Compare home equity loan rates in Maine.

Introduction to Home Equity Loan Rates

If you’ve been paying off your home loan each month, you’ve likely built up some equity in your house. Maybe you’ve even started to consider how to make use of that equity and specifically, what is a home equity loan and how do you get one? We’ll cover all you need to know about home equity loan rates in Maine, what factors can impact the rate you’re offered, and how to improve your chances of securing a good rate.

And if you’re wondering what is a home equity line of credit and how is it different from a home equity loan, don’t worry — we’ll get to that, too.

How Do Home Equity Loans Work?

A home equity loan uses your home as collateral. If you’re still paying off your home, then a home equity loan would be a second mortgage. Because the loan is secured by your home, it typically offers a lower interest rate than a personal loan. Plus, the interest rate is typically fixed, which can be a win if you like a predictable monthly repayment structure.

To qualify for a home equity loan (or its cousin, a home equity line of credit, or HELOC), you’ll generally need to have at least 20% equity in your primary residence. Once you have the funds, you can use them for all sorts of things, like home renovations, education costs, medical bills, or debt consolidation.

Where Do Home Equity Loan Interest Rates in Maine Originate?

Maine’s home equity loan interest rates are a product of larger economic factors. Federal Reserve policy decisions about interest rates help guide banks as they set their prime rate, which is what they charge their most creditworthy clients. Banks and other lenders then adjust their rates according to borrowers’ individual financial metrics, which we’ll get to in detail below.

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you obtain for your home equity loan will have a major impact on its cost, both monthly and over the life of the loan. The table below shows you how the monthly payment will change based on three factors: your loan amount, interest rate, and loan term.

Home Equity Loan Rate Trends

Once you understand how critically important your interest rate is, you’ll probably start wondering how to get the best rate. Having a basic understanding of the prime rate’s fluctuations is a first step, because it will give you a sense of what kind of movement in the rate that you might be able to expect. As you can see below, since 2018, the prime rate has seen its share of ups and downs, reaching a low of 3.25% in 2020 and a high of 8.50% in 2023.

Historical Prime Interest Rates

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

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

When it comes to home equity loan rates in Maine, there are factors beyond the prime rate at play. Even better: Unlike the prime rate, many of these are within your control.

Credit Score

If you have a strong credit score, you may be able to qualify for a lower interest rate on a home equity loan. Lenders generally look for a credit score of at least 680 to approve a home equity loan application. However, many lenders prefer a credit score of 700 or higher.

Home Value

Lenders will request a professional appraisal to figure out how much your home is worth, which in turn will determine the maximum loan amount you can snag. An appraiser may come to your home, or the bank may use an automated valuation model, which takes into consideration lots of data about your home and the local market.

Loan-to-Value (LTV) Ratio

Once you know your home’s value, you can determine your loan-to-value (LTV) ratio. Most home equity loan lenders require your combined loan-to-value ratio (CLTV) to be 85% — that’s your first mortgage balance plus the amount you want to borrow, divided by your home’s appraised value. Let’s say you currently owe $600,000 on your mortgage and you want to borrow $60,000 for a renovation project. Your home is appraised at $800,000:

At 82.5% CLTV, there is a good chance a lender will approve a home equity loan, but it will be dependent on the lender’s policies, and your other qualifications will need to be favorable. The LTV ratio also matters if you decide to borrow money with a HELOC.

Home Value Stability

When home values seem to be trending upward, lenders approve larger loan amounts. Conversely, when home values are declining, a lender may feel more exposed, which can lead to stricter lending criteria and reduced loan amounts. So keep an eye on what’s happening in the real estate market in your corner of Maine.

Property Location

Living in areas with a higher risk of natural disasters or extreme weather can sometimes mean you’ll face higher interest rates on your home mortgage. Lenders may see these areas as riskier places in which to do business.

Lender Policies

Each lender has its own unique set of policies, and these can affect what rate you’re offered or whether you qualify for a home equity loan at all. To ensure you get the best deal, take the time to shop around and compare interest rates, fees, and closing costs among multiple lenders.

How to Qualify for the Lowest Rates

To get the best home equity loan rates in Maine, you’ll want to have a great credit score, a low debt-to-income ratio, enough property insurance, and a good amount of equity in your home. Let’s take a look at each of these to-dos in more detail:

Build a Strong Credit Score

It’s no secret that a higher credit score can lead to more attractive interest rates when you’re applying for a home equity loan. This means that the better you manage your finances, the more you could save over the life of your loan. By using a HELOC Monthly Payment Calculator, you can see how different interest rates will impact your monthly payment, which is another reason to keep your credit score in good shape.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a key factor in determining your eligibility for a home equity loan. This ratio compares your monthly income to your monthly debt obligations. Lenders typically look for a DTI ratio below 36% when considering you for a home equity loan, though some will allow a DTI up to 50%. This ratio helps the lender understand how well you can manage your current debt and repay a new home equity loan.

Obtain Adequate Property Insurance

In the world of home equity loans, having property insurance is a must. This insurance helps protect you and your lender from financial loss. When you’re thinking about a home equity loan in Maine, it’s important to make sure your property is sufficiently insured.

Maintain Sufficient Home Equity

If you’re a homeowner looking to take out a home equity loan in Maine, you’ll need to ensure you have at least 20% equity in your property. This requirement is in place to confirm that you have a significant financial stake in your home, and it’s a key factor in determining your eligibility for a home equity loan.

Fixed vs. Variable Interest Rates

Home equity loans typically come with fixed interest rates, which means you’ll always know what your monthly payment will be. Fixed rates offer stability, but they can also mean higher initial rates than variable rates, which start lower but can increase over time.

Tools & Calculators

Make the most of tools and calculators when you are thinking about getting a home equity loan or HELOC. These resources can help you estimate your monthly payments, compare interest rates from different lenders, and see the impact of different loan terms on your bottom line.

Closing Costs and Fees

Closing costs for home equity loans generally fall between 2% and 5% of the loan amount. These include fees for services such as the appraisal, credit report, document preparation, origination, notary, title search, and title insurance. While no-closing-cost loans are an option, they often come with higher interest rates. When you’re comparing offers from different lenders, make sure you factor in closing costs in addition to interest costs.

Tax Deductibility of Home Equity Loan Interest

Here’s the scoop: The interest on home equity loans is tax deductible if used for significant home improvements. Couples filing jointly can deduct interest on the first $750,000 of home equity loans, while single filers can deduct interest on up to $375,000. To claim this deduction, you’ll need to itemize on your tax return.

Alternatives to Home Equity Loans

In addition to home equity loans, there are other ways to get equity out of your home, including home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances. Each of these different types of home equity loans has its own unique characteristics and eligibility requirements. Be sure to consider the current home equity rates in Maine when exploring these options.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is akin to having a credit card secured by your home’s equity. The beauty of a HELOC is that you only pay interest on the amount of the credit line that you actually use. In the HELOC vs home equity loan calculation, this is one big difference. With a home equity loan, you’ll borrow a fixed amount and begin paying it back, with interest, immediately. Another difference — and this is important — is that the interest rate on a HELOC is usually variable, meaning it can go up and down with the market. This flexibility can be a double-edged sword, as it might lead to increased costs if rates take an upward turn.

Home Equity Conversion Mortgage (HECM)

The HECM, a government-insured reverse mortgage, is an option for those 62 and older to receive payments from the lender based on their home’s value. You can choose to receive the funds as a lump sum, regular payments, or a line of credit. The main advantage of a reverse mortgage is that you don’t need to make payments until you leave the home, unlike a traditional home equity loan or HELOC. Keep in mind, though, that HECMs generally have higher closing costs and a longer processing time. (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 bit like a reset button for your mortgage. It’s a mortgage refinance that allows you to take out a new loan that pays off the old one and gives you cash to spare. If you’re weighing a cash-out refinance vs. HELOC or home equity loan, an important consideration is whether the refi would come with a lower interest rate than you currently have. You’ll want to carefully compare the total cost of a refi over the life of the loan vs. the cost of interest on the other methods.

The Takeaway

Understanding home equity loan rates and the various factors that influence them can empower Maine homeowners to make a well-informed decision. By diligently comparing lenders, utilizing available tools and calculators, and exploring alternatives to the traditional home equity loan, homeowners can set themselves up for a favorable financial outcome.

FAQ

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

The monthly payment on a $50,000 home equity loan could vary depending on the interest rate and loan term. A 6.00% rate and a 20-year term would equal a monthly payment of $358. An 8.00% interest rate and a 10-year term is $607 per month.

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

If you used all $100,000 of the credit line and repaid it over a 20-year term at 7.00% interest, you would pay $775 per month. But remember that 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 actually used.

What is the monthly 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. It’s best to use a home equity loan calculator to understand exactly what your monthly payment might be at different terms and rates.

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

Borrowing $30,000 with a home equity loan at a 7.00% interest rate 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 keep you from getting a home equity loan include a credit score that’s too low (generally speaking, below 680), not enough equity in your home, a high debt-to-income ratio, or inadequate property insurance.

What are the benefits 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 you borrow. This makes HELOCs an attractive option for people who know they need extra cash on hand — say, for a kitchen remodel — 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-Q424-079

Compare home equity loan rates in South Carolina.

Introduction to Home Equity Loan Rates

If you’re a homeowner in South Carolina, this guide is your ticket to understanding home equity loans and the interest rates you can expect. We’ll walk you through the current rates and the factors that will influence your loan’s affordability. With this information, you’ll be well-equipped to decide if a home equity loan is the right financial move for you.

First of all, what is a home equity loan anyway?

How Do Home Equity Loans Work in SC?

A home equity loan is a smart way to leverage your home’s value at a lower interest rate than most personal loans. If you are still paying off your home loan, the home equity loan is a second mortgage. You get a lump sum of cash upfront, with repayment over a term that can stretch from five to 30 years. The interest rate is typically fixed, so you’ll know what to budget for each month.

To be eligible, homeowners should have at least 20% equity in their primary residence. The funds from a home equity loan can be used for a variety of expenses like home improvements, education, medical bills, or debt consolidation.

If you’re wondering what is a home equity line of credit, we’ll get to that below.

Where Do Home Equity Loan Interest Rates in South Carolina Originate?

Home equity loan interest rates are no mystery. They’re influenced by a variety of economic factors, including the prime rate. The prime rate is what banks charge their most creditworthy customers. Federal Reserve policy decisions regarding interest rates can also influence home equity loan rates.

Understanding the factors that influence home equity loan rates can enable borrowers to anticipate rate fluctuations and make informed decisions about how to get equity out of your home. That said, a loose understanding of where rates come from is all you need.

How Interest Rates Impact Home Equity Loan Affordability

Your interest rate is a key player in the affordability of your loan. Over the course of a standard 20-year term, even a 1% change in interest means a higher monthly payment. It also means you could end up paying an extra chunk of interest — to the tune of $14,000+ — over the life of the loan.

Let’s take a look at what happens if you borrow $100,000 with a 20-year term at three different interest rates:

•  8.00%: the monthly payment would be $836; the total interest paid would be $100,746.

•  7.00%: the monthly payment would be $775; the total interest paid would be $86,072.

•  6.00%: the monthly payment would be $716; the total interest paid would be $71,943.

Home Equity Loan Rate Trends

The prime interest rate is a good indicator of the direction of home equity loan rates. By keeping an eye on the prime rate, you can get a sense of what lenders are doing and how you might want to time your application for a home equity loan in South Carolina. If you see that the prime rate is about to go up, you might want to lock in your rate before it does. If it’s going down, you might want to wait a little longer to see if you can get an even better deal.

Historical Prime Interest Rates

Since 2018, the prime rate has fluctuated significantly, from a low of 3.25% in 2020 to a high of 8.50% in 2023.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

In South Carolina, your home equity loan rates are also influenced by you, the borrower, and your financial metrics. That includes your credit score, loan-to-value ratio, home value, home value stability, property location, and lender policies. Lenders carefully consider all these factors to determine the level of risk they take on with each loan, which in turn affects the interest rates they offer to borrowers.

Credit Score

Homeowners who have a history of managing their finances responsibly and making timely payments are often rewarded with more attractive interest rates. For home equity loans, lenders generally prefer a credit score of 680 or higher, with many leaning toward scores of 700 and above. The rationale is simple: A higher credit score is often associated with a lower risk of default.

Home Value

Lenders often use independent appraisals to determine the market value of a home. This helps them set appropriate loan limits. Appraisals also help lenders understand a homeowner’s equity position, which can affect how much a lender is willing to loan.

Loan-to-Value (LTV) Ratio

The loan-to-value (LTV) ratio is a number lenders use to determine how much risk they’re taking on when they lend you money. To calculate your LTV, divide the amount of your loan by the appraised value of your property. Most lenders will let you borrow up to 85% of your home’s value, but the amount you can borrow may be lower depending on your financial situation.

Home Value Stability

The steadiness of home values is a key player in the equity game. When the market is on the up and up, lenders are often more open to approving larger loans, as the property’s value is a solid safety net. But if the market takes a dip, lenders get more cautious, and that could mean stricter criteria and lower loan amounts.

Property Location

Living in high-risk areas, such as those prone to extreme weather conditions or natural disasters like storms, flooding, and wildfires, can often result in higher interest rates. These areas are considered more susceptible to property damage and financial losses, leading lenders to charge higher interest rates to compensate for the increased risk of default. This is particularly relevant for those considering a South Carolina home equity loan, as the state is known for its varied weather.

Lender Policies

Lender policies can also impact the interest rate you’re offered. To make sure you’re getting the best deal, shop around and compare interest rates, fees, and closing costs from several lenders. By doing your homework and comparing your options, you can potentially save money and get more favorable loan terms.

How to Qualify for the Lowest Rates

To get the best home equity loan rates, you need to have a good credit score, a low debt-to-income ratio, and enough equity in your home. You can also get a better rate if you have a good amount of property insurance. Let’s look at the details so you’re prepared:

Build a Strong Credit Score

You probably know that having a higher credit score can help you get the best interest rate on a home equity loan. By building and maintaining a strong credit history — which includes paying your bills on time and not taking on more debt than you can handle — you can improve your chances of getting the most favorable terms and conditions on a home equity loan. And the better the terms, the more you could save over the life of the loan.

Manage Debt-to-Income Ratio

When you’re ready to apply for a home equity loan, keep your debt-to-income (DTI) ratio in mind. This is the number that compares your monthly income to your monthly debt obligations. Lenders in South Carolina usually look for a DTI ratio below 36% for home equity loans. This ratio gives them a sense of your ability to handle your current debt and still manage the added monthly payments of a home equity loan.

Obtain Adequate Property Insurance

In the world of home equity loans, having enough property insurance is a big deal. This is especially true in areas like South Carolina that are at a higher risk for flooding. These insurance policies protect you and your lender by providing a way to pay for any damage or loss to your property. This is important to your lender because if something happens to your home, they want to make sure they can still sell it and get their money back.

Maintain Sufficient Home Equity

In South Carolina, homeowners looking to apply for a home equity loan should have at least 20% equity in their home. You can use a home equity loan calculator to see if you have enough equity to qualify for a loan.

Fixed vs. Variable Interest Rates

A home equity loan typically comes with a fixed interest rate, which means you’ll make the same monthly payment over the life of the loan. A fixed rate can be a good thing, because it gives you predictable payments. But fixed rates can sometimes start out higher than variable rates. Variable rates can start out lower, but they can also go up (or down) over time.

Tools & Calculators

Make the most of our suite of tools and calculators to get a solid grasp on what your payments might look like with different home equity loan rates. It’s about more than just the numbers on the page — it’s about finding the right fit for you, both now and down the road. Below you’ll also find a HELOC monthly payment calculator as well as a HELOC interest only calculator.

Closing Costs and Fees

Closing costs for home equity loans typically range from 2% to 5% of the loan amount. These costs can include a variety of fees, such as those for appraisals, credit reports, document preparation, origination, notary, title searches, and title insurance. Origination fees for home equity loans can range from 0.5% to 1% of the loan amount, while title insurance can cost between 0.5% and 1% of the loan balance.

Tax Deductibility of Home Equity Loan Interest

Here’s some good news: The interest you pay on a home equity loan can be a tax write-off if it’s used for home improvements. You can deduct the interest on up to $750,000 in loans for joint filers, and $375,000 for single filers. You’ll need to itemize your deductions to claim the benefit. For the nitty-gritty on how to maximize this perk, a sit-down with a tax advisor is a smart move.

Alternatives to Home Equity Loans

When it comes to different types of home equity loans and lines of credit, the possibilities are quite diverse. You’ve got HELOCs, home equity conversion mortgages (HECMs), and cash-out refinances to consider. Each of these options comes with its own set of features and eligibility requirements that you’ll need to weigh up.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is like a credit card. You can borrow up to a certain amount and you only have to pay interest on the amount you use. HELOCs have variable interest rates, which means that your costs could go up if the rate rises. Our HELOC vs home equity loan chart below spells out the differences at a glance.

Home Equity Conversion Mortgage (HECM)

If you’re 62 or older — and want money to pay off your mortgage, supplement your income, or pay for health care expenses — you may consider an HECM. It allows you to convert a portion of your home equity into cash. Unlike a traditional home equity loan, no repayment is required until the borrower(s) no longer use the home as their principal residence. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

This type of mortgage refinance pays off your old mortgage and lets you borrow extra cash. Lenders usually cap cash-out refinances at 85% of your home’s equity. Our guide to Cash-Out Refinances vs Home Equity Lines of Credit can give you the details.

The Takeaway

Understanding South Carolina home equity loan rates and the factors that influence them can help you make smarter financial decisions. By carefully comparing lenders, using online tools and calculators, and exploring other ways to borrow against your equity, you can find the best financing for your immediate needs and future goals.

FAQ

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

When you’re considering a big $50,000 home equity loan, it’s important to carefully consider how the interest rate and loan term will affect your monthly payments. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month. To get an estimate of what your monthly payments might be, it’s a good idea to use a loan calculator.

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

If you’re contemplating a $100,000 HELOC, it’s crucial to consider both the interest rate and the amount drawn, as these will determine your monthly payment. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month. To get a better handle on your potential payments and make smarter financial choices, a HELOC calculator is a fantastic resource.

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

When you’re pondering a $25,000 home equity loan, consider how the interest rate and loan term will shape your monthly payments. To give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment. For a precise picture of what to expect, turn to a dependable loan calculator.

How about a $30,000 home equity loan? What would that cost?

When you’re looking at a $30,000 loan, it’s important to understand how the interest rate and loan term will affect your payment. But if you had a 7.00% interest rate and repaid the loan over 10 years, you’d pay about $348 per month.

What might disqualify you from getting a home equity loan?

There are a few factors that could prevent you from being approved for a home equity loan. These include a less-than-stellar credit history, not enough equity in your home, a high debt-to-income ratio, and inadequate property insurance. Recent bankruptcies or foreclosures, delinquency on child support or alimony payments, or a home in disrepair could also be red flags for lenders.

What are the benefits of a HELOC?

A home equity line of credit (HELOC) offers homeowners a number of significant advantages, including flexible borrowing options, lower interest rates compared to most credit cards, the ability to pay interest only on the amount borrowed, and the potential for tax deductions on the interest paid. These benefits make HELOCs an attractive financial tool for homeowners looking to access additional funds for various purposes.

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-Q424-100

Compare home equity loan rates in Minnesota.

Introduction to Home Equity Loan Rates

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

How Do Home Equity Loans Work?

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

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

•  Current mortgage balance + proposed home equity loan = X

•  X / appraised home value = CLTV

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

•  $250,000 + $75,000 = $325,000

•  $325,000 / $400,000 = 81%

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

Where Do Home Equity Loan Interest Rates in Minnesota Originate?

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

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you secure can have a significant impact on your ability to afford a loan over the long term. When considering a 20-year home loan, a seemingly small 1% difference in the interest rate can translate to substantially higher costs: an additional $11,000 in interest, as illustrated in the chart below.

Home Equity Loan Rate Trends

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

Historical Prime Interest Rates

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

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

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

Credit Score

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

Home Value

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

Loan-to-Value (LTV) Ratio

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

Home Value Stability

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

Property Location

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

Lender Policies

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

How to Qualify for the Lowest Rates

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

Build a Strong Credit Score

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

Manage Debt-to-Income Ratio

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

Obtain Adequate Property Insurance

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

Maintain Sufficient Home Equity

In Minnesota, it’s recommended that homeowners maintain at least 20% equity in their home to qualify for a home equity loan. The 20% equity requirement is in place to protect borrowers from taking on more debt than they can handle and to protect lenders from the risk of default.

Fixed vs. Variable Interest Rates

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

Tools & Calculators

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

Closing Costs and Fees

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

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

Tax Deductibility of Home Equity Loan Interest

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

Alternatives to Home Equity Loans

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

Home Equity Line of Credit (HELOC)

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

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

Home Equity Conversion Mortgage (HECM)

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

Cash-Out Refinance

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

Recommended: Cash Refinance vs Home Equity Line of Credit

The Takeaway

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

FAQ

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

The interest rate and loan term will determine your monthly payment. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month.

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

The monthly payment on a $100,000 HELOC is influenced not only by the interest rate but also by the amount of the HELOC that is actually drawn. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month. To get a better understanding of your potential monthly payments, consider using a HELOC calculator.

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

The two most important factors that will determine your monthly payment are the interest rate and the length of the loan. To get an estimate, you can use a home equity loan calculator. But to give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment.

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

Interest rates and repayment terms play a big role in what you’ll owe each month, so a calculator tool can be an invaluable guide. But if you had a 7.00% interest rate and repaid the loan over 10 years, you’d pay about $348 per month.

What could prevent you from securing a home equity loan?

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

What are the benefits of a HELOC?

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

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

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

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

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

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

SOHL-Q424-083

Compare home equity loan rates in Tennessee.

Introduction to Home Equity Loan Rates

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

How Do Home Equity Loans Work?

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

Lenders determine the maximum loan amount based on your combined loan-to-value ratio (CLTV). You can estimate your CLTV easily: Add your current mortgage balance to your proposed home equity loan. Divide the total by your appraised home value. If the CLTV is below 85%, you’re in a good position to obtain your desired loan. A home equity loan calculator can help you do the math.

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

Where Do Home Equity Loan Interest Rates Come From?

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

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

How Interest Rates Impact Home Equity Loan Affordability

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

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

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

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

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

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

Home Equity Loan Rate Trends

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

Historical Prime Interest Rates

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

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

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

Credit Score

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

Home Value

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

Loan-to-Value (LTV) Ratio

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

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

Home Value Stability

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

Property Location

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

Lender Policies

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

How to Qualify for the Lowest Rates

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

Build a Strong Credit Score

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

Manage Debt-to-Income Ratio

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

Obtain Adequate Property Insurance

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

Maintain Sufficient Home Equity

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

Fixed vs. Variable Interest Rates

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

Tools & Calculators

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

Closing Costs and Fees

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

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

Tax Deductibility of Home Equity Loan Interest

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

Alternatives to Home Equity Loans

There are different types of home equity loans and lines of credit. Home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances all have their own special benefits and eligibility requirements. It’s important to consider your financial situation and goals before choosing the one that’s right for you.

Home Equity Line of Credit (HELOC)

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

Recommended: HELOC vs Home Equity Loans

Home Equity Conversion Mortgage (HECM)

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

Cash-Out Refinance

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

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

The Takeaway

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

FAQ

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

When you’re considering a $50,000 home equity loan, you need to think about the interest rate and loan term, because they’ll impact how much you’ll pay each month. At 8.50% interest repaid over 10 years, your monthly payment would be about $620. Over a 20 year term, your payment would be just $434 — but you’d pay a lot more in interest over time. To get a good idea of what your monthly payments might be, use a home equity loan calculator.

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

With a home equity line of credit (HELOC), your monthly payment varies based on the interest rate and how much of the credit line you’ve used. Assuming you draw the full amount and make interest-only payments during the draw period, at 8.50% interest and a 20-year term, the payment would be $868.

How about a $25,000 home equity loan?

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

How about a $30,000 home equity loan?

When you’re contemplating a $30,000 home equity loan, it’s important to consider how the interest rate and loan term will affect your monthly payments. For example, a $30,000 loan at 8.00% repaid over 7 years gives you a monthly payment of $468. The same loan amount and interest rate repaid over 15 years lowers the monthly payment to $287 but increases the total interest paid.

What could disqualify you from getting a home equity loan?

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

What are the benefits of a HELOC?

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

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

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

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

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

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

SOHL-Q424-102