Compare home equity loan rates in Michigan.

Introduction to Home Equity Loan Rates

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

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

How Do Home Equity Loans Work?

If you’ve been diligently paying off your home loan, you have built up equity in your property. A home equity loan allows you to borrow against this and receive a lump sum of cash that you can use for any purpose. The interest rate is usually fixed, which can make repayment easy to plan for; monthly payments will remain the same over the entire repayment term, which may be anywhere from 5 to 30 years.

To qualify for a home equity loan, you’ll need to have at least 20% equity in your primary residence. Home equity loans can be used for a variety of purposes, including home improvements, education, medical bills, and debt consolidation. (If you’re wondering what is a home equity line of credit, we’ll get to that — and how it differs from a home equity loan — below.)

Where Do Home Equity Loan Interest Rates Originate?

Home equity loan interest rates are a product of various economic elements, with the prime rate playing a significant role. The prime rate is what banks charge their most creditworthy customers. Federal Reserve policy decisions on interest rates drive banks’ prime rates. So if you tune into the news you may have a hint of where home equity loan rates in Michigan may be going.

How Interest Rates Impact Home Equity Loan Affordability

When it comes to any loan, the interest rate is a big deal. Even a 1% difference in the rate can change your monthly payment and the total amount you’ll pay over the life of the loan. For example, on a $60,000 home equity loan with a 10-year term, a 1% difference in the interest rate (from 7.00% to 8.00%) could mean an extra $31 per monthly payment and an additional $3,758 in interest paid over the life of the loan.

Home Equity Loan Rate Trends

By keeping an eye on changes in the prime rate, you can get a feel for when the time might be right to apply for a home equity loan. The chart below shows the average prime rate in the U.S. in recent years, from a modest 3.25% in 2020 to a peak of 8.50% in 2023. You can also see how the rate has fluctuated across more than 50 years.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

There are several factors beyond the prime rate that influence exactly what rate any individual borrower in Michigan may be offered. Banks and other lenders use these details to determine your creditworthiness and the level of risk associated with making a loan.

Credit Score

If you’ve got a solid track record of making your payments on time, you’re in a great position. Lenders are more likely to offer you a lower interest rate if you’ve shown that you’re a responsible borrower. Most lenders in Michigan will want to see a credit score of at least 680 for a home equity loan, but the higher your score, the better your chances of getting a good rate.

Home Value

Lenders typically determine the value of your property by ordering an independent appraisal to establish the exact amount you can borrow. This process helps ensure that you have enough equity in your home to qualify for the loan you want, and that the loan amount you request is below the appraised value of the home.

Loan-to-Value (LTV) Ratio

Once you and a lender know your home’s appraised value, the loan-to-value (LTV) ratio can be determined. Your combined LTV ratio is calculated by dividing the loan amount you’re seeking plus any remaining balance on your first mortgage by the appraised value of the home. The maximum combined LTV lenders typically allow for home equity loans is around 85%.

Home Value Stability

The ebb and flow of home values in your corner of Michigan can significantly impact a lender’s decision about how much to lend and at what rate. When the housing market is up, lenders are often more willing to greenlight larger loans. But when values dip, the lending landscape can become more conservative.

Property Location

If your property is located in a high-risk area, such as an area prone to tornados or flooding, you may be charged a higher interest rate. This is because these areas are more likely to experience property damage and financial losses, which can lead to a higher risk of default.

Lender Policies

When it comes to choosing the best home equity loan, the policies of various lenders can have an impact on the interest rate you receive. To make sure you’re getting the best deal, take the time to shop around and compare home equity rates in Michigan, as well as fees and closing costs, from multiple lenders. This can help you save a significant amount of money over the life of your loan.

How to Qualify for the Lowest Rates

Now that you understand the factors lenders weigh when deciding what interest rate to offer — or whether to lend to you at all — you can take these steps to make sure that you get the best loan terms possible:

Build a Strong Credit Score

Of course you’ll need to pay your bills on time to cultivate a healthy credit score. But you’ll also want to periodically check your credit report for any inaccuracies (yes, mistakes do happen). And try to avoid using the max on all your credit lines at one time.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio plays an important role in determining your eligibility. Typically, lenders like to see a DTI ratio that falls within a range of 36% to 50% for home equity loans. To compute your own DTI ratio, add up all your monthly debts (car payment, student loan, etc.) and divide that by your gross monthly income. If you’re spending more than half your income on debt, you may need to dial that back before applying for a loan.

Obtain Adequate Property Insurance

When you own a home, having enough property insurance is a must. And if you want to take out a home equity loan, it’s non-negotiable, particularly if you live in a flood-prone area.

Maintain Sufficient Home Equity

When you’re considering a home equity loan in Michigan, you’ll need to keep at least 20% equity in your home, as noted above. Remember that when you’re figuring out your home equity, you should use your home’s appraised value, not its sale price when you originally made the purchase.

Fixed vs. Variable Interest Rates

With a home equity loan, you’ll typically have a fixed interest rate. This means you’ll know exactly what your monthly payment will be for the entire life of the loan. While fixed rates provide peace of mind, they can sometimes be higher initially than variable rates, which can start lower but may increase over time.

Tools & Calculators

Online tools and calculators can help you get a precise estimate of the payments you’ll make for your home equity loan or home equity line of credit (HELOC). You can easily run different scenarios through the calculators to see how, say, different loan amounts or interest rates might change your monthly payment amount. Here are a few of our favorite calculators:

Closing Costs and Fees

Interest rates are the main driver of home equity loan costs in Michigan, but each lender has its own fee and closing cost schedule. Closing costs can be from 2% to 5% of the loan amount. Make sure you look at all the costs associated with a potential loan and compare them head to head before selecting a lender and loan package.

Tax Deductibility of Home Equity Loan Interest

Good news: The interest you pay on a home equity loan can be a tax write-off if the funds you borrow are used for home improvements (so keep those receipts). Couples filing joint tax returns can deduct interest paid on up to $750,000 of qualified home equity loans, while single filers are permitted to deduct interest paid on loans of up to $375,000. To claim this benefit, you’ll need to itemize your deductions. For the nitty-gritty on maximizing your tax benefits, a sit-down with a tax advisor is the way to go.

Alternatives to Home Equity Loans

In Michigan, homeowners have a variety of alternatives to traditional home equity loans. These different types of home equity loans include home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances. Let’s look at the details, as they are all different:

Home Equity Line of Credit (HELOC)

The qualification process for a home equity line of credit (HELOC) is similar to that for a home equity loan but in practice, a HELOC functions more like a credit card. You get a lender’s permission to borrow up to a certain limit, but you only pay interest on the portion of that credit line you actually use. As you weigh the HELOC vs. home equity loan decision remember that the HELOC’s interest rate is usually variable and so can increase.

Home Equity Conversion Mortgage (HECM)

An HECM, or Home Equity Conversion Mortgage, is a government-insured reverse mortgage program that enables homeowners who are 62 years of age or older to withdraw some of the equity in their home. You can choose to receive the money from an HECM as a lump sum, fixed monthly payments, a line of credit, or a combination of these. Unlike a home equity loan, HECMs do not require borrowers to make monthly mortgage payments. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

A cash-out refinance is a special type of mortgage refinance. With a cash-out refi, you’ll take out a new mortgage that’s larger than your existing one. You’ll then pay off the old loan and be left with extra cash to use as you please. Considering a cash-out refinance vs. a home equity line of credit? One thing to remember is that a cash-out refi leaves you with one monthly payment instead of two, which some borrowers like. However, if your existing mortgage rate is well below current rates in Michigan, you may find that doing a refinance won’t save you money on interest charges. Use a home mortgage calculator to run the numbers before you proceed.

The Takeaway

Understanding home equity loan rates and the many factors that influence them is key to making a smart financial decision about how to borrow money. By comparing multiple lenders, working to cultivate a strong credit score, and considering alternatives to home equity loans, you can get the rate and terms that are most favorable for you.

FAQ

What will you be paying each month on a $50,000 home equity loan?

If you’re thinking about taking out a $50,000 home equity loan, it’s important to understand that the monthly payment could vary depending on the interest rate and loan term. A 6.00% rate and a 20-year term would mean a monthly payment of $358. An 8.00% interest rate and a 10-year term would mean you pay $607 per month.

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

The monthly payment on a $100,000 home equity line of credit (HELOC) can fluctuate based on how much of the line of credit you have used. If you used all $100,000 and repaid it over a 20-year term at 7.00% interest, you would pay $775 per month.

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

When you’re looking at a $25,000 home equity loan, remember that your payment is determined by the interest rate and the loan term. To get a clear idea of what your monthly payment might be at different terms and rates, use a home equity loan calculator.

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

At a 7.00% interest rate, borrowing $30,000 with a home equity loan would cost you $348 per month if you repaid the loan with interest over 10 years.

What might disqualify you from getting a home equity loan?

Things that could hold you back from getting a home equity loan include a credit score that’s too low, not enough equity in your home, a high debt-to-income ratio, and inadequate property insurance.

What are the advantages of a HELOC?

A HELOC, or home equity line of credit, offers flexibility. You only borrow what you need at any given time, and you only pay interest on the amount of the credit line that you have used. This makes HELOCs a popular choice for homeowners who know they need some cash on hand —say, for a home renovation — but aren’t sure exactly how much.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q424-082

Compare home equity loan rates in New Mexico.

Introduction to Home Equity Loan Rates

Home equity loan rates in New Mexico will be an important factor if you’re thinking about how to get equity out of your home. But to grasp just how important rates are, it helps to understand how home equity loans work in the first place — how lenders decide what rate to offer prospective borrowers and how borrowers qualify for the loan and repay it. A thorough understanding of what is a home equity loan will help you make well-informed financial decisions. So study this guide. And if you’re wondering what is a home equity line of credit, we’ll get to that, too.

How Do Home Equity Loans Work?

Different types of home equity loans are a popular way for homeowners to access the equity they have built up in their home by making consistent payments on home loans over the years. You can use the money from a home equity loan for just about any expense, including home renovation, debt consolidation, and education costs.

This particular type of loan is secured by the equity that you’ve built up over time in your home, making it a lower-risk loan option for lenders to consider and approve than an unsecured loan. For this reason, home equity loan rates in New Mexico, as elsewhere, tend to be lower than rates for personal loans.

Unlike a home equity line of credit (HELOC), which functions as a revolving credit account, a home equity loan provides the borrower with a lump sum of cash up front. Repayment of the principal balance and interest begins immediately, typically with a fixed interest rate.

The table below shows you how that monthly payment will change based on three factors: your loan amount, interest rate, and loan term.

What’s even more striking is the change in the total interest you’ll pay over the life of the loan. For example, a 1% difference in interest rate on a $100,000 home equity loan repaid over 20 years comes to more than $14,000 in interest, either paid or saved!

Where Do Home Equity Loan Interest Rates Come From?

The interest rates that lenders charge on home equity loans are influenced by a number of different factors, including the prime rate and the current economic climate, among other considerations.

New Mexico Home Equity Loan Rate Trends

By gaining an understanding of the historical trends in home equity loan interest rates, borrowers can potentially anticipate upcoming fluctuations in the rates, enabling them to make more informed financial decisions regarding their home equity loans. This is particularly relevant when considering the current home equity rates in New Mexico.

Historical Prime Interest Rates

If you’re thinking about getting a home equity loan, examining historical U.S. prime rates can give you some perspective on the prevailing interest rate trends. Below, you’ll see an example of how rates shift incrementally over a brief period of several years, as well as the ebb and flow over many decades.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

Fortunately the prime rate isn’t the only thing that lenders factor into the decision about what interest rate to offer an individual borrower. There are a number of other important factors and many of them are within your control.

Credit Score

A robust credit score can be instrumental in securing more advantageous loan terms and potentially lower interest rates. Generally speaking, for a home equity loan in New Mexico, you’ll need a minimum credit score of 680, and higher is better.

Home Value

Don’t be surprised if a prospective lender requests an appraisal of your home. The home’s value will help determine both how much equity you have in the property (you need a minimum of 20% equity to get a home equity loan) and how much you can borrow against your property.

Loan-to-Value (LTV) Ratio

The loan-to-value ratio (LTV) is a crucial factor that lenders consider when determining the interest rate offered on a New Mexico home equity loan. It represents the percentage of the home’s appraised value that the lender is willing to lend against.

Once you and the lender know your home value, you can determine your LTV ratio. Most lenders will let you borrow up to 85% of your home’s value, though the exact number can vary. The higher your LTV, the higher your interest rate is likely to be.

In the case of a home equity loan, the combined amount of any remaining first mortgage and your new home equity loan will need to be under 85%. You can calculate your combined loan-to-value ratio (CLTV) easily:

  (Current mortgage balance + proposed home equity loan amount) ÷ Home appraised value = CLTV

Home Value Stability

Stable home values are reassuring to lenders, and you can expect better rates and more liberal loan amounts in a real estate market where prices are on the upswing. If your local market is depressed, lenders will be more cautious and interest rates may be higher.

Lender Policies

Different lenders have varying policies that affect the interest rates they offer. These policies can have a significant impact on the overall cost of borrowing, so it is crucial for borrowers to carefully consider and compare the terms offered by lenders before making a decision.

Property Location

The geographic location of the real estate in question can have a significant bearing on the interest rate offered by lenders, with areas that are considered to be at higher risk for natural disasters such as wildfires or tornados often being offered higher interest rates.

How to Qualify for the Lowest Rates

In order to secure the most favorable home equity loans in New Mexico, it’s helpful to take these steps:

Build a Strong Credit Score

Taking good care of your credit score can potentially help you unlock more favorable loan terms, saving you a significant amount of money over the life of your loan. This means checking your credit report periodically, correcting any inaccuracies, and not using the entire credit line on your credit cards. Your smartest move, of course, will be paying your bills on time.

Manage Debt-to-Income Ratio

A lower debt-to-income (DTI) ratio can significantly enhance your prospects of qualifying for a home equity loan. Your DTI is the total of all your monthly debts (including your car payment or student loan payment) divided by your gross monthly income. To qualify for a home equity loan in New Mexico, you’ll typically need a DTI on the lower end of the spectrum: 36% or less. But some lenders may allow a DTI as high as 50%.

Obtain Adequate Property Insurance

It is crucial to ensure that your property is adequately insured — it will safeguard your investment and help ensure you can pass muster with a potential lender.

Maintain Sufficient Home Equity

As noted above, you need 20% equity in your home to use your property as collateral on a home equity loan.

Fixed vs. Variable Interest Rates

Home equity loans are typically distinguished by fixed interest rates and predictable monthly payments. In contrast, a HELOC typically has a variable interest rate. The introductory rate on a HELOC might be lower than on a home equity loan, but remember that variable rates can go up — and so, potentially, will monthly payments. Opting for fixed rates can make setting and sticking to a monthly budget easier.

Tools & Calculators

There are a variety of helpful tools and calculators available to assist borrowers in understanding their loan options. Here are three of our favorites:

Closing Costs and Fees

Closing costs and associated fees are important factors to consider when applying for a home equity loan, as they can significantly impact the overall cost of borrowing. Fees can vary depending on the lender, the loan amount, and the borrower’s credit history, so make sure to carefully review them before finalizing a home equity loan agreement. Some fees you might see include origination fees, title insurance and title search fees, and credit report fees. Some lenders offer no-closing-cost loans; it’s important to consider that these loans often come with higher interest rates compared to traditional loans with closing costs.

Tax Deductibility of Home Equity Loan Interest

IRS guidelines determine the tax deductibility of interest paid on loans. Borrowers can deduct the interest paid on the first $750,000 of a mortgage, home equity loan, or HELOC ($375,000 for couples filing separately). Just remember, you’ll need to itemize your deductions to use this benefit.

Alternatives to Home Equity Loans

As we’ve seen, a HELOC is one alternative to a conventional home equity loan. But it’s not the only option. Let’s take a look at several alternatives to home equity loans in New Mexico.

Home Equity Line of Credit (HELOC)

HELOCs provide flexibility, convenience, and versatility in borrowing and repaying, making them a widely popular alternative to traditional home equity loans. The primary advantage of a HELOC is that you only borrow from your credit line what you need at any given time — so you aren’t paying interest on the entire credit line amount if you aren’t using it.

When considering a HELOC vs. a home equity loan, remember that HELOCS can have a variable interest rate, as noted above. So your monthly payment amount may be somewhat unpredictable.

Home Equity Conversion Mortgage (HECM)

HECMs provide a way for homeowners aged 62 and over to access the equity built up in their home without the burden of making regular monthly payments. These government-sponsored reverse mortgages can be a great financial tool for people looking to supplement their retirement income or cover unexpected expenses.

The funds from an HECM can be received as a lump sum, regular payments, or a line of credit. Unlike home equity loans and HELOCs, HECMs don’t require monthly payments; repayment is only necessary when you leave or sell the home. While HECMs generally have higher closing costs and a lengthier processing time than home equity loans and HELOCs, they offer unique benefits. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

Cash-out refinances offer homeowners a way to tap into their accumulated home equity while simultaneously refinancing an existing mortgage. This financial strategy works much like a typical mortgage refinance but allows you to borrow an extra amount of cash to use for any purpose, including debt consolidation, home renovations, or even investments. Just remember that if you have a very low rate on your current home loan, refinancing could leave you with a significantly higher rate — so you’ll want to do the math to make sure a refi makes financial sense.

When comparing a cash-out refinance vs. a home equity line of credit one big difference is that the refinance means you’ll have one payment, while with a HELOC, you’ll have two.

The Takeaway

In New Mexico, understanding the most favorable home equity loan (or HELOC) interest rates available can help you make well-informed decisions regarding your financing options. Carefully considering your credit score, home equity level, and other financial obligations before you dive into the home equity loan market is an essential step.

FAQ

What would my monthly payment be on a $50,000 loan?

As a general rule, the monthly payment on a $50,000 home equity loan depends on two primary factors: the interest rate and the loan term. If you borrowed $50,000 at 8.00% interest and repaid it over 20 years, your monthly payment would be $418.

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

The monthly payment for a $100,000 HELOC can vary based on the current interest rate and the amount of the credit line that is drawn. If you borrowed $100,000 at a rate of 7.00% and paid it back over 20 years, your monthly payment would be $775.

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

Paying off a $25,000 home equity loan at 7.00% interest over 10 years would cost you $290 per month. But if either the interest rate or repayment term (or both) change, your payment amount would change, too.

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

When considering a $30,000 home equity loan, you should understand that the repayment amount is influenced by two key factors: the interest rate you obtain and the chosen repayment term. Using a home equity loan calculator can help you compute the precise payment amount depending on your specific situation.

What could disqualify you from getting a home equity loan?

There are several important factors that can disqualify you from being approved for a home equity loan, including having poor credit, lacking sufficient equity in the home, and having a high debt-to-income ratio. Be sure to carefully consider these factors and consult with a financial advisor before applying for a home equity loan.

What are the benefits of a HELOC?

HELOCs are a popular choice for borrowers seeking financial flexibility and cost savings due to their flexible borrowing options, lower initial costs, and the ability to pay interest solely on the amount of the credit line that is used.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q424-091

Compare home equity loan rates in New Hampshire.

Introduction to Home Equity Loan Rates

In this guide, you’ll find the most current information on home equity loan rates in New Hampshire, including historical rate trends and the factors that influence the rates you may be offered. We’ll help you find the best rate in the Granite State. First, let’s make sure we cover what is a home equity loan.

How Do Home Equity Loans Work?

When you secure a home equity loan, your home becomes the collateral. This often means you can borrow money at a lower interest rate than if you were to get a personal loan. But it also means you have a second mortgage (assuming you’re still paying your first mortgage). Home equity loan interest rates are usually fixed, so if you like a predictable monthly payment, this could be a good fit for you. To qualify for a home equity loan, you typically need at least 20% equity in your primary residence.

In New Hampshire, and elsewhere, you can use a home equity loan for all sorts of things, from sprucing up your space to tackling education expenses, medical bills, or consolidating debt. If you’re wondering what is a home equity line of credit (HELOC), and how it’s different from a home equity loan, stay tuned — we’ll get to that momentarily.

The Source of Home Equity Loan Interest Rates

Home equity loan interest rates drive the overall cost of your loan. These rates aren’t just pulled out of thin air. The Federal Reserve sets its rates which in turn influence the prime rate — the interest rate banks offer to their most creditworthy clients.

How Interest Rates Impact Home Equity Loan Affordability

It’s important to think about how interest rates can affect the cost of your loan over time. For example, a 1% difference in interest rates on a 20-year loan can make a difference in your monthly payment. But it also makes a difference in how much interest you’ll pay over the life of the loan. Look at how that plays out if you borrow $30,000 and repay the funds plus interest over 20 years:

•  At 6.00%: The monthly payment would be $215 and the total interest paid would be $21,583.

•  At 7.00%: The monthly payment would be $233 and the total interest paid would be $25,822.

•  At 8.00%: The monthly payment would be $251 and the total interest paid would be $30,224.

Home Equity Loan Rate Trends

Keep an eye on the prime interest rate as you’re determining how to get equity out of your home. It’s a solid barometer for where New Hampshire home equity loan rates might be headed.

In the chart below, you’ll find some recent history, showing how rates shifted from 2018 to 2023. And then the graphic shows a much longer trajectory, over 50-plus years.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

The prime rate isn’t the only factor driving the interest rate you’ll be offered if you apply for a home equity loan. There’s a long list of other factors that lenders will carefully assess to determine the level of risk associated with your application and offer you a rate that reflects that risk.

Credit Score

You probably recall that your credit score was vitally important when you took out your home loan to purchase your home. If you’re someone who’s been diligent about making timely payments, you’re in luck. Lenders are more inclined to offer you better interest rates. For a home equity loan, they usually look for a credit score of 680 or higher, but many prefer to see 700 or above.

Home Value

You can expect to need a home appraisal if you apply for a home equity loan, as the market value of your property will determine how much equity you have in your home (remember, most lenders will require you have 20% equity in order to get the loan).

Loan-to-Value (LTV) Ratio

Your home value is also important for computing your loan-to-value (LTV) ratio, which helps determine how much you’ll be allowed to borrow. You can compute your personal number by adding the amount you wish to borrow to the amount you currently owe on your mortgage. Then divide that total by the appraised value of your home. Multiply the result by 100 and you’ll have what’s called a “combined LTV,” or CLTV. The maximum LTV most lenders will allow for a home equity loan is typically 85%. If you’re unsure about how much you might be allowed to borrow, you can use a home equity loan calculator to get that number.

Home Value Stability

The stability of home values is another thing that lenders consider when setting rates. When the market is on the upswing, lenders are more likely to greenlight larger loans. But when the housing market takes a turn, lenders may tighten their belts, resulting in stricter criteria and smaller loan amounts.

Property Location

If your property is located in an area that is deemed at high risk for natural disasters, higher interest rates may result, as lenders consider these areas riskier bets.

Lender Policies

Policies set by individual lenders can have a significant impact on the interest rates borrowers are offered, and each lender is unique. That’s why you’ll want to compare interest rates, fees, and closing costs from a few different lenders during the loan application process.

How to Qualify for the Lowest Rates

Take these steps and you’ll better your chances of finding your lowest available home equity loan rate in New Hampshire.

Build a Strong Credit Score

Elevating your credit score can be the key to unlocking more favorable interest rates. Keep tabs on your score. Check your credit report for inaccuracies and if you find any, request a correction. Pay your bills on time, of course. And don’t max out every credit line you have.

Manage Debt-to-Income Ratio

The debt-to-income (DTI) ratio, which compares your monthly debt obligations to your gross monthly income, is a key factor in determining your eligibility for a loan. The typical DTI limit for a New Hampshire home equity loan is 36% to 50%, so it’s important to manage your DTI to ensure you meet the lender’s requirements.

Obtain Adequate Property Insurance

It’s a standard requirement for any home loan to have proper property insurance, and home equity loans are no exception. These policies — including special flood insurance policies — are designed to protect both you and the lender from the unexpected.

Maintain Sufficient Home Equity

In New Hampshire, and across the country, you need to keep at least 20% equity in your home to qualify for a home equity loan. This will help ensure you’re not borrowing more than you can afford.

Fixed vs. Variable Interest Rates

Home equity loans typically come with fixed interest rates, which means you’ll pay the same amount every month over the life of the loan. While fixed rates offer stability, they may start out higher than variable rates.

Tools & Calculators

As you search for the best home equity loan for you, online calculators can help you estimate your future payments. Here are a few you may find useful:

Closing Costs and Fees

Home equity loans typically come with closing costs that hover between 2% to 5% of your loan amount. These may include appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. It’s wise to factor in these fees as you shop around and compare lenders for a New Hampshire home equity loan.

Tax Deductibility of Home Equity Loan Interest

Couples filing joint tax returns can deduct interest paid on up to $750,000 of qualified home equity loans obtained after December 15, 2017, while single filers may deduct interest paid on loans up to $375,000 — that is, provided you use the money to “buy, build, or substantially improve” a home. For the nitty-gritty on how to maximize your tax benefits, a sit-down with a tax advisor is a smart move.

Alternatives to Home Equity Loans

There are different types of home equity loans you might consider if you’re in the market for a home equity loan. You’ll still want to consider current home equity rates in New Hampshire to make an informed choice where most of these options are concerned.

Home Equity Line of Credit (HELOC)

A HELOC is a bit like a credit card, but one that’s backed by your home. It allows you to borrow up to a certain approved amount and only pay interest on the amount of the credit line you actually use. When you compare a HELOC vs. a home equity loan, this is not the only difference you should note. Unlike a home equity loan, a HELOC typically has a variable rate that can change over time, which means your monthly costs might increase, too.

Home Equity Conversion Mortgage (HECM)

An HECM, or Home Equity Conversion Mortgage, is a government-insured reverse mortgage that empowers homeowners aged 62 and older to receive payments from the lender based on their home’s value. Borrowers can opt for a lump sum, regular payments, or a line of credit. And no payments are required until you leave the home. This is in stark contrast to home equity loans and HELOCs, which demand regular payments. While HECMs may have higher closing costs and longer processing times, they offer unique benefits that may be worth exploring. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

A cash-out refinance is a special type of mortgage refinance that allows you to pay off your old mortgage and borrow extra funds to use as you wish. As with a home equity loan, lenders usually allow you to borrow up to 85% of your home’s value. When comparing a cash-out refinance vs home equity line of credit, the main difference, of course, is that the former is a refinance — meaning you’ll be getting a completely new mortgage at current rates in New Hampshire.

The Takeaway

Understanding home equity loan rates and the various factors that influence them can empower homeowners to make smart financial decisions. Utilizing online calculators, presenting your best possible financial profile to prospective lenders, and exploring alternative options such as a HELOC or cash-out refi can help ensure a more secure financial future in New Hampshire.

FAQ

What would my monthly payment be on a $50,000 loan?

A home equity loan of $50,000 would require a monthly payment of $587. That’s assuming an interest rate of 7.25% and a 10-year term. Changing either the rate or term would change the payment amount.

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

For the most accurate estimate of the monthly payment on a $100,000 HELOC, use a HELOC monthly payment calculator. Payments can fluctuate based on the current interest rate and the amount of your credit line you’ve used.

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

A home equity loan of $25,000 would mean a monthly payment of $297, assuming you’re able to secure a 7.50% interest rate and repay the loan over 10 years.

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

When you’re considering a $30,000 home equity loan, the loan term will have a big impact on your monthly payment. Borrow $30,000 at 8.00% and repay it over 10 years and you’ll pay $364 a month. With a 20-year term your payment will be $251. Remember, though, that the longer payment term results in significantly more interest paid over the life of the loan.

What could disqualify you from getting a home equity loan?

There are a number of reasons you might not qualify for a home equity loan, including a poor credit history, not enough equity in your home, a high debt-to-income ratio, and insufficient property insurance. These factors can dramatically affect your ability to get a home equity loan, so it’s important to consider them before applying.

What are the benefits of a HELOC?

HELOCs offer a variety of benefits, including flexible borrowing options, lower interest rates than credit cards, and the ability to pay interest only on the amount of money you are using. They’re a good solution if you know you need money for a project, such as a home renovation, but you don’t know exactly how much it will cost. Plus, the interest you pay on a HELOC may be tax deductible if you borrow money to substantially improve your home.

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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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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