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Jul
22
2025

Playground 2

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Jul
22
2025

Life Insurance Calculator

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Life Insurance Calculator: How Much Life Insurance Do I Need?

By Lauren Ward | Updated July 22, 2025

A life insurance calculator is a useful tool to help you determine what size policy you need in order to leave your family with the best financial protection after you pass away. While you can manually estimate how much insurance to buy, it’s easier to use a life insurance cost calculator for the most accurate results.

What Is Life Insurance and Why Do I Need It?

Life insurance is a type of contract in which the policyholder pays an ongoing premium in exchange for a death benefit that is paid out to one or more beneficiaries when the policyholder passes away.

It’s an important part of any adult’s financial plan because life insurance provides your family with money to relieve stress during an already difficult time. For instance, a life insurance death benefit can pay for one-time expenses like burial costs and outstanding medical bills. But it can also cover lost income after the death of a working spouse, or extra household and childcare expenses if a non-employed spouse passes away first.

No matter how old you are or how much you earn, nearly everyone needs life insurance. Having the right policy in place can make a huge difference in the financial health of your loved ones in the event you pass away sooner than expected.

Recommended: Life Insurance Guide

How to Use Our Life Insurance Calculator

Using a “how much life insurance do I need” calculator lets you customize the death benefit amount based on your personal situation. Before you jump in, gather a few pieces of information to get the most accurate estimate for coverage and premium costs.

• Annual income

• Outstanding debt

• Years of income to replace

• Funeral and burial costs

• Existing savings and life insurance

It’s also smart to re-evaluate these categories every few years to make sure your coverage needs haven’t changed. For instance, you may have more kids or buy a more expensive house. Those updates should be reflected in your life insurance coverage.

Life Insurance Made Easy With SoFi Protect

Explore your life insurance options with SoFi Protect.


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Key Factors for Determining How Much Life Insurance You Need

Here’s how each of the factors above can impact the amount of life insurance you need for your family.

Annual Income

The amount you earn each year affects how much life insurance you should get, especially if you have a family that relies on your income. And if your job is taking care of kids and the general household, calculate how much it would cost to outsource childcare and household tasks. After all, a working parent will need to pay for all of those additional costs if a stay-at-home parent passes away.

One way to estimate a portion of coverage is to add up all of your debt and upcoming expenses. But another method is to multiply your annual income by 10. That would allow your family to save or invest the lump sum and at least partially live off the interest or capital gains

Outstanding Debt

Getting enough coverage to pay off outstanding debt can provide your family with peace of mind in the future. Instead of having all of the same bills as a one-income household, they’ll be able to pay off any auto loans, mortgages, student loans, credit card balances, and personal loans.

As you add up all of those outstanding balances, you may be surprised at the total, both on a monthly and annual basis. Enabling your family to pay off those balances with a life insurance benefit gives them a much stronger financial foundation. That’s especially true when you can’t predict all of their future needs, like potential medical expenses or other financial emergencies.

Years of Income Replacement

Your policy amount also depends on how long you want to replace your income. This number varies with each individual because your circumstances will be different. If you aren’t married and don’t have children, you may not worry about leaving a substantial death benefit that’s meant to replace your income for years to come.

But if you do have a spouse and kids, there are several variables to think about. For instance, how much does your spouse earn and how long would you like them to be able to live off your existing income? Until retirement? Until the kids move out?

You should also consider the age of your children. Providing enough income to get them through their college years can lift a major financial burden off the entire family. And if you have more kids in the future, you may want an additional policy that resets the clock on how long your coverage lasts, especially if you choose term life insurance

Funeral and Burial Costs

Everyone needs a plan in place to cover their final expenses, no matter what your family situation may be. If you don’t have immediate family members to cover those costs, the money will be distributed from your estate, which includes any assets you have at the time of death.

No matter who’s in charge of your estate when you die, it’s important to plan for funeral, burial, or cremation costs because they can add up quickly regardless of what method you choose. In 2023, the average price of a viewing and burial funeral was $8,300 and $6,280 for cremation, according to the National Funeral Directors Association.

Explore your local average costs for your preferred method to incorporate into your life insurance calculator. That way, no matter who arranges your final requests, they’ll have the budget to carry out your wishes.

Existing Saving and Life Insurance

You may not need such a large life insurance policy if you have substantial savings or some life insurance in place already. For instance, if you have a well-funded retirement account that your spouse could tap into, you may not need to replace as many years of income.

Or if you’re adding an extra policy because you had another kid, you can include that policy amount to put towards your new calculation. Just remember to consider how many extra years’ worth of expenses you’ll need when accounting for a new child.

Recommended: Glossary of Life Insurance Terms

The Takeaway

A life insurance calculator like this one from SoFi can help you understand what size policy you need to leave your loved ones on firm financial footing after you pass away. The tool also lets you customize the death benefit amount based on factors like your annual income, outstanding debt, years of income to replace, funeral and burial costs, and existing savings and life insurance policies.

FAQ

What’s the main difference between term life and whole life insurance?

A term life insurance calculator shows more affordable coverage because your policy only lasts for a set period of time, usually between 10 and 30 years. A whole life insurance calculator, on the other hand, provides coverage estimates for your entire lifetime. It’s more expensive, but your policy lasts as long as you pay your premium. There also may be a cash value component in case you want to tap into those funds throughout your lifetime.

How does my health affect my life insurance premium?

A life insurance premium calculator asks questions about your age, height, weight, and health history. This is because pre-existing conditions or family history could impact potential life span. The fewer issues in your medical history, the less you’ll likely pay in premiums.

Can I change my life insurance policy after I buy it?

It’s possible to change your life insurance policy after you buy it. If you surrender an existing policy, you may have to pay penalty fees. You may, however, be able to negotiate the terms of your policy with your existing provider. Or you can search either entirely new policies or get a smaller one to add to your current coverage.

Is the death benefit from life insurance taxable to my beneficiaries?

No, life insurance policy proceeds typically aren’t taxable and don’t need to be reported to the IRS. But you may need to report any earned interest from the death benefit.

What happens if I stop paying my life insurance premiums?

Your insurance company will stop providing coverage if you don’t pay your life insurance premiums. If you have a term life policy, coverage will completely end. If you have a permanent policy, you may have access to any cash savings that was part of the contract. But your beneficiary won’t receive the death benefit if you pass away during a lapsed policy.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.


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.

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Jul
21
2025

Tariffs Put Spotlight on ‘Shrinkflation’ and ‘Skimpflation’

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This article appeared in SoFi's On the Money newsletter. Not getting it? Sign up here.


It looks like this year’s tariffs have finally started to trickle down to consumer prices — at least for some things (toys, for one.) But as the monthly U.S. inflation rate ticks up from 2.4% to 2.7%, the big question is: How much more could prices go up, and how widespread could it get?

The trajectory is unclear in part because companies who face these higher import taxes don’t have to pass the costs on to their customers. They could absorb them, taking a hit to their own profit. Or they might find U.S.-made versions of the materials they need, hopefully at a similar cost.

A third option is to reduce the size of their products rather than charge more, a tactic that became popular among many consumer product companies when inflation spiked during the pandemic.

It’s called “shrinkflation,” and experts say consumers could see a resurgence as the trade war threatens to reignite inflation. Actually, not just shrinkflation (smaller size, same price) but its even sneakier cousin, “skimpflation” (same size, lower-quality materials or ingredients.)

In fact, many brands are already shaving net weight instead of hiking prices to deal with tariff cost pressures, according to DataWeave, which analyzes retail data. The average package reduction is 5%-6% with extreme cases reaching 15%-25%, the firm said in a June blog post.

Shrinkflation can be an appealing solution for corporate America because price-sensitive customers may be less sensitive to a bag of chips weighing 15.5 instead of 18 ounces. And it’s unlikely they’ll even notice that a roll of toilet paper has 312 rather than 340 sheets.

(FWIW, there’s nothing illegal about shrinkflation as long as companies are transparent about their sizes, although Democrats in the Senate did introduce a bill called the Shrinkflation Protection Act in 2024 that hasn’t gone anywhere.)

So what? While economists at Goldman Sachs predict companies will pass 70% of their tariff costs onto consumers, that doesn’t seem to be happening yet. But if a lot more tariff-related inflation is in fact just a matter of time, it could sneak up on us in various forms — some less obvious than others. This makes it all the more important to be on the lookout when you’re shopping.

Consumer advocate Edgar Dworsky, a former Massachusetts assistant attorney general, tracks size and ingredient changes on his websites, ConsumerWorld.org and Mouseprint.org.

Here are some examples:

•   A jug of liquid laundry detergent containing 132 ounces instead of 146 ounces (but still apparently covering us for the same 100 washes.)

•   A roll-on deodorant in its same tall cartridge, but containing about 9% less actual deodorant.

•   A box of macaroni and cheese that uses corn starch instead of butter and skim milk as a thickener. (Macaroni and Tease, anyone?)

Related Reading

Prices are Now Starting to Rise Because of Tariffs. Economists Say This Is Just the Beginning (CNN)

The Battle to Keep Consumers Means Smaller Packs of Cookies and Chips (The Wall Street Journal via MSN)

How Americans Deal With Effects of Tariffs Firsthand (Talker Research)

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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Jul
21
2025

Week Ahead on Wall Street: Corporate Spotlight

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Earnings season is hitting full stride this week, with a diverse slate of industry heavyweights scheduled to give a broad view of the current business landscape.

Though only one of the big technology companies reports this week (most report next week), we’ll still be hearing from over 22% of S&P 500 companies. From auto manufacturers to defense contractors to airlines and hospitality groups, the diverse representation will help investors piece together a more complete picture of the U.S. economy and how tariffs are impacting their businesses.

Corporate earnings will likely dominate headlines, but some economic reports will also warrant attention. We’ll get updates on the housing market with new and existing home sale data, as well as regional economic surveys from the Philadelphia, Richmond, and Kansas City Federal Reserve banks.

(Despite the handful of regional Fed surveys being released, the central bank is now in its communication blackout period ahead of the rate-setting meeting next week.)

Economic and Earnings Calendar

Monday

•   June Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy.

•   Earnings: Alexandria Real Estate Equities (ARE), Domino’s Pizza (DPZ), NXP Semiconductors (NXPI), Roper Technologies (ROP), Steel Dynamics (STLD), Verizon (VZ), W R Berkley (WRB)

Tuesday

•   July Philadelphia Fed Non-Manufacturing Activity: The Philadelphia Fed’s survey of services executives in the region on business conditions and their outlook.

•   July Richmond Fed Manufacturing Activity: The Richmond Fed’s survey of manufacturing executives in the region on business conditions and their outlook.

•   July Richmond Fed Non-Manufacturing Activity: The Richmond Fed’s survey of services executives in the region on business conditions and their outlook.

•   Earnings: Avery Dennison (AVY), Baker Hughes (BKR), Chubb (CB), Capital One Financial (COF), CoStar Group (CSGP), Quest Diagnostics (DGX), DR Horton (DHI), Danaher (DHR), Equifax (EFX), Enphase Energy (ENPH), EQT (EQT), General Motors (GM), Genuine Parts (GPC), Halliburton (HAL), Interpublic Group of Companies (IPG), IQVIA Holdings (IQV), Intuitive Surgical (ISRG), Invesco (IVZ), KeyCorp (KEY), Coca-Cola (KO), Lockheed Martin (LMT), MSCI (MSCI), Northrop Grumman (NOC), PACCAR (PCAR), PulteGroup (PHM), Philip Morris International (PM), Pentair (PNR), Raytheon Technologies (RTX), Sherwin-Williams (SHW), Synchrony Financial (SYF), Texas Instruments (TXN)

Wednesday

•   June Existing Home Sales: Most home transactions in any given month tend to come from the existing market, and as a result set the tone for the broader housing market.

•   Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market.

•   Earnings: Amphenol (APH), Boston Scientific (BSX), Crown Castle International (CCI), CME Group (CME), Chipotle Mexican Grill (CMG), CSX (CSX), Freeport-McMoRan (FCX), Fiserv (FI), General Dynamics (GD), GE Vernova (GEV), Globe Life (GL), Alphabet (Non-Voting Shares) (GOOG), Alphabet (GOOGL), Hasbro (HAS), Hilton Worldwide Holdings (HLT), International Business Machines (IBM), Lennox International (LII), Las Vegas Sands (LVS), Lamb Weston (LW), Moody’s (MCO), Molina Healthcare (MOH), NextEra Energy (NEE), ServiceNow (NOW), Northern Trust (NTRS), NVR (NVR), O’Reilly Automotive (ORLY), Otis Worldwide (OTIS), Packaging of America (PKG), Raymond James Financial (RJF), Rollins (ROL), AT&T (T), Teledyne Technologies (TDY), TE Connectivity (TEL), Thermo Fisher Scientific (TMO), T-Mobile US (TMUS), Tesla (TSLA), United Rentals (URI)

Thursday

•   June Chicago Fed National Activity Index: This is a monthly index put together that incorporates 85 indicators from four categories: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories.

•   July S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.

•   June New Home Sales: While only a minority of home transactions in any given month come from new constructions, these home prices tend to be more cyclical and give insight into developing trends.

•   July Kansas City Fed Manufacturing Activity: The Kansas City Fed’s survey of manufacturing executives in the region on business conditions and their outlook.

•   Weekly Jobless Claims: This high frequency labor market data gives insight into filings for unemployment benefits. Initial jobless claims have remained mostly steady, while continuing claims have increased of late.

•   Earnings: Allegion (ALLE), Ameriprise Financial (AMP), A O Smith (AOS), Blackstone Group LP (BX), CenterPoint Energy (CNP), Deckers Outdoor (DECK), Digital Realty Trust (DLR), Physicians Realty Trust (DOC), Dover (DOV), Dow Inc (DOW), Edwards Lifesciences (EW), Honeywell International (HON), Intel (INTC), Keurig Dr Pepper (KDP), Laboratory of America Holdings (LH), L3Harris Technologies (LHX), LKQ (LKQ), Southwest Airlines (LUV), Mohawk Industries (MHK), Nasdaq (NDAQ), Newmont Mining (NEM), Pool (POOL), Tractor Supply Company (TSCO), Textron (TXT), Union Pacific (UNP), Valero Energy (VLO), VeriSign (VRSN), Westinghouse Air Brake Technologies (WAB), West Pharmaceutical Services (WST), Weyerhaeuser (WY)

Friday

•   June Factory and Durable Goods Orders: These metrics give insight into underlying trends for leading cyclical indicators.

•   July Kansas City Fed Non-Manufacturing Activity: The Kansas City Fed’s survey of services executives in the region on business conditions and their outlook.

•   Earnings: Aon Plc (AON), Charter Communications (CHTR), Centene (CNC), Erie Indemnity (ERIE), HCA Healthcare (HCA), Phillips 66 (PSX)

 
 

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Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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Jul
18
2025

Current Home Equity Loan Rates in San Diego, CA Today

By | mortgage | Comments Off on Current Home Equity Loan Rates in San Diego, CA Today

SAN DIEGO HOME EQUITY LOAN RATES TODAY

Current home equity loan

rates in San Diego, CA.



Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.


View your rate

Turn your home equity into cash. Call us for a complimentary consultation or get prequalified online.

Compare home equity loan rates in San Diego.

Key Points

•   Home equity loan rates are influenced by a borrower’s credit score, debt-to-income ratio, and home equity.

•   In recent years, the prime rate has been as low as 3.25% in 2020, and as high as 8.50% in 2023.

•   With a fixed interest rate, you can enjoy the stability of predictable monthly payments.

•   Property insurance is often required and can impact loan approval and rates.

•   The interest on home equity loans might be tax-deductible if you use the funds for home improvements.

•   Online tools and calculators can help you estimate your potential savings and monthly payments.

Introduction to Home Equity Loan Rates

Home equity loans can be a fantastic financial resource for homeowners, providing the opportunity to borrow against the equity in your home. In this article, we’ll explore the current home equity loan interest rates in San Diego, California, and discuss the various factors that influence these rates. We’ll also cover the potential benefits and risks of home equity loans, how to qualify for the best rates, and alternative financing options. Whether you’re looking to finance home improvements, consolidate debt, or cover other significant expenses, we’re here to guide you through the process and empower you to make a well-informed decision.

First up, what is a home equity loan?

How Home Equity Loans Work?

A home equity loan is a second mortgage that uses your home as collateral and provides you with a lump sum of money for a variety of uses. The loan is disbursed in one lump sum and repaid in equal monthly installments over a fixed term, typically five to 30 years. Because the loan is secured by your home, interest rates are usually lower than with unsecured loans. The interest rate is usually fixed, so you know exactly what your monthly payment will be.

To qualify for a home equity loan, most lenders require you to have at least 20% equity in your home. For example, if you have a home valued at $1 million and a mortgage balance of $750,000, you have $250,000 of equity, or 25%. Many lenders will allow you to borrow up to 85% of your available equity.

If you’re wondering how to get equity out of your home, a home equity loan is a strong contender.

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

Where Do Home Equity Loan Interest Rates Originate?

Interest rates for all kinds of home loans are influenced by a variety of economic and personal factors. Federal Reserve policy, particularly the federal funds rate, has a significant impact on lending rates. Lenders base home equity interest rates on the prime rate, which is closely tied to Fed policy. But that’s not the whole story.

A borrower’s credit score and debt-to-income ratio are also important factors in the interest rates they’re offered. Your loan amount and repayment term can also impact rates; larger loans and longer terms often mean higher rates due to the increased risk for lenders.

Understanding these factors can help you predict rate changes and make informed decisions about the best time to take out a home equity loan.

How Interest Rates Impact Home Equity Loan Affordability

Interest rates play a pivotal role in the affordability of a home equity loan over time. Even a seemingly minor difference in interest rate can lead to significant sum in total interest.

For instance, a $100,000 loan with a 15-year repayment period at 8.50% interest would mean a monthly payment of $985 and total interest of $77,253. Now, if that rate were 9.50%, the monthly payment would rise to $1,044 — not a big deal, right? But the total interest paid would climb to $87,960. That’s an additional $10,700 over the life of the loan. By being mindful of the total cost of different types of home equity loans, you can make a more informed and cost-effective choice.

Home Equity Loan Rate Trends

Predicting the movement of home equity loan rates can be a bit like forecasting the weather. However, we can look at the prime rate to get a sense of what might happen. The prime rate, which many loan products are tied to, was as low as 3.25% in 2020 before steadily climbing to 8.50% in 2023. While it’s true that timing your application to coincide with favorable economic conditions can pay off in a big way, most people can’t wait that long. Instead, your best bet is to shop around and compare offers from multiple lenders to ensure you get the best rate possible.

Source: TradingView.com

Date Prime Rate
9/19/2024 8.00%
7/27/2023 8.50%
5/4/2023 8.25%
3/23/2023 8.00%
2/2/2023 7.75%
12/15/2022 7.50%
11/3/2022 7.00%
9/22/2022 6.25%
7/28/2022 5.50%
6/16/2022 4.75%
5/5/2022 4.00%
3/17/2022 3.50%
3/16/2020 3.25%
3/4/2020 4.25%
10/31/2019 4.75%
9/19/2019 5.00%
8/1/2019 5.25%
12/20/2018 5.50%
9/27/2018 5.25%

Source: St. Louis Fed

Fluctuations like these strongly impact San Diego’s home equity loan rates, so it’s a good idea to stay on top of economic trends. Even if you can’t predict the future perfectly, you may be able to time your loan strategically if you have a sense of the market.

How to Qualify for the Lowest Rates

As we mentioned earlier, a borrower’s financial profile influences the interest rates they’re offered by lenders. To secure the most favorable home equity loan rates, you’ll want to present yourself as a low-risk borrower. That means shining up your credit score, keeping your debt-to-income ratio in check, and ensuring a healthy amount of equity in your home. Focus on these factors, and you’ll be well on your way to getting the best available deal.

Maintain Sufficient Home Equity

To be eligible for a home equity loan, you need to have at least 20% equity in your home. Here’s how you calculate that: Subtract your mortgage balance from your home’s current value. For example, if your mortgage balance is $750,000 and your home is worth $1 million, you have $250,000 in home equity, or 25%. A home equity loan calculator can help you estimate your equity level.

Build a Strong Credit Score

Most home equity lenders are on the lookout for a 700 or higher, but some are willing to work with 680+. A sparkling credit score speaks volumes about your financial acumen and can open doors to friendlier loan terms and lower interest rates. Keep your eye on the prize by making bill payments on time, chipping away at credit card balances, and steering clear of new debt. And here’s a tip: Give your credit report a once-over for any errors and dispute them pronto. Some corrections could result in a slightly higher score.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is an important number when considering a home equity loan. Most lenders require a DTI ratio that’s under 50%, with preferred treatment given to borrowers with a DTI below 36%. To calculate this, you divide your total monthly debt payments (student loans, auto loan, etc) by your gross monthly income. The lower your DTI, the better your chances of securing a loan with competitive rates. To boost your DTI, think about paying down existing debts or finding ways to increase your income.

Obtain Adequate Property Insurance

Property insurance is a must-have for home equity loans, especially in areas susceptible to natural calamities. Lenders need the assurance that the property underpinning the loan is safeguarded. In San Diego, with the looming threats of wildfires, landslides, and earthquakes, having the right insurance can make all the difference in your loan’s green light. The right coverage not only secures better rates but also shields your investment.


Tools & Calculators

Using online calculators can help you compare home equity loan offers and their total costs. That can save you time and money, ensuring you choose the best home equity loan deal for your needs.

Run the numbers on your home equity loan.

Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.

Closing Costs and Fees

Closing costs for home equity loans typically fall between 2% and 5% of the loan amount. These fees cover a range of services, from appraisals to credit reports and document preparation. For example, appraisals can cost anywhere from $300 to $500, while origination fees usually amount to 0.5% to 1% of the loan. Title insurance and search fees can add another 0.5% to 1% of the loan balance. Credit reports, which are essential for lenders, can cost $50 to $100, and document/attorney fees can range from $500 to $2,000. While no-closing-cost loans are available, they often come with higher rates.

Tax Deductibility of Home Equity Loan Interest

The interest on home equity loans may be tax-deductible if you use the funds to improve your home. Married couples filing jointly can deduct interest on up to $750,000 of qualified home equity loans, and single filers can deduct interest on up to $375,000.

This tax benefit can make home equity loans more attractive, potentially offsetting some of the costs associated with higher home equity loan rates. But remember, you can only take advantage of this if you itemize deductions on your tax return. Consult a tax advisor to see how this might apply to your specific financial situation.

Alternatives to Home Equity Loans

While home equity loans are a great choice, there are other options to consider. A home equity line of credit (HELOC) and a cash-out refinance, a type of mortgage refinance, are two popular alternatives. Each has its own benefits and eligibility criteria, and the right choice for you depends on your financial goals and situation. Here’s a bit more information to help you decide.

Home Equity Line of Credit (HELOC)

What is a home equity line of credit? A HELOC is a bit like a credit card. It allows you to borrow up to a certain limit based on your home equity. Unlike a home equity loan, which gives you a lump sum all at once, you’ll only pay interest on the amount you’ve borrowed. HELOC rates are variable, which means they can increase over time.

During the draw period, which often lasts 10 years, you can make interest-only payments. (Use a HELOC interest-only calculator to estimate your monthly bills.) After that, the repayment period lasts 10-20 years; that’s when you’ll start repaying both the principal and interest. (A HELOC repayment calculator can help you determine how much you’ll owe.)

Cash-Out Refinance

A cash-out refinance is a strategic move that could replace your existing mortgage with a larger one, giving you up to 80% of your home’s value in cash. You can choose between fixed or variable rates, with the latter potentially unlocking more equity. Typically, a 620+ credit score and a 43% or lower DTI are what you need to qualify. The beauty of a cash-out refinance is that it consolidates your debts into a single monthly payment, streamlining your financial landscape.

The chart below layouts out the three main ways to borrow against your home equity in an at-a-glance format:

The chart below layouts out the three main ways to borrow against your home equity in an at-a-glance format:

Home Equity Loan

 HELOC

 Cash-Out Refinance
Borrowing Limit Up to 85% of borrower’s equity Up to 90% of borrower’s equity 80% of borrower’s equity for most loans
Interest Rate Fixed Generally variable May be fixed or variable
Type of Credit Installment loan: Borrowers get a specific amount of money all at once that they then immediately begin repaying, with interest, in regular installments. Revolving credit: Borrowers receive a line of credit. They have a draw period (5-10 years) during which they borrow and can only pay interest (a HELOC interest-only calculator is useful then). Then there is a repayment period (10-20 years) to repay the principal plus interest. Installment loan: Borrowers receive a lump sum payment from the excess funds of their new mortgage, which has a new rate and repayment terms.
Repayment Term Generally 5-30 years A draw period of 5-10 years, followed by a repayment period of 10-20 years Generally 15-30 years
Fees Closing costs (typically 2-5% of the loan amount) Closing costs (typically 2%-5% of the loan amount), plus other possible costs, depending on the lender (annual fees, transaction fees, inactivity fees, early termination fees) Closing costs (typically 2-5% of the loan amount)

The Takeaway

When you’re considering a home equity loan in San Diego, remember to bolster your credit score, keep your debt-to-income ratio in check, and ensure your property is well-insured. These elements can influence the rates you’re offered, ensuring you get the best interest rate possible. Use the tools at your disposal to estimate payments and compare lenders. Keep an eye out for closing costs and fees, and don’t forget to consider the tax implications of the interest you’ll be paying. And, of course, look into alternatives like HELOCs and cash-out refinances to find the best fit for your financial needs. Armed with this knowledge, you’ll be well-equipped to make savvy decisions and secure the most favorable terms for your home equity loan.

SoFi now offers home equity loans. Access up to 85%, or $350,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.



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FAQ

What can you do with a home equity loan?

A home equity loan is a good option for large purchases, home renovations, and consolidating high-interest debt. The flexibility of these loans makes them a popular choice for homeowners. However, it’s important to use the funds responsibly and consider the long-term financial impact, since your home is at risk should you fail to make the payments.

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

The monthly payment on a $50,000 home equity loan is determined by the interest rate and the loan term. Let’s break it down: At a 7.00% interest rate over a 15-year term, your monthly payment would be about $449. If the interest rate were 8.00%, you’d be looking at approximately $478 per month. Keep in mind, these payment amounts don’t include closing costs, which can run 2% to 5% of the loan amount and are typically due upfront.

What would you pay monthly on a $100,000 HELOC?

A $100,000 home equity line of credit (HELOC) typically has a variable interest rate, along with a 10-year draw period and a 20-year repayment period. During the draw period, you often repay only the interest, which would run you $667 per month at 8.00%. After that, during the repayment period, you’ll pay back both principal and interest. At 9.00%, the monthly payment would be around $1,650. Due to the fluctuating interest rate, it’s impossible to predict what your exact payments will be.

What could prevent you from securing a home equity loan?

There are a few things that could keep you from getting a home equity loan. Not having enough equity in your home, a low credit score, and a high debt-to-income (DTI) ratio are the most common. Most lenders require at least 20% equity in your home. To get the best rates, you’ll typically need a credit score of 700 or higher. And a DTI ratio over 50% can make it hard to qualify. You might also be disqualified if you don’t have adequate property insurance, especially if you live in an area prone to natural disasters.

What are the perks of a home equity loan?

Home equity loans are a smart choice for several reasons. They come with fixed interest rates and predictable monthly payments, which can help you manage your finances. The interest rates are generally lower than on unsecured loans, making it a cost-effective solution for big expenses or consolidating debt. And here’s a bonus: The interest you pay on a home equity loan could be tax-deductible if it’s used for home improvements. Be sure to shop around for the best rates and terms, as they can vary widely from lender to lender.

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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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.

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✝︎ To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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