Compare home equity loan rates in Des Moines.

Introduction to Home Equity Loan Rates

A home equity loan is a powerful financial resource for homeowners who want to tap into the value of their property without selling it. In this guide, we’ll explore the current home equity loan rates in Des Moines, Iowa, and help you understand the factors that influence the rate you might be offered. We’ll explain what a home equity loan is and the potential advantages and drawbacks of this type of loan, as well as alternative financing solutions. With this information in hand, you’ll be better prepared to decide if a home equity loan is the right way to get equity out of your home.

How Home Equity Loans Work?

A home equity loan, which is a second mortgage, provides a one-time lump sum that you can use for a variety of expenses. Because the loan is secured by your home, the interest rate you can expect is lower than what you would be offered for a personal loan. Rates are also typically fixed, which make your monthly payments predictable. Most lenders require that you have at least 20% equity in your home to qualify. A home equity loan calculator can help you determine how much you might be able to borrow.

Recommended: What Is a Home Equity Line of Credit?

What Determines Home Equity Loan Interest Rates?

Interest rates for differen types of home equity loans are influenced by a variety of factors, including the economic climate and your personal financial situation. The Federal Reserve’s policies and the prime rate help lenders determine, broadly, the rates they will offer. But lenders also consider each borrower’s credit score and debt-to-income (DTI) ratio, with higher scores and lower ratios typically leading to more favorable rates. The amount you’re borrowing and the length of your repayment term can also impact the interest rate.

How Interest Rates Impact Home Equity Loan Affordability

Your interest rate is an important factor when it comes to the affordability of a home equity loan. Even a small change in percentage can add up to significant savings or costs over time. For instance, a $100,000 loan at 8.50% interest would set you back about $985 a month, with a total interest of $77,253 over 15 years. But increase the rate to 9.50%, and you’re looking at a monthly payment of $1,044 and total interest of $87,960. That’s a more than $10,000 difference in interest alone. So it’s smart to seek out the best possible interest rate and think about how payments fit into your monthly budget and long-term financial goals.

Home Equity Loan Rate Trends

The landscape of home equity loan rates is constantly changing, influenced in part by the prime rate. As you can see here, the prime rate dropped to 3.25% in 2020, only to rise to 8.50% by 2023. These shifts have a ripple effect on home equity loan rates. So it’s wise to keep an eye on economic conditions as you prepare to file a loan application.

How to Qualify for the Lowest Rates

To obtain the most favorable home equity loan rates, you need to focus on several key areas: your level of home equity, your credit score, your DTI ratio, and property insurance. The process of applying for a home equity loan is similar to getting a home loan. Let’s take these important qualifying factors one by one:

Maintain Sufficient Home Equity

You need to keep at least 20% equity in your home to qualify for a home equity loan. To determine your equity percentage, subtract your mortgage balance from your estimated home value (find the latter on a real estate site). Then divide the result by your estimated home value to arrive at a percentage. The more equity you have, the better your chances of scoring a loan with favorable terms, and the easier it is to handle your financial commitments.

Build a Strong Credit Score

A credit score of 680 is often the starting point when lenders are considering home equity loan applicants, but the higher, the better. A robust credit score is a sign of financial prudence and can translate to more attractive loan rates. Those with a history of timely payments, low credit balances, and a diverse credit portfolio are more likely to secure favorable terms. Focusing on your credit score before you apply for a home equity loan is a smart move that can lead to long-term savings on interest.

Manage Debt-to-Income Ratio

Your DTI ratio will be carefully considered by a potential lender. They generally accept a DTI under 50%, but a ratio below 36% is preferred. You can determine your DTI by totaling your monthly debts and dividing by your gross monthly income. To manage your DTI, consider chipping away at your current debt, boosting your income, or both. A lower DTI not only increases your likelihood of approval but also sets the stage for more favorable loan terms.

Obtain Adequate Property Insurance

It’s a good idea to give your property insurance a checkup before you apply for a home equity loan. This is especially important if you live in an area that’s prone to natural disasters, like tornados or severe winter storms. Having solid coverage not only protects your investment but also gives your lender peace of mind. Check that your policy is up to date and meets your lender’s requirements, which may include flood insurance, depending on your location.

Useful Tools & Calculators

Running the numbers on a home equity loan can help you get a feel for how borrowing might affect your financial situation. Fortunately, online tools can do the math for you. Here are a few of our favorite calculators.

Closing Costs and Fees

Closing costs for home equity loans usually fall between 2% and 5% of the loan amount. These fees cover a long list of expenses, from an appraisal to the title search and more. While no-closing-cost home equity loans are out there, they often come with higher interest rates. It’s crucial to include a comparison of closing costs when you are looking at offers from multiple lenders to find the best deal.

Tax Deductibility of Home Equity Loan Interest

Here’s a potential tax break: The interest on your home equity loan might be tax-deductible if you use the money to make significant home improvements, or to buy or build a home. Married couples filing jointly can deduct the interest on up to $750,000 of qualified home equity loans, while single filers can deduct the interest on loans up to $375,000. To claim this deduction, you’ll need to itemize your deductions on your tax return, so you may want to consult a tax advisor to get advice tailored to your financial situation.

Alternatives to Home Equity Loans

A home equity lines of credit (HELOC) and a cash-out refinance are two popular alternatives to home equity loans. Each of these options has its own unique features and eligibility requirements — and both use your home as collateral.

Take a quick look at a HELOC vs. a home equity loan and a cash-out refi:

The Takeaway

Home equity loans can help you capitalize on your home’s equity to get cash you can use to pay for home improvements or debt consolidation. But they also come with risks. If you miss payments, you could experience foreclosure. To get the best home equity loan rate, focus on building a strong credit score, managing your DTI ratio, and making sure you have enough property insurance. Shop around and check rates at multiple lenders to find a loan that aligns with your long-term financial goals.

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.

Compare home equity loan rates in Columbia.

Introduction to Home Equity Loan Rates

Home equity loan interest rates are a key consideration when you’re thinking about how to get equity out of your home in Columbia, South Carolina. We’ll help you understand what they are, how they can affect your finances, and what you can do to get the best rate and find the right type of home equity loan for your personal situation.

First step? Make sure you understand what a home equity loan is and how it differs from other ways of borrowing against your home’s equity.

How Do Home Equity Loans Operate?

A home equity loan is technically a second mortgage that uses your home as collateral. The loan is disbursed in one lump sum, and you immediately begin repaying it in monthly installments over the loan term, typically five to 30 years. Because the loan is secured by your home’s equity, these loans usually offer lower interest rates than unsecured personal loans. The interest rate tends to be fixed, which can make it easier to budget for monthly payments. To qualify for a home equity loan, you’ll need at least 20% equity in your home.

To get a sense of how much you might be able to borrow, use a home equity loan calculator.

Where Do Home Equity Loan Interest Rates Originate?

Home equity loan interest rates are the result of a variety of economic and personal factors. The policies of the Federal Reserve have a significant impact on the cost of borrowing. Lenders adjust their rates based on the prime rate, which is influenced by the Federal Reserve’s decisions. Your credit score and debt-to-income (DTI) ratio are also important; generally, the better your credit score, the lower the interest rate you’ll receive. Loan amount and the repayment term you choose also play a role.

How Interest Rates Impact Affordability

The interest rate you lock in can make a world of difference in how manageable a home equity loan is over time. Even the slightest change in rates can add up to significant extra interest. Consider a $100,000 home equity loan with a 15-year repayment period. At an 8.50% rate, your monthly payment would be $984, and the total interest paid would amount to $77,253. But, at 9.50%, that monthly payment jumps to $1,044, and the total interest paid skyrockets to $87,961. That’s an extra $10,700 in interest alone over the life of the loan. Both the interest rate and the loan term are important factors. Take a look at the chart below, which shows you how different loan terms and rates affect monthly payments for varying loan amounts.

Home Equity Loan Rate Trends

The trends in home equity loan rates can be a bit like the weather — blowing hot and cold. The prime rate, a key benchmark for home equity loan rates, has seen some significant ups and downs. For example, it was as low as 3.25% in 2020 and as high as 8.50% in 2023. These changes have a direct impact on the rate you qualify for. Just like when you obtained your original home loan, if you have the flexibility to wait for a lower rate, keeping an eye on economic conditions and the prime rate can help you time your application to the moment that feels right for you.

How to Qualify for the Lowest Rates

To snag the lowest possible home equity loan rate, you need to be proactive. Take these steps before applying for a home equity loan.

Maintain Sufficient Home Equity

To be eligible for a home equity loan, it’s important to have at least 20% equity in your home. Calculating your equity is simple: Subtract your outstanding mortgage balance from your home’s estimated value, then divide the result by your home value to arrive at a percentage of equity. For instance, if your mortgage balance is $400,000 and your home is valued at $550,000, your equity totals $150,000. Divide that by $550,000, and you have an equity level of 27%.

Most lenders permit borrowing up to 85% of your equity, which in this case could mean a potential loan of $127,500. It’s a smart move to ensure you have ample equity not only for favorable loan rates but also to steer clear of foreclosure risks. If you’re close to 20% equity but not quite there, making extra payments toward your loan principal can help you hit the mark faster.

Build a Strong Credit Score

To snag enviable home equity loan rates, set your sights on a credit score of 680 or higher. Many lenders even look for 700 and above. A track record of timely payments shows lenders you’re the responsible sort they love to work with. If your score isn’t quite stellar, chip away at your debts, challenge any credit report errors, and keep your credit card balances in check.

Manage Debt-to-Income Ratio

Your DTI ratio is a significant piece of the puzzle when it comes to qualifying for a home equity loan. Lenders generally look for a DTI ratio under 50%, with an even better chance of approval if it’s 36% or lower. You can calculate this ratio by dividing your total monthly debt payments by your gross monthly income. To improve your DTI, consider strategies like paying off high-interest debts, boosting your income, or a combination of both. Not only will this make you a more appealing borrower, but it could also lead to a lower interest rate.

Obtain Adequate Property Insurance

Property insurance is a must-have for most home equity loans, as it is for most mortgages. It’s a safety net for you and your lender in case of damage. Lenders often ask for proof of insurance before giving the green light on your loan, and it’s crucial to keep that coverage throughout the loan term. In Columbia, having the right insurance can not only help you meet lender requirements but may also help you snag the best home equity loan rate.

Useful Tools & Calculators

Online calculators can help you estimate your monthly payments and total interest costs, making a comparison of different home equity loan offers a breeze. Try a home equity loan calculator or, if you’re exploring a home equity line of credit, a HELOC calculator.

Closing Costs and Fees

Closing costs for home equity loans typically range from 2% to 5% of the loan amount. The itemized tab tends to include the usual suspects: appraisal, credit report, document preparation, origination, notary, title search, and title insurance.

Recommended: HELOC vs. Home Equity Loan

Tax Deductibility of Home Equity Loan Interest

The interest you pay on a home equity loan may be tax deductible if the proceeds are used to buy, build, or substantially improve the home. If you’re married and filing jointly, you can deduct interest on up to $750,000 of qualified home equity loans. For single filers, the loan limit is $375,000. To claim the deduction, you must itemize your deductions on your tax return. This tax benefit is currently set to expire after 2025, but it could be extended. Consult a tax advisor to see how this deduction may apply to your specific financial situation.

Alternatives to Home Equity Loans

There are other ways to tap into your home’s equity, so it’s worth considering these if you’re thinking about a home equity loan. A home equity line of credit (HELOC) or a cash-out refinance could be a good fit.

Here’s a quick look at a cash-out refinance vs. a home equity line of credit and a home equity loan:

The Takeaway

If you’re thinking about a home equity loan, start by getting your financial house in order. That means building a strong credit score and managing your debt-to-income ratio. You’ll also need to make sure you have adequate property insurance, as that can affect the rates you’re offered. Use online tools to estimate costs, and consider alternatives like a HELOC or a cash-out refinance before you commit. With a little research and good credit habits, you should be well positioned to obtain a loan that’s friendly to your finances.

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.

Compare home equity loan rates in Modesto.

Introduction to Home Equity Loan Rates

Welcome to our comprehensive guide to home equity loan rates and how to get equity out of your home in Modesto, CA. We’re here to help you understand the factors that influence the rate you might be offered and share tips on how to secure the best deal. Home equity loans are a valuable financial tool for homeowners, allowing you to borrow money for renovations, education, and debt consolidation. We’ll break down the process, from understanding the interest rates to comparing offers from different lenders, to help you make informed decisions about your financial future.

How Do Home Equity Loans Work?

Your first step: understand exactly what a home equity loan is. A home equity loan is a type of second mortgage that uses your home as collateral, providing a lump sum of money for large purchases or debt consolidation. Funds are disbursed all at once and repaid in equal monthly installments over a term ranging from five to 30 years. Because home equity loans use the equity in your home as collateral, they usually offer lower interest rates than unsecured personal loans. The interest rate is typically fixed, which is good for borrowers who prefer a consistent and predictable repayment structure.

To qualify, homeowners should have at least 20% equity in their primary residence. A home equity loan calculator can give you a sense of how much you might be able to borrow.

The Origin of Home Equity Loan Interest Rates

Interest rates on different types of home equity loans are determined by a variety of factors, including the current economic climate and your personal financial situation. The Federal Reserve’s policies can affect lending rates. Lenders set home equity loan rates based on the prime rate, which is driven largely by the Fed’s decisions. Any change to the prime rate can have a direct impact on the interest rates for home equity loans.

How Interest Rates Impact Home Equity Loan Affordability

As with the rate you obtained on your original home loan, the interest rate you secure for your home equity loan plays a pivotal role in the loan’s long-term affordability. Even a seemingly minor difference in rates can add up to significant extra costs. A $100,000 home equity loan with a 15-year repayment term at 8.50% interest would mean a monthly payment of $984 and a total interest of $77,253. Bump that rate up to 9.50%, and the payment jumps to $1,044, with a total interest of $87,961. The takeaway? The borrower with the higher rate ends up shelling out $10,700 more in interest over the life of the loan.

The numbers change depending on how much you borrow, but the importance of the rate remains the same. Here are different monthly payment amounts and total interest costs for a $75,000 home equity loan that is repaid over 20 years.

Home Equity Loan Rate Trends

Predicting the exact trajectory of interest rates is a bit like forecasting the weather — there are many moving parts. The prime rate, which is the reference point for home equity loan rates, has seen its fair share of ups and downs. In 2020, it was a mere 3.25%, while in 2023, it peaked at 8.50%. These fluctuations can have a real impact on the rates you encounter in Modesto. To capitalize on the current market, be sure to compare offers from different lenders. Having a sense of the prime rate’s history can give you some perspective on current rates.

Fluctuations like these strongly impact Modesto’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

To secure enviable home equity loan rates, you need a game plan. Consider this your to-do list:

Maintain Sufficient Home Equity

To be eligible for a home equity loan, you need to have at least 20% equity in your home. Calculating your equity is as simple as subtracting your mortgage balance from your home’s estimated value, which you can find on a real-estate site. Let’s say your mortgage balance is $400,000 and your home is now valued at $550,000. That means you’ve got $150,000 in home equity. Divide your equity number by your home’s estimated value to arrive at a percentage of equity. That’s the magic number to keep in mind if you’re aiming for the best home equity loan rates. You can boost your equity over time by making regular mortgage payments and sprucing up your home.

Build a Strong Credit Score

To snag an enviable home equity loan rate, a robust credit score is key. Lenders are often looking for a score of 680 or even 700. A high score speaks volumes about your financial prudence and reassures a lender about your risk level. The result? Sweeter interest rates. So make timely payments, keep credit card balances in check, and steer clear of new debt. Also give your credit report a regular once-over to catch any errors — disputing them can nudge your score in the right direction.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a big deal when it comes to securing a home equity loan. Lenders typically look for a ratio that’s under 50%, with 36% or less being the sweet spot. This ratio is a comparison of your monthly income to your monthly debt commitments. (To compute your DTI ratio, tally all your monthly debt payments and divide by your gross monthly income.) A lower DTI is a sign that you’re in a good place to manage monthly loan payments. If your ratio is around 50%, consider paying down your existing debts or finding ways to increase your income before you apply.

Obtain Adequate Property Insurance

Property insurance is a standard requirement for home loans, so if you haven’t updated yours in a while, give it a look to make sure you are fully protected. Having the right insurance coverage not only safeguards you from extra expenses but also streamlines the loan application process. If you happen to reside in a high-risk area, it’s wise to explore insurance policies that align with your potential lender’s requirements.

Useful Tools & Calculators

Using online resources like a home equity loan calculator can help you get a rough idea of how much you might be able to borrow and what your monthly payments could look like. These are three useful calculators if you’re considering a home equity loan or its cousin, a home equity line of credit (HELOC).

Closing Costs and Fees

When it comes to closing costs for home equity loans, you’re typically looking at a range of 2% to 5% of the loan amount. These costs include some things that you’ll be familiar with from your original home purchase process: fees for the appraisal, credit report, document preparation, loan origination, notary, title search, and title insurance.

Tax Deductibility of Home Equity Loan Interest

You’ll be pleased to know that the interest on a home equity loan could be tax-deductible if the funds are used to buy, build, or significantly improve your home. As of 2025, those filing jointly can deduct interest on up to $750,000 of qualified home equity loans, and single filers can claim up to $375,000. To take this deduction, you need to itemize when filing your taxes. Chat with a tax advisor about future tax years and to see how this could play out in your specific situation.

Alternatives to Home Equity Loans

In addition to a HELOC, a cash-out refinance is another option when you’re looking to borrow against your equity. The latter is a special kind of mortgage refinance. Here are the details:

Home Equity Line of Credit (HELOC)

A HELOC is like a credit card: You’re approved to borrow up to a certain amount and you borrow as needed up to that amount. During the initial “draw” period on the HELOC, which can be up to 10 years, you only have to pay interest on the money you borrow. You can use a HELOC interest-only calculator to get a sense of what those payments might look like.

Once the draw period ends, you repay all that you have borrowed, plus interest, over a period of 5 to 20 years. At this point, you might be using a HELOC repayment calculator to help keep tabs on estimated payments.

HELOCs have variable interest rates, which means your payment can go up or down as the market changes. Lenders typically require a 680+ credit score (700 is ideal) and a DTI ratio of 50% or less (36% is the ideal). A HELOC is a good option if you’re not sure how much you need to borrow or if you don’t need to borrow everything at once. Here’s a quick look at a HELOC vs a home equity loan:

Cash-Out Refinance

With a cash-out refinance, you’re swapping your current mortgage for a larger one and pocketing the difference between the old and new mortgage in cash to use as you wish. The exact amount depends on your home equity, with most lenders green-lighting up to 80%. To qualify, a credit score of 620 or above and a DTI of 43% or less are typically the benchmarks. You can choose between fixed or variable interest rates, with variable rates potentially offering access to more equity. When you compare a cash-out refinance vs. a home equity line of credit, one difference is that the refi leaves you with just one monthly payment to keep track of.

The Takeaway

When you’re ready to apply for a home equity loan in Modesto, take the time to build your credit, manage your debt-to-income ratio, and secure property insurance. These factors can all impact the rates you’re offered. Use online calculators to estimate your monthly payments and understand the financial impact of taking on a new loan. Keep in mind that closing costs for home equity loans can be 2% to 5% of the loan amount. You may also be able to deduct the interest you pay on a home equity loan from your taxes. Consider the benefits of a HELOC or cash-out refinance, and weigh the pros and cons of each option to help you secure the best home equity loan rates for your financial goals.

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.