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And rents are already pretty darn high — even if they’re not rising like they were back in 2021 and 2022. The typical (aka median) asking rent nationwide — $2,049 as of May — is up 36% since the COVID-19 pandemic and requires a household income of nearly $82,000 annually to comfortably afford, according to Zillow data. That’s over $20,000 more than you would have needed before the pandemic and about $2,500 more than just one year ago.
So what? If you’re facing a rent increase, don’t assume you’re stuck with it. You can try to negotiate a better deal with your landlord and/or explore the tradeoffs of moving. Even just a different renewal timeline can help you down the road. Here’s a quick guide:
• Start by researching the going rate on similar rentals. This will help you determine whether your rent increase is fair and help you evaluate whether to move. If a move would save you $100 a month, is it worth the upfront costs of a security deposit and hiring movers?
• Come up with a compromise number. Ask your landlord to renew at a rent that’s higher than what you’re paying but lower than what they’re asking. If you have a record of being a good tenant, the landlord is more likely to come to the table with an open mind, according to Danielle Arlotta, CERTIFIED FINANCIAL PLANNER® at Brooklyn Plans, a New York-based financial planning firm.
• Ask for a month-to-month or 18-month lease. Asking rents tend to be higher this time of year because of the higher rate of turnover in summer (think of all the families, college students, and teachers dependent on a school-year timeline.) So even if you’re not able to negotiate a lower rent, try to set yourself up to renew in the colder months next time. “It’s so competitive when everyone is looking in the summer,” Arlotta said. “If you’re moving in November or December or January, it’s a little bit less. Not thousands less, but maybe a couple hundred less per month.”
• Get creative when you’re negotiating. Is there something you could offer your landlord in exchange for a lower rent? For instance, could you help with building maintenance or other small tasks like cutting the grass or changing the hallway light bulbs?
Negotiating with your landlord can feel intimidating, and may be the last thing you want to do when the rest of the world is taking time off work and enjoying summer.
But being proactive about your lease renewal is a worthwhile endeavor — even if it doesn’t get you immediate results. And in the long run, moving your lease renewal to a less competitive time of year could make other things easier too, like finding movers and scheduling utility hookups.
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• Your credit score, debt-to-income ratio, and market conditions all play a part in the interest rate you’re offered.
• Fixed interest rates result in predictable monthly payments, while adjustable rates tend to start a bit lower.
• To be eligible for a home equity loan, you’ll need to maintain at least 20% equity in your home.
• The interest on home equity loans may be tax-deductible if you use it for home improvements.
• Alternatives to home equity loans include home equity lines of credit (HELOC) and cash-out mortgage refinances.
Introduction to Home Equity Loan Rates
Home equity loans are a popular way to access cash for a variety of big expenses. Getting the best available home equity loan rates in Austin, Texas, starts with understanding how rates are influenced by economic and personal factors. We’ll also discuss how a home equity loan works — along with alternatives like the home equity line of credit (HELOC) and the cash-out mortgage refinance.
Whichever financing tool you choose, your prep work will be similar, and we’ll explain the steps to present yourself as a stellar candidate. The payoff could be thousands of dollars saved on interest and fees.
How Do Home Equity Loans Work?
What is a home equity loan? In short, it’s a second mortgage that uses your home as collateral. The loan is disbursed in one lump sum and repaid in equal monthly installments over five to 30 years. Because the loan is secured by your home equity, it typically offers lower interest rates than unsecured personal loans. Most home equity loans have fixed interest rates, which can provide peace of mind if you like predictable payments. To qualify, you’ll generally need to have at least 20% equity in your home.
How Are Home Equity Loan Interest Rates Determined?
The interest rates on all kinds of home loans are influenced by a multitude of factors, from the economy to your own financial standing. The Federal Reserve’s policies, particularly the federal funds rate, have a significant impact on lending. Lenders typically peg their rates to the prime rate, which in turn is influenced by the Fed. Keeping an eye on the prime rate can give you a good view of where home equity loan rates are headed.
Your credit score and debt-to-income ratio also factor in, with higher scores and lower ratios often translating to better rates. Loan size and repayment term come into play, with larger loans and longer terms carrying increased risk and, consequently, higher rates.
How Interest Rates Impact Affordability
Your interest rate helps determine the affordability of different types of home equity loans. Even a seemingly small difference in interest rate can add up to significant savings or costs over the life of your loan. For example, a $100,000 home equity loan with a 15-year term would have a monthly payment of $985 at 8.50% interest, and $1,044 at 9.50% interest.
But the real story is in the total interest paid: The 8.50% rate adds up to $77,253 in interest over the life of the loan. Compare that to $87,960 with the 9.50% rate. That means securing the lower rate would save you $10,700 — well worth the time and effort you spend shopping around.
The chart below gives you a broader view of how small changes in interest rate alter your monthly payment and total interest for a $100K loan repaid over 15 years.
Interest Rate
Monthly Payment
Total Interest Paid
9.00%
$1,014
$82,568
8.875%
$1,007
$81,232
8.75%
$999
$79,901
8.625%
$992
$78,574
8.50%
$985
$77,253
8.375%
$977
$75,937
8.25%
$970
$74,625
8.125%
$963
$73,319
8.00%
$956
$72,017
Home Equity Loan Rate Trends
The trends in home equity loan rates can be a bit like the weather—unpredictable. Interest rates on home equity loans are influenced by a number of factors, including the prime rate, which is closely related to the federal funds rate set by the Federal Reserve. The prime rate has fluctuated significantly in recent years, ranging from 3.25% in 2020 to 8.50% in 2023. These changes can have a direct impact on the rates offered to you.
While it’s impossible to predict future movements with certainty, staying informed about economic conditions and what the prime rate is up to can help you time your application for the best possible rate. Comparing rates from multiple lenders and considering the broader market context can also provide valuable insights.
Most of us can’t wait around long for interest rates to drop. All we can do is set ourselves up for success. Lenders will scrutinize your credit score, debt-to-income (DTI) ratio, and the equity in your home. You can bolster your chances of qualifying for a lower rate by enhancing your credit score, reducing your debt, and ensuring your home’s value is accurately appraised.
Maintain Sufficient Home Equity
To be eligible for a home equity loan, you need to maintain at least 20% equity in your home. Calculating your equity is straightforward: Just subtract your mortgage balance from your current home value. For instance, if you owe $400,000 on your mortgage and your home is valued at $550,000, your equity is $150,000, or 27%. Lenders typically allow you to borrow up to 85% of your equity, which means in this example, you could potentially access $127,500.
Keeping a healthy amount of equity in your home is not only a smart financial move, but it also ensures you can secure favorable loan rates and manage the loan effectively, even in the face of financial challenges. A home equity loan calculator can help you calculate your equity level.
Build a Strong Credit Score
To get the most competitive home equity loan rates, set your sights on a credit score of 700 or higher. A robust credit score is a testament to your financial acumen and can lead to more favorable loan terms. Lenders scrutinize your payment track record, credit utilization, and the length of your credit history. By paying your bills on time and keeping credit card balances in check, you can give your score a boost. Steer clear of opening new accounts or closing old ones before applying, as this can dent your score.
Manage Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is a big deal when it comes to qualifying for a home equity loan and getting lower rates. Lenders typically look for a DTI ratio below 50%, and ideally below 36%. To calculate your DTI, divide your total monthly debt payments (student loans, auto loan, mortgage payment) by your gross monthly income. Let’s say your student loan payment is $300 a month, your auto loan is $400, your mortgage is $1,600, and your monthly income before taxes is $7,000. Your DTI ratio is 33%. ($300 + $400 + $1,600 = $2,300 / $7,000 = 33%)
A lower DTI can help you qualify for a loan and show lenders that you have a manageable debt load, which can reduce the risk of default. To improve your DTI, consider paying down existing debts, increasing your income, or both. Keeping your DTI in check can help you qualify for better loan terms and lower interest rates, which can make your home equity loan more affordable.
Obtain Adequate Property Insurance
Property insurance is a must-have for home equity loans, especially in flood-prone areas. This insurance is a safety net for both you and the lender. It’s a smart move to review your current policy and consider beefing it up if needed. Getting the right coverage not only meets your lender’s requirements but also safeguards your investment, making the road to your home equity loan smoother and more secure.
Current home equity loan rates by state.
Compare current home equity loan interest rates by state and find a home equity loan rate that suits your financial goals.
Select a state to view current rates:
Tools & Calculators
Using these resources can be a game-changer. They can help you get a handle on the numbers, compare rates, and find the loan that fits your financial situation like a glove.
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 generally range from 2% to 5% of the loan amount. Here’s a quick breakdown: There’s the appraisal, which can set you back $300 to $500, and the credit report, which typically costs $50 to $100. Title insurance (0.5% to 1% of the loan) and the title search ($100 to $250) make sure everything’s shipshape with your property title. Origination fees (0.5% to 1% or a flat fee) cover the lender’s costs for getting you set up. And don’t forget about the document preparation/attorney fees, which can range from $500 to $2,000.
Tax Deductibility of Home Equity Loan Interest
The interest on home equity loans may be tax-deductible if the funds are used to improve your home. If you’re married and filing jointly, you can deduct the interest on up to $750,000 of qualified home equity loans. If you’re single, the limit is $375,000. To claim the deduction, you’ll need to itemize your tax return. A tax advisor can help you understand how this deduction applies to your specific financial situation and how you can maximize your potential tax savings.
Alternatives to Home Equity Loans
Home equity loans are just one of the many financial tools at your disposal. You might also consider a home equity line of credit (HELOC) or a cash-out mortgage refinance. Both options allow you to tap into the equity in your home, but they work a little differently. Both options can be helpful for big expenses or debt consolidation, but it’s important to compare the terms and fees to find the best fit for your financial goals.
A HELOC is akin to a credit card, granting you the flexibility to borrow up to a set limit and pay interest solely on what you use. While the interest rates for HELOCs are variable, they can be a cost-effective solution. Typically, a 680 credit score (700 is even better) and a debt-to-income ratio under 50% (ideally under 36%) are what lenders look for. HELOCs are particularly handy if you’re uncertain about the total amount you need to borrow or anticipate expenses over time.
During the initial draw period, which often lasts 10 years, you typically 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.)
Repay only what you borrow plus interest; you may have the option to make interest-only payments during the draw period.
Starts immediately at a set monthly payment
Disbursement
Charge only the amount you need
Lump sum
Cash-Out Refinance
This option replaces your current mortgage with a larger one, giving you a lump sum to work with. The amount you can borrow is tied to your home’s equity, with most lenders allowing borrowing up to 80% of your property’s value. To qualify, you need a credit score of 620 or above and a debt-to-income ratio under 43%. You can choose between fixed or variable interest rates, with the latter potentially offering more financial flexibility.
If you’re on the fence about a cash-out refinance vs. a hoem equity line of credit, consider that a cash-out refinance consolidates your debts into a single monthly payment, streamlining your financial landscape.
The Takeaway
When you’re ready to take the next step, keep in mind that a strong credit score, a manageable debt-to-income ratio, and the right property insurance can all play a part in securing favorable terms for your home equity loan. Leverage the tools and calculators at your disposal to estimate monthly payments and compare lenders. And don’t forget to account for closing costs and fees, which typically range from 2% to 5% of the loan amount. We hope this information makes your decision a bit easier — and maybe saves you some serious money.
SoFi now offers home equity loans. Access up to 85%, or $750,000, 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.
Unlock your home’s value with a home equity loan from SoFi.
Home equity loans are a great way to finance big expenses or consolidate high-interest debt. They can also be a smart option for home improvements since they can be tax-deductible. Just be sure to use the money wisely and make sure you can afford the monthly payments.
What’s the monthly payment on a $50,000 home equity loan?
The monthly payment for a $50,000 home equity loan depends on the loan term and interest rate. For instance, with a 7.00% rate across a 20-year term, your monthly payment would be around $388. Shorten the term to 10 years, and your payment rises to $581. The longer term eases your monthly budget, but remember you’ll pay more in interest over a longer repayment term. Before you decide, compare rates and terms from different lenders to find the best fit for your financial situation.
What’s the monthly payment on a $100,000 HELOC?
The payment on a $100,000 HELOC depends on the interest rate and the payment period you’re in. There are two phases to a HELOC: the draw period and the repayment period. During the draw period, which is typically 10 years, you usually can make interest-only payments on the amount you’re using. If you draw $50,000 and your rate is 8.00%, your interest-only payment would be $333 per month. Once the draw period ends, the repayment period begins, and you’ll start paying both principal and interest. If you draw the full $100,000 at the same 8.00% rate over a 20-year repayment period, the monthly payment would increase to around $1,503. Keep in mind that HELOCs have variable interest rates, and your actual payment could be higher or lower depending on the rate and how much you borrow.
What might prevent you from securing a home equity loan?
There are a few things that might prevent you from qualifying for a home equity loan, such as not having enough equity in your home, a low credit score, and a high debt-to-income (DTI) ratio. Lenders usually require at least 20% equity in your home and a credit score of 680 or higher, although some prefer a score over 700. A DTI ratio of 43% or less is also typically required. Additionally, not having adequate property insurance, particularly in flood-prone areas, can also disqualify you. To improve your chances, consider increasing your credit score, paying down your current debts, and making sure your property is well-insured.
What are the benefits of a home equity loan?
Home equity loans are a smart choice for many reasons. They come with fixed interest rates and predictable monthly payments, which makes budgeting easier. If you’re thinking about a major expense like home renovations, college tuition, or consolidating debt, a home equity loan could be just what you need. The best part? The interest rates are usually lower than unsecured loans because your home is the collateral. And there’s a potential tax perk: The interest you pay on home equity loans used for home improvements might be tax-deductible (up to certain limits). Just remember to consider the risks, like the potential for foreclosure, before you take the leap.
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A mortgage preapproval calculator is a helpful tool for understanding how much money a lender is likely to allow you to borrow when you’re buying a house. This can give you a good frame of reference in the early stages of house shopping, when you’re not quite ready to submit to a hard credit check with a lender and get a preapproval letter.
Use our mortgage preapproval calculator to get a better idea of how much of a mortgage you can get based on your income and debts.
Key Points
• A mortgage preapproval calculator estimates borrowing power for a home purchase.
• Using a preapproval calculator doesn’t require a credit check. It’s fast and easy to get results.
• Preapproval amounts depend on the borrower’s income and debt levels.
• Tips for getting a formal preapproval letter from a lender include checking your credit and comparing different lenders’ rates.
• A preapproval calculator helps borrowers understand home affordability and monthly payment amounts.
*Actual preapproval amount may vary from the estimated preapproval amount noted in the calculator.
This calculator is for informational purposes only. The outputs are estimates based solely on information you inputs. Calculations are not an offer to make a loan or an approval. All SoFi loans are subject to eligibility restrictions and limitations not reflected in this calculator, including a loan applicant’s credit, income, property. SoFi products, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.
Calculator Definitions
Before you dive into using our mortgage preapproval calculator, it’s important to understand the terms involved:
• Mortgage preapproval: The mortgage preapproval process is a formal step in home-buying wherein a lender reviews your credit and financial history to determine the maximum amount it is willing to loan you. If you’re preapproved, you’ll receive a mortgage preapproval letter with the loan amount and interest rate. It’s not a guarantee, but it’s a solid sign that you can qualify for the loan.
• Annual income: Your annual income refers to the amount of money you make in a year before taxes. If you have multiple sources of income, you should add these together, including salary, hourly pay from a part-time job, income as a self-employed contractor, or government benefits. If you’re buying the house with a second person, such as your spouse, you can combine your income.
• Loan term: This refers to the length of the mortgage. Typically, a conventional mortgage lasts 30 years, but some buyers may get a 15-year mortgage. Though less common, borrowers can also get 5-, 10-, 20-, and 25-year mortgages.
• Interest rate: While you won’t know the exact interest rate you’ll be offered until you move forward with an official preapproval, you can estimate based on current rates.
• Monthly debt payments: The home loan preapproval calculator asks you to input monthly debt payments, because this is something a lender will review. Add up all your monthly obligations, including credit card payments, personal loan payments, car payments, student loan payments, and payments from any existing mortgages.
How to Use the Mortgage Preapproval Calculator
Using the mortgage preapproval calculator is easy. Here’s how:
1. Calculate and enter your annual income: Add up all your relevant sources of income (pre-tax), including your own income and that of any other applicants. Insert that number in the first field.
2. Calculate and enter your monthly debt payments: Sit down with your bank statement or budget to figure out your monthly debt obligations (how much you spend each month on your debts). Add these together and type the number in the second field.
3. Determine the term of the loan: Use the slider to indicate the ideal mortgage term length (between five and 30 years). Remember that 30 years is the standard; a shorter loan term length can result in significantly higher monthly payments — but less interest paid over the life of the loan.
4. Research current interest rates: Look at the current mortgage rates and input the rate you’re most likely to be offered based on the loan term you’re considering.
5. Look at your results: Based on the information you provide, you’ll be able to see the estimated maximum monthly mortgage payment you should consider, as well as the estimated preapproval amount.
Remember: The mortgage preapproval calculator is an estimate only, intended to help you get a sense of how much house you might be able to afford as you begin to shop. If you live somewhere with a high cost of living, your personal budget may vary accordingly. When you’re getting closer to the offer stage, you’ll want to get a real preapproval letter for a home loan.
A mortgage preapproval calculator is an online tool that gives you an idea of what size loan a lender is likely to approve you for when buying a house. It can also show you the highest monthly payment you can likely afford. It’s a useful tool, especially if you are buying your first home and haven’t been through the process before.
The calculator is only an estimate. Before you officially make an offer on a house, you may want to get a mortgage preapproval letter from a lender. The letter shows buyers that you’re serious about your offer and you have taken steps to secure financing.
Benefits of Using a Mortgage Preapproval Calculator
• Fast and easy: You can use a preapproval calculator from the comfort of your couch. One minute, you’re using the calculator and the next, you can be scrolling for house listings.
• No credit check: When the time comes, you’ll need to get an official preapproval, which will require a hard credit check. But if you’re not yet serious about making an offer on a house, a mortgage preapproval calculator sets a good frame of reference as you start saving for a down payment and eyeing the market — without requiring a credit check.
• No expiration: An official mortgage preapproval lasts only 30 to 90 days, depending on the lender. That means you shouldn’t get one until you’re sure you’ll be making an offer in the coming weeks or months. The estimate provided by a mortgage preapproval calculator, however, has no expiration date.
Types of Mortgage Preapproval
People throw around the term “mortgage preapproval” quite freely, but it’s actually a distinct term from “mortgage prequalification” and “fully underwritten,” which are different stages in the process. Here’s a look at mortgage prequalification vs. mortgage prequalification vs. fully underwritten:
• Mortgage prequalification: Getting prequalified with a mortgage lender is a less formal process than getting preapproved or underwritten. You provide a few details (your estimated income, debts, and credit score), and the lender will let you know how large a loan you’d likely be approved for, if you did apply. This is just an estimate, but it’s enough to help you start thinking about the home-buying process.
• Mortgage preapproval: When you’re more serious about making an offer, you’ll want a mortgage preapproval. You’ll consider different types of loans and think about the term of your mortgage. The lender will check your credit and require documentation to verify all the information you provided. Once your stats are reviewed, the lender can offer a preapproval letter with the amount of money you can likely borrow and at what interest rate.
• Fully underwritten: Once you make an offer on a house — and that offer is accepted — you can apply for the mortgage. At that point, the lender reviews your application more thoroughly (this is the underwriting process) and, assuming everything is as it should be, approves you for the mortgage, pending an appraisal.
Examples of Mortgage Preapproval
The table below shows various mortgage preapproval examples for a 30-year fixed-rate loan at 6.50%. You can see how big an impact annual income and monthly debt payments have on estimated preapproval amounts by putting your own numbers into the mortgage preapproval calculator.
Annual Income
Monthly Debt Payments
Estimated Preapproval Amount
$50,000
$0
$187,580
$50,000
$600
$89,653
$50,000
$1,200
Cannot be preapproved
$75,000
$0
$276,869
$75,000
$600
$181,943
$75,000
$1,200
$87,016
$100,000
$0
$369,159
$100,000
$600
$274,233
$100,000
$1,200
$179,306
$150,000
$0
$553,738
$150,000
$600
$458,812
$150,000
$1,200
$363,885
$200,000
$0
$738,318
$200,000
$600
$643,391
$200,000
$1,200
$548,465
Mortgage Preapproval Tips
Here are some quick tips for a successful mortgage preapproval process:
• Check your credit score and save for a down payment: Before focusing on preapproval, make sure your credit score is strong enough to qualify for a loan. (Here are the basic credit score requirements for a mortgage.) You should also figure out how much money you are willing to put down at signing and start saving, as needed.
• Use a calculator or get prequalified: Before requesting a preapproval, get a general idea of what you can expect to borrow. You can obtain an estimate from a mortgage preapproval calculator or get one by prequalifying with a lender.
• Shop around: Just because a seller accepts your offer with a preapproval letter from a specific lender doesn’t mean you have to apply for the mortgage with that lender. You’re free to seek multiple offers to find the lowest rate and fees.
Using a mortgage preapproval calculator can give you a good idea of what size loan you could be approved for. While it’s not a guarantee of approval, the estimate can be quite accurate, as long as you input all the correct information. When you’re ready to buy a house, however, you should get a true preapproval letter from a mortgage lender.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
The income needed for a $500,000 mortgage is around $150,000 a year. However, if you have a fair amount of debt, you may need to make even more money to afford a $500,000 home. Remember, a lender may approve you for a $500,000 mortgage based on your income, but you need to look at the estimated monthly payments to make sure you’re comfortable spending that much each month for the next three decades.
How much mortgage can I get with $70,000 salary?
The amount of house you can afford on $70,000 a year is around $200,000, but much of that depends on the size of your down payment, the length of the loan, and your monthly debt obligations. If you make $70,000 and have no monthly debt payments, you could afford a $250,000+ house with a 6.5% interest rate. But if you pay $1,000 a month between student loans and a car loan, you should aim for a house closer to $100,000.
How much income do you need to be approved for a $400,000 mortgage?
The income needed for a $400,000 mortgage is at least $130,000 a year, but much of that depends on your debt obligations and the size of your down payment. Interest rates, property taxes, homeowners insurance costs, and loan term length can all impact salary requirements for affordability.
How much income do you need to be approved for a $400,000 mortgage?
The income needed to be approved for a $300,000 mortgage is around $90,000. This estimate assumes you don’t have other sources of significant debt. Other factors, like how much you have saved for a down payment and your credit history, will also impact how much money you should make to get a $300,000 mortgage.
Can I afford a $250k house on a $50k salary?
You probably can’t afford a $250,000 house on a $50,000 salary. Though it depends on other factors, including your monthly debts and your credit score, the typical income needed for a $250,000 mortgage is $76,000. That said, if you have no monthly debt obligations (no student loans, no car loans, etc.) and have saved up a significant down payment (like $50,000 or $100,000), you may be more likely to be approved for a $250,000 house.
What is the 28/36 rule?
The 28/36 rule is a simple tool to use to determine how much house you can afford. While everyone’s situation is unique, conventional wisdom states that total housing costs should not account for more than 28% of your monthly gross income, and your overall debts (car, house, personal loan, student loans, credit cards, etc.) should not account for more than 36% of your takehome pay.
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