lenders determine the maximum loan amount based on your 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.

To qualify, you should have at least 20% equity in your primary residence. Once you’re approved, the funds can be used for a variety of expenses, such as home improvements, education, medical bills, or debt consolidation.

Where Do Home Equity Loan Interest Rates Come From?

Home equity loan interest rates are tied to a variety of economic indicators, starting with the prime rate. This is the rate that banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates can also have an impact on home equity loan rates.

By paying attention to news on interest rates and understanding the factors that influence rates, you can be better prepared to anticipate rate changes and make informed decisions about home equity loan in Tennessee.

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you lock in can affect how comfortably you manage your home loan payments. You probably know that a 1% difference in the interest rate can translate to a higher monthly payment. But that 1% makes a much bigger difference in the total interest you pay over the life of the loan.

You can see below how a 1% or 2% difference in interest rate affects the monthly payment and total interest paid on a $60,000 home equity loan that is repaid over 15 years.

•  At 6.00% interest: Your monthly payment is $506; total interest paid is $31,137.

•  At 7.00% interest: Your monthly payment is $539; total interest paid is $37,073.

•  At 8.00% interest: Your monthly payment is $573; total interest paid is $43,210.

Now you see why it’s so important to shop around for the best home equity loan rates in Tennessee.

Home Equity Loan Rate Trends

We mentioned the prime rate above. The prime rate is a key benchmark in the world of interest rates, influencing what you pay on your mortgage, auto loans, and credit cards. The prime rate fluctuates over time, which in turn causes home equity loan rates to climb or fall. Following trends in the prime rate will give you an indication of what’s to come in home equity loan rates.

Historical Prime Interest Rates

Since 2018, the prime rate has fluctuated quite a bit, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

Other influences on interest rates have to do with the borrower’s financial profile and the Tennessee housing market. Your credit score, loan-to-value ratio, home value, home value stability, and property location all go into the lender’s calculation of your interest rate whether you’re shopping for a home equity loan or a HELOC.

Credit Score

If you’re the kind of person who’s diligent about making timely payments, you’re in for a treat. Lenders often favor those with a credit score of 680 or higher, but many are really looking for scores of 700 and above.

Home Value

In Tennessee, as in most states, lenders require an independent appraisal to determine a home’s value and set a loan limit. This appraisal is used to calculate the equity position of a homeowner and to determine the maximum loan amount that a lender will approve. The valuation process is a critical step in the loan process and ensures that a homeowner is not over-leveraged and that the lender is not over-exposed.

Loan-to-Value (LTV) Ratio

Most lenders will allow you to borrow up to 85% of your available equity, although it’s important to remember that the lower your percentage, the better your interest rate and loan terms will be. You can estimate your LTV by adding your mortgage balance to your hoped-for home equity loan amount and dividing the total by your appraised home value.

For example, if you have a home valued at $400,000, owe $250,000 on your mortgage, and are looking for a home equity loan of $50,000, your LTV is 75%: $250,000 + $50,000 / $400,000 = .75. That’s well within the acceptable range.

Home Value Stability

The stability of home values in your area of Tennessee is a big deal. It can significantly impact the amount of equity you can access and use. When home values are on the rise, lenders are more likely to approve larger loan amounts. That’s because the increasing value of the property helps offset some of the risk for the lender. But when home values are falling, lenders may get more cautious. They might tighten up their lending criteria and offer smaller loan amounts.

Property Location

Living in a part of Tennessee that’s considered high-risk can mean you’ll pay more for insurance. That’s because insurance companies see these areas as more likely to file claims due to natural disasters and extreme weather. These areas can include those prone to hurricanes, floods, earthquakes, and wildfires.

Lender Policies

Interest rates can vary a bit from lender to lender. Borrowers should compare interest rates, fees, and closing costs from a handful of lenders while shopping around for a home equity loan.

How to Qualify for the Lowest Rates

If you’re looking for the best home equity loan rates in Tennessee, you’ll want to make sure you have a good credit score, a low debt-to-income ratio, adequate property insurance, and a good amount of home equity. These factors will help you qualify for the most competitive loan terms. When you’re exploring how to get equity out of your home, your To Do list will typically look like this:

Build a Strong Credit Score

When it comes to your personal finances, a strong credit score can be a game changer. People with higher credit scores often qualify for lower interest rates, which can add up to significant savings over the life of the loan.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a critical number for lenders. It’s calculated by taking your monthly debt obligations (mortgage, car loan, student loans) and dividing them by your monthly gross income. For a home equity loan, you generally need a DTI below 36% — though some lenders will approve a DTI up to 50%.

Obtain Adequate Property Insurance

It’s standard practice for lenders to require you to have adequate property insurance, especially if you live in a flood-prone area. These insurance policies are designed to protect you and your lender from potential losses to your property in the event of an emergency.

Maintain Sufficient Home Equity

You need to have at least 20% equity in your home to get a home equity loan. This is a good thing — it means you’re not borrowing more than you can afford to pay back.

Fixed vs. Variable Interest Rates

Home equity loans in Tennessee often come with fixed interest rates. This means you can plan for the same monthly payment over the life of the loan. While fixed rates offer predictability, they can also start off higher than variable rates. Variable rates fluctuate over time, but they often start lower than fixed rates. A home equity loan can be a great option if you need a set amount of money for a specific purpose, like a home improvement project or consolidating debt.

Tools & Calculators

Online tools and calculators can help you estimate home equity loan payments, compare interest rates, and understand the impact of different loan repayment terms. These tools can provide valuable insights and help you make informed decisions regarding your home equity loan options. Below you’ll also find a HELOC monthly payment calculator as well as a HELOC interest only calculator.

Closing Costs and Fees

When it comes to home equity loan closing costs, you’re typically looking at 2%-5% of the loan amount. These fees can include charges for an appraisal, credit report, document preparation, origination, notary, title search, and title insurance.

Origination fees can be around 0.5%-1% of the loan amount or a flat fee. Title insurance might run you 0.5%-1% of the loan balance, with title search fees typically ranging from $100 to $250. Appraisals can cost anywhere from $300 to $500, and credit report fees usually fall between $50 and $100. Document preparation and attorney fees can vary.

Tax Deductibility of Home Equity Loan Interest

The interest on your home equity loan is deductible if you’re using the funds for home improvements. For joint filers, you can deduct the interest on up to $750,000, and for single filers, it’s $375,000. To get this benefit, you’ll need to itemize your deductions. It’s a smart move to chat with a tax advisor to ensure you’re making the most of these potential tax savings.

Alternatives to Home Equity Loans

There are 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 their own special benefits and eligibility requirements. It’s important to consider your financial situation and goals before choosing the one that’s right for you.

Home Equity Line of Credit (HELOC)

What is a home equity line of credit? It works much like a credit card. You can borrow up to a certain limit and make monthly payments to pay down your balance. With a HELOC, you only pay interest on the amount you borrow, although you may be required to pay down a portion of the principal over time.

Recommended: HELOC vs Home Equity Loans

Home Equity Conversion Mortgage (HECM)

An HECM, a government-insured reverse mortgage, is a fantastic option for those 62 and older. It allows you to receive payments from the lender based on your home’s value. You can receive the funds as a lump sum, regular payments, or a line of credit. The best part? You don’t need to repay the loan until you leave the home. This is quite different from home equity loans and HELOCs, which require regular payments.

Cash-Out Refinance

A cash-out refinance, a type of mortgage refinance, is a bit like hitting the reset button on your mortgage. You take out a new loan, pay off the existing one, and pocket the difference. Lenders typically allow you to borrow up to 85% of your home’s value.

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

The Takeaway

Understanding current home equity rates and the many factors that influence them can help Tennessee homeowners make more informed borrowing decisions. By comparing lenders, maintaining a good credit score, and managing debt, homeowners can increase their chances of getting the best rates available.

FAQ

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

When you’re considering a $50,000 home equity loan, you need to think about the interest rate and loan term, because they’ll impact how much you’ll pay each month. 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 a good idea of what your monthly payments might be, use a home equity loan calculator.

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

With a home equity line of credit (HELOC), your monthly payment varies based on the 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.

How about a $25,000 home equity loan?

When you’re considering a $25,000 home equity loan, it’s important to think about how the interest rate and loan term will impact your payment. For a loan with an 8.00% interest rate and 10-year term, the monthly payment would be $303. To get a better idea of what your monthly payments might look like, use a home equity loan calculator. This can help you plan your budget and decide if a home equity loan is the right choice for you.

How about a $30,000 home equity loan?

When you’re contemplating a $30,000 home equity loan, it’s important to consider how the interest rate and loan term will affect your monthly payments. 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.

What could disqualify you from getting a home equity loan?

There are several key factors that could lead to disqualification for a home equity loan. These include having a poor credit history, insufficient home equity, a high debt-to-income ratio, and inadequate property insurance coverage.

What are the benefits of a HELOC?

HELOCs are a type of revolving credit, which means you have a lot of flexibility when it comes to borrowing and repaying. They typically have lower interest rates than credit cards, which can make them an attractive option for homeowners who want to complete home improvement projects, consolidate debt, or cover unexpected 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-Q424-102