Compare home equity loan rates in Virginia.

Introduction to Home Equity Loan Rates

A home loan likely helped you to purchase your home, and if you’ve been paying your mortgage for a while now, you may be wondering how to get equity out of your home. In this guide, you’ll find the most comprehensive information available on Virginia home equity loan rates. We’ll cover the factors that affect home equity loan rates. By the end of this guide, you’ll know how to compare lenders, use loan calculators and other tools, and understand the benefits and potential drawbacks of home equity loans.

Let’s start at the very beginning, with what is a home equity loan and how they work.

How Do Home Equity Loans Work?

A home equity loan uses your home as collateral. If you are currently paying off your home mortgage, 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. And the interest rate is usually fixed, which can be helpful if you like a predictable monthly repayment structure.

To qualify for a home equity loan (or a home equity line of credit, or HELOC, which is also secured by your home), you will 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.

The Source of Home Equity Loan Interest Rates

The interest rates on home equity loans are a product of several economic factors, including the prime rate. This is the rate at which banks lend to their most creditworthy clients. Federal Reserve decisions on interest rates can affect the prime rate and thus have a ripple effect on home equity loans in Virginia. By familiarizing yourself with movements in the prime rate and the Fed’s activities, you can make better-informed decisions about the different types of home equity loans in your state.

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you obtain from your lender can have a major impact on the affordability of the loan over the long term. When considering a 20-year mortgage, a seemingly minor 1% difference in the interest rate can mean a substantially greater amount of interest paid. Have a look at this example, assuming you borrow $60,000 with a 20-year term:

•  At 6.00% interest, monthly payments would be $430 and the total interest paid would be $43,166.

•  At 7.00% interest monthly payments would be $465 and the total interest paid would be $51,643.

•  At 8.00% interest monthly payments would be $502 and the total interest paid would be $60,447.

Home Equity Loan Rate Trends

The prime rate is a good barometer for what you can expect for your home equity loan rate. As you can see from the chart below, since 2018, the prime rate has seen some significant ups and downs, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. These fluctuations have a direct impact on home equity rates in Virginia.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

In Virginia, several factors come into play when determining your home equity loan rates. Each of the factors below is carefully weighed to determine the level of risk associated with your loan application, which in turn affects the interest rate you’re offered.

Credit Score

Here’s a tip: Be the kind of person lenders love by keeping up with your payments. It’s a surefire way to better your chances of getting attractive interest rates. Most lenders in Virginia look for a credit score of 680 or higher when it comes to home equity loans, but many prefer to see 700 or above. The rates might fluctuate, but a solid credit score will always be your best friend.

Home Value

You can expect a lender to require a home appraisal if you apply for a home equity loan, as your home’s market value will determine how much equity you have (again, most lenders will require you have 20% equity).

Loan-to-Value (LTV) Ratio

Your home value is also important for figuring out 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%. A home equity loan calculator can help you quickly see what your borrowing capacity might be.

Home Value Stability

The ebb and flow of home values in Virginia affects the equity you can leverage. When values are rising, lenders are more inclined to give the okay to larger loans, as the lower risk of default is tied to your home’s increased worth. When values dip, lenders are more cautious. Here’s where understanding the homebuying climate in Virginia — and especially in the area where you live — may come in handy.

Property Location

If your property is in a high-risk area, such as one prone to flooding, you might be offered a higher interest rate. Lenders worry about the potential for property damage or loss of home value.

Lender Policies

Each lender has its own policies, and the differences between them may influence the interest rates offered on home equity loans. That’s why it’s recommended that you shop around and compare interest rates, fees, and closing costs among multiple lenders.

How to Qualify for the Lowest Rates

To qualify for Virginia’s best home equity loan rates, you’ll want to build a strong credit score, manage your level of debt, get adequate property insurance, and maintain your home equity. Doing all this will put you in a better position to get the most favorable loan terms possible.

Build a Strong Credit Score

A carefully tended credit score is your passport to the best home equity loans in Virginia, potentially allowing you a better interest rate. Make your debts payments on time and periodically check your credit reports to ensure they are accurate. Also avoid maxing out every line of credit you have.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio will be important when you apply for a home equity loan. This financial metric compares your monthly income to your monthly debt obligations and is a key factor in determining your loan eligibility. Lenders typically look for a DTI ratio below 36% for home equity loans, though some may allow up to 50%. A lower number is a signal that you can manage debt responsibly.

Obtain Adequate Property Insurance

Home equity loans usually require borrowers to have sufficient property insurance. By ensuring your property is well-covered, you’re not only meeting the loan’s requirements but also potentially qualifying for more favorable terms. This, in turn, can bolster your financial standing as well as your peace of mind. The same goes for a HELOC — having enough insurance can protect the lender’s interests and may lead to better terms for you.

Maintain Sufficient Home Equity

In Virginia, you’ll need 20% equity to qualify for a home equity loan. Once you meet this criterion, you’re free to leverage your home’s equity for a range of financial needs, from a kitchen overhaul to a college education.

Fixed vs. Variable Interest Rates

Home equity loans in Virginia often come with fixed interest rates, which means you’ll have the same monthly payment for the life of the loan. While fixed rates offer predictability, they can also start out higher than variable rates, which have the potential to start lower. (HELOCs, on the other hand, usually have variable rates.) When you’re looking for the best home equity loan in Virginia, it’s important to consider these factors to find the right fit.

Tools & Calculators

When you’re considering a home equity loan, it’s important to take a good look at your financial situation. Use the tools and calculators below to figure out what loan amount or line of credit you might be eligible for and what your monthly payments might be if you borrow.

Closing Costs and Fees

Closing costs for a home equity loan typically fall between 2% to 5% of the loan amount, but as noted above, each lender has its own policies, and that extends to fees and closing costs. So when you are comparing offers from different lenders, don’t just look at the interest rate. Consider closing costs, too.

Tax Deductibility of Home Equity Loan Interest

The interest on your home equity loan is tax-deductible, but only if you’re using it to significantly improve your home. If you’re filing jointly, you can claim interest costs on the first $750,000 of a loan (for single filers, the number is $375,000). Just be sure to itemize your deductions to snag this benefit (and save your receipts). A quick chat with a tax advisor can help you make the most of this perk.

Alternatives to Home Equity Loans

As you mull over alternative financing options to home equity loans, it’s important to grasp the differences between HELOCs, HECMs, and cash-out refinances. Each of these options has its own unique features and specific eligibility requirements that should be carefully weighed to determine the best fit for your individual financial circumstances.

Home Equity Line of Credit (HELOC)

Let’s get more deeply into what is a home equity line of credit, as we have mentioned HELOCs a couple times already. A HELOC is a bit like a credit card, but the balance you’re borrowing against is your home’s equity. You can borrow up to a certain preapproved amount, and you’ll only pay interest on the amount of the credit line that you actually use. HELOCs typically have variable interest rates, which means your payments could go up if interest rates rise.

Here’s a quick look at HELOCs vs. home equity loans.

Home Equity Conversion Mortgage (HECM)

A government-insured reverse mortgage, the HECM is an option for those 62 and older to receive payments based on their home’s value. You can choose to receive the proceeds as a lump sum, regular payments, or a line of credit. The beauty of an HECM is that you don’t need to make payments until you leave your home, unlike home equity loans or HELOCs. While they may have higher closing costs and longer processing times, they are a solid option for many homeowners. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

This special type of mortgage refinance involves taking out a new mortgage to replace your existing one and pocketing the difference in cash. As you are considering a cash-out refinance vs. a home equity line of credit or a home equity loan, one big question is: Are interest rates lower now than they were when you got your first mortgage? If not, it might not be the best idea to refinance. Run the numbers in a home loan calculator to see what refinancing does to your payments.

The Takeaway

Home equity loans allow homeowners to use their property’s value to meet a wide range of financial goals. But, there’s a lot to learn when it comes to current interest rates, the different types of loans, and the many factors that influence what interest rate you will be offered. Using online calculators and comparing offers from multiple lenders can help you get the loan that’s right for you.

FAQ

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

The monthly payment on a $50,000 home equity loan (or any 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. If you instead snagged a 6.50% interest rate, the payment would be $373.

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

When you’re looking at a $100,000 HELOC, keep in mind that your monthly payment can fluctuate based on the current interest rate and how much of your credit line you’ve actually used. For an estimate, it’s a good idea to use a HELOC calculator. This tool will take these variables into account and give you a better sense of what to expect.

What’s the monthly payment on a $25,000 home equity loan?

The monthly payment on a $25,000 home equity loan could range from around $150 to $500 depending on your interest rate (6.00% to 8.00%) and loan term (5 years to 30 years).

What’s the monthly payment on a $30,000 home equity loan?

At a 7.00% interest rate, a $30,000 home equity loan would cost $348 per month if you repaid the loan with interest over 10 years. If the interest rate or loan term changes, the payment amount will change, too.

What could disqualify you from getting a home equity loan?

There are a number of factors that could lead to disqualification, such as a poor credit history, insufficient equity in your home, a high debt-to-income ratio, or inadequate property insurance. These are just a few examples, and there are other factors that could potentially impact your eligibility.

What are the benefits of a HELOC?

HELOCs, or home equity lines of credit, offer several advantages, such as flexible borrowing and interest rates that are generally more favorable than those of credit cards. Moreover, you have the option to pay interest solely on the amount you’ve borrowed, making HELOCs a versatile financial tool for addressing a wide array of expenses and financial needs.

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-Q424-106

Compare home equity loan rates in Ohio.

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 all you need to know about home equity loan rates in Ohio. We’ll examine how rates are set and provide the lowdown 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?

A home equity loan is a loan that uses your home as collateral, which typically results in a lower interest rate than most personal loans. The interest rate is usually fixed, which means your payments will be consistent from month to month.

To qualify for a home equity loan, most lenders will require you to have at least 20% equity in your primary residence. Home equity loans can be used for a variety of expenses including home renovations, education, medical bills, and debt consolidation.

Where Do Home Equity Loan Interest Rates Originate?

Home equity loan interest rates, like home loan rates, are a product of various economic factors, including the prime rate. This rate is what banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates also play a part in influencing home equity loan rates. Understanding rate fluctuations can help you make informed decisions about home equity loans.

How Interest Rates Impact Home Equity Loan Affordability

Your interest rate is a key player in the affordability of your loan. Over a 20-year term, even a 1% difference in interest rates can mean a significant difference in interest paid. 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%) equals an extra $31 per month and an additional $3,758 in interest paid over the life of the loan.

Home Equity Loan Rate Trends

Watching for changes in the prime rate can give you a sense of 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 high of 8.50% in 2023. You can also see how the rate has shifted across more than 50 years in the graph below.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

In Ohio, a variety of factors come into play when determining your home equity loan interest rate. Your credit score, loan-to-value ratio, the stability and location of your home, and the policies of your lender are all in the mix. Let’s look at each of these in more detail:

Credit Score

If you have a strong credit score of 680 or higher, you’re in a position to get a good home equity loan rate. Still, lenders may look for a score of 700 or higher to give you the best rate. They may also offer better terms, like a lower origination fee or more flexibility with loan terms, to borrowers with the sparkling score.

Home Value

Lenders rely on independent appraisals to assess home values and set borrowing limits. This valuation process determines the maximum loan amount that a lender is willing to approve for your property. While you’re waiting for an appraisal, you can use online tools to estimate your home’s market value.

Loan-to-Value (LTV) Ratio

The LTV ratio is a key factor in determining your loan terms and interest rate. Most lenders cap the LTV at 85%. Your combined LTV ratio is calculated by adding the loan amount you’re seeking to any remaining balance on your first mortgage, then dividing by the appraised value of the home. For example, let’s say you currently owe $400,000 on your mortgage and you want to borrow $75,000 for a renovation project. Your home is appraised at $800,000:

Home Value Stability

The stability of home values in your corner of Ohio is a big deal. Rising property values can make a lender comfortable giving you a larger loan. On the flip side, if area home values are dropping, lenders might be risk-averse, which could make it harder to qualify for a home equity loan or HELOC.

Property Location

If your property is in a high-risk area of Ohio — like a flood zone, or an area prone to tornadoes — your interest rate might be higher. That’s because lenders see these areas as riskier, and they might need to adjust their lending practices to account for potential losses.

Lender Policies

Lenders’ policies have a big impact on the interest rate you’ll pay for a home equity loan in Ohio. Get estimates from several lenders, so you can compare interest rates, fees, and closing costs.

How to Qualify for the Lowest Rates

To qualify for the best Ohio home equity loan rates, you should focus on a few key areas. Following the guidelines below can help you get the best terms for your needs.

Build a Strong Credit Score

You probably know that a higher credit score can land you better interest rates when you’re in the market for a home equity loan. This link between your credit score and the rates you’re offered highlights the importance of maintaining a solid credit history. In addition to paying your bills on time (of course), you’ll want to periodically check your credit report and correct any inaccuracies. And avoid using the maximum credit line on your existing credit accounts in the time leading up to your loan process.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a critical number that lenders look at when you apply for a home equity loan. This figure, which compares your monthly income to your monthly debt obligations, is an indicator of your financial health. Most lenders in Ohio require a DTI ratio below 36%, though some may allow up to 50%. Keep in mind that your total debt, including credit card balances, student loans, and other monthly payments, will be factored in. Add up your monthly debts and divide by your gross monthly income to reveal your DTI ratio.

Obtain Adequate Property Insurance

Adequate property insurance is a prerequisite for Ohio home equity loans, particularly in areas with a history of flooding or other natural disasters. The goal is to protect both you and the lender from the financial fallout of property damage or loss.

Maintain Sufficient Home Equity

In Ohio, as elsewhere, homeowners looking to secure a home equity loan must maintain at least 20% equity in their home’s value. This equity is an important qualifier in determining your eligibility for the loan.

Fixed vs. Variable Interest Rates

Fixed interest rates are just that — fixed. They don’t change over the life of the loan, which means you’ll have predictable, consistent monthly payments. While that’s a benefit, it can mean slightly higher initial rates than variable interest loans, which start with lower rates that could increase over time. A home equity line of credit (HELOC) tends to have a variable interest rate. More on that below.

Tools & Calculators

Using online tools and calculators to run the numbers on different home equity loan scenarios can help you determine your potential eligibility for a home equity loan, understand the maximum loan amount you may be able to borrow, and get a sense of what monthly payments could be. Here are three of our favorites:

Closing Costs and Fees

When it comes to closing costs, you’re typically looking at 2% to 5% of the loan amount. These costs can include an appraisal fee, credit report fee, document preparation, origination fee, notary fee, title search, and title insurance. It’s important to shop around and compare both fees and interest rates from multiple lenders when considering an Ohio home equity loan.

Tax Deductibility of Home Equity Loan Interest

Here’s the scoop on the tax benefits: If you’re using your home equity loan for significant home improvements, the interest is tax-deductible. Joint filers can deduct interest on the first $750,000 of a loan; for single filers the number is $375,000. To claim this benefit, you’ll need to itemize your deductions. It’s always a smart move to chat with a tax advisor to ensure you’re maximizing your benefits.

Alternatives to Home Equity Loans

In addition to a traditional home equity loan, you have different types of home equity loans or financing methods to consider. Each of these options has its own features and eligibility requirements.

Home Equity Line of Credit (HELOC)

We’ve mentioned HELOCs a few times so if you’re wondering what is a home equity line of credit, here are the basics: A HELOC is like a credit card in that it allows you to borrow up to a certain limit and only pay interest on the amount you actually use. However, it’s like a home equity loan because the collateral for the line of credit is your home.

Another factor in the HELOC vs home equity loan comparison: HELOCs have variable interest rates, which can mean increased costs if rates rise. When you’re looking for the best home equity loan or HELOC in Ohio, it’s important to consider the terms and conditions to make sure they fit your financial needs.

Home Equity Conversion Mortgage (HECM)

A HECM is a government-insured reverse mortgage, exclusively for those 62 and older, that allows you to receive payments from the lender based on your home’s value. You can opt for a lump sum, regular payments, or a line of credit.

The beauty of an HECM is that you don’t have to make payments until you leave your home, unlike traditional home mortgage loans and HELOCs. Just a heads up, though — HECMs usually come with higher closing costs and longer processing times. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

With this special type of mortgage refinance, you’ll take out a new mortgage that’s more than your old one, paying off your first loan and pocketing the difference to use as you wish. As you think about a cash-out refinance vs a home equity line of credit or home equity loan, the big thing to consider is that the refinance gets you a new interest rate and term. So you’ll want to run the numbers to make sure your new interest rate isn’t wildly more costly over the long haul.

The Takeaway

Understanding the factors that influence home equity loan rates can help you make the most of your borrowing options as an Ohio homeowner. Comparing rates from different lenders and maintaining a strong financial profile can help you secure the best rates you can qualify for.

FAQ

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

Borrowing $50,000 at a 7.50% interest rate with a 10-year term would equal a monthly payment of $594. But the exact monthly payment on a $50,000 home equity loan can vary depending on the interest rate and your repayment schedule. To get a better estimate of what your monthly payment could be, consider using a home equity loan calculator.

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

The monthly payment on a home equity line of credit (HELOC) of $100,000, will depend on how much of the credit line you have used. But if you draw the full $100,000 and repay the amount with interest over 20 years, the monthly payment at 7.00% would be $775.

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

When considering a $25,000 home equity loan, the interest rate and loan term are the two most significant factors that will affect your payment amount. To get a better idea of what your payment will be, it’s a good idea to use a loan calculator that takes into account these factors and gives you a more accurate payment amount.

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

The monthly payment on a $30,000 home equity loan will differ according to the interest rate and loan term. Here are examples based on a 20-year term: At 8.00% interest the monthly payment would be $251 and the total interest paid would be $30,224. At 7.00% interest the monthly payment would be $233 and the total interest paid would be $25,822. At 6.00% interest the monthly payment would be $215 and the total interest paid would be $21,583.

What might disqualify you from getting a home equity loan?

There are a number of things that can stop you from getting a home equity loan. If you have a bad credit history, lack adequate equity in your home, have a high debt-to-income ratio, or don’t have enough insurance on your property, you might not be able to get a home equity loan.

What are the benefits of a HELOC?

A home equity line of credit (HELOC) offers a number of distinct advantages, including flexible borrowing options, lower interest rates when compared to traditional credit cards, and the convenience of only paying interest on the amount of credit drawn. HELOCs provide homeowners with a versatile financial tool that can be tailored to their specific needs and circumstances.

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-Q424-095

Compare home equity loan rates in Indiana.

Introduction to Home Equity Loan Rates

Welcome to our guide to home equity loan rates in Indiana. You’ll learn everything you need to know about the current interest rate environment, how to compare different lenders and loan offers, and what you can do to get the best rates on your home equity loan. We’ll also cover what is a home equity line of credit and look at other alternatives to home equity loans. Armed with this knowledge, you’ll be better prepared to make smart decisions about how to take advantage of the equity in your home.

How Do Home Equity Loans Work?

Let’s start at the beginning: What is a home equity loan, exactly? With a home equity loan, you leverage your home’s value to secure a loan that will likely have a lower interest rate than a personal loan. If you are still paying off your mortgage, a home equity loan is a second mortgage. With a fixed interest rate and a repayment term that can be anywhere from 5 to 30 years, it’s a flexible and affordable option.

To qualify, homeowners usually need to have at least 20% equity in their property. (Your equity is the difference between what you owe on your mortgage and what your home is currently worth.) Home equity loans can be used for a variety of expenses, including home renovations, education costs, medical bills, and debt consolidation.

Where Do Home Equity Loan Interest Rates in Indiana Originate?

Home equity loan interest rates are not arbitrary; they are influenced by a variety of economic factors. Federal Reserve policy decisions regarding interest rates influence banks, which set a prime rate for their most creditworthy customers. They then adjust the rate according to individual borrowers’ financial stats (more on that below).

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you obtain can make a big difference in the affordability of the loan over its full term. Imagine that you borrow $60,000 with a home equity loan. You can see below what a difference the interest rate will make in the monthly payment, but especially in the total interest paid over the life of the loan:

•  At 6.00% interest, monthly payments would be $430 and the total interest paid would be $43,166.

•  At 7.00% interest monthly payments would be $465 and the total interest paid would be $51,643.

•  At 8.00% interest monthly payments would be $502 and the total interest paid would be $60,447.

Home Equity Loan Rate Trends

As noted above, a big part of the interest rate you’ll obtain is the prime rate, and since 2018, the prime rate has fluctuated between 3.25% in 2020 and 8.50% in 2023. These economic shifts have impacted home equity rates in Indiana. Staying tuned to these movements can help you assess whether or not the time is right for you to apply for a home equity loan.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

The prime rate isn’t the only thing that lenders factor into the decision about what interest rate to offer when you apply for a home equity loan in Indiana. There are a number of other important factors and — good news — they are much more within your control.

Credit Score

A robust credit score can be instrumental in securing better loan terms, just as it was when you initially applied for your home loan. Generally speaking, for a home equity loan in Indiana, you’ll need a minimum credit score of 680, and higher is better.

Home Value

A prospective lender will likely request an appraisal of your home. The home’s value will help determine both how much equity you have in the property (remember, 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 major factor that lenders consider when determining the interest rate offered on a home equity loan in Indiana. 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, any remaining first mortgage balance plus your new home equity loan will need to be under 85% of your home’s value. (Add your mortgage balance and desired home equity loan amount. Divide by your home’s appraised value. Multiply the result by 100 and you’ll get a percentage representing your LTV.)

Home Value Stability

You can anticipate better rates and more liberal loan amounts in a real estate market where prices are on the upswing. If your local market is on a downswing, lenders will be more cautious and interest rates may be higher.

Lender Policies

Lenders have varying policies that affect the interest rates they offer. These policies can have a big impact on the overall cost of borrowing, so borrowers should carefully consider and compare the terms offered by multiple lenders before making a decision.

Property Location

The geographic location of the property 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

To get the best home equity loan rates, you need to have a good credit score, manage your debt-to-income ratio, have property insurance, and have a good amount of equity in your home. By doing the following things, you can increase your chances of getting the best loan terms.

Build a Strong Credit Score

As you’re thinking about how to get equity out of your home, it would be a good idea to check your credit score. A good credit score can make it easier to get a loan and help you qualify for a lower interest rate. Check your credit report and request corrections to any inaccuracies (mistakes do happen). Avoid using the maximum credit line on all your credit cards. And of course, pay your bills on time.

Manage Debt-to-Income Ratio

When you’re applying for a home equity loan, your debt-to-income (DTI) ratio is a big deal. Add up your monthly debts (car payment, student loan payment, etc) and divide by your gross income. Hopefully the result is a DTI ratio of 36% or less, because that is what lenders are typically looking for, although some may allow a DTI up to 50% when considering you for a home equity loan.

Obtain Adequate Property Insurance

Property insurance is a must-have, but you’ll especially want to make sure you’re properly insured before applying for a home equity loan. This protects you and your lender in the event of a disaster.

Maintain Sufficient Home Equity

If you’re in Indiana and mulling over a home equity loan, remember that your equity should be at least 20% of your home’s value. This is a win-win; you get a loan with favorable terms, and lenders are assured that you’re just as invested in your home as they are.

Fixed vs. Variable Interest Rates

Home equity loans in Indiana, as elsewhere, usually come with fixed interest rates. This means your monthly payments will stay the same throughout the life of the loan, giving you a clear picture of your budget. While fixed rates might start a little higher than variable rates, they can offer peace of mind because payments are so predictable. Variable rates, on the other hand, may start lower but can fluctuate over time. (The interest rate on a home equity line of credit, or HELOC, is often variable.)

Tools & Calculators

Online tools and calculators can help you determine your borrowing power, see what your monthly payment would be with different interest rates and loan terms, and understand the potential impact of different loan options on your financial situation. Here are a few of our favorite home equity calculators:

Closing Costs and Fees

Closing costs for home equity loans typically range from 2% to 5% of the loan amount. Common fees include an application fee, an origination fee, and a title search fee. The fees vary by lender, so it’s important to compare Indiana home equity loan rates and terms when looking for the best loan.

Tax Deductibility of Home Equity Loan Interest

Many borrowers are happy to learn that the interest you pay on a home equity loan can be tax-deductible if you use the funds for significant home improvements. If you’re married and file jointly, you could be eligible to deduct the interest on a home equity loan up to $750,000, and for single filers, the number is $375,000. Just remember, you’ll need to itemize your deductions to claim this benefit. Keep a record of all your home-improvement expenses for tax purposes.

Alternatives to Home Equity Loans

In addition to a traditional home equity loan, there are different types of home equity loans — technically, different ways you can borrow against your home equity. Take a look at these alternatives:

Home Equity Line of Credit (HELOC)

A HELOC, like a home equity loan, is secured by your home. But in practice it is similar to a credit card — albeit one with a lower interest rate. A lender allows you to borrow up to a certain limit and you only pay interest on the amount of that credit line that you actually use.

Here’s a look at HELOCs vs. home equity loans.

Home Equity Conversion Mortgage (HECM)

A HECM is a government-insured reverse mortgage available to those 62 and older. The flexibility of an HECM allows you to choose from a lump sum, regular payments, or a line of credit. The best part? You don’t have to make payments until you leave your home. This is quite different from home equity loans, which require regular payments. While HECMs may have higher closing costs and longer processing times, the benefits may be worth it to borrowers. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

Another option is to consider a special type of mortgage refinance called a cash-out refinance. In this case, you would get an entirely new mortgage. You use it to pay off the old mortgage and you walk away with extra cash to use however you wish.

As you consider a cash-out refinance vs. a home equity line of credit or a home equity loan, remember that the refi is just that: a refinance. So if you have a really sweet interest rate on your current mortgage, you may find that the cost of a cash-out refi doesn’t make sense for you. On the other hand, if a refi allows you to obtain a better interest rate, it could be a good solution.

The Takeaway

A home equity loan — or one of the alternatives, such as a HELOC — is a great way for Indiana homeowners to access money to pay for big projects. By understanding current interest rates, knowing the various factors that affect loan affordability, and carefully considering the different types of loans available, you can make the best choice for your financial situation.

FAQ

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

Borrow $50,000 with a home equity loan and repay it over 10 years, and your monthly payments could be anywhere from $530 to $607, depending on whether your interest rate is 5.00% or 8.00%, or somewhere in between.

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

The monthly payment on a $100,000 HELOC can vary depending on the interest rate and how much principal you owe. To get an idea of what your monthly payment might be, use a HELOC monthly payment calculator. This will help you understand the financial implications of a HELOC and what you can expect to pay each month.

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

The interest rate and the loan term will affect monthly payments on a $25,000 home equity loan. Assuming a 10-year term, an interest rate of 6.00% would mean a $278 monthly payment. An interest rate of 8.00% would be $303.

What’s the monthly payment on a $30,000 home equity loan?

A 10-year term and 8.00% interest rate would mean a monthly payment of $364 on a $30,000 home equity loan. The exact number can vary depending on the interest rate and the loan term.

What would disqualify you from getting a home equity loan?

A few factors could stand in the way of you and a home equity loan. These include, but aren’t limited to, a low credit score, a high debt-to-income ratio, insufficient home equity, and inadequate property insurance coverage. Each of these can play a big role in whether you’re approved for a loan, so it’s important to consider them carefully before you apply.

What are the benefits of a HELOC?

A home equity line of credit (HELOC) is a smart choice for many reasons. It generally has a lower interest rate than a credit card, and you only pay interest on the amount of the credit line that you actually use. This line of credit that can be used for a variety of purposes, from home improvements to debt consolidation and even educational expenses. And if you use a HELOC for big home improvements, some or all of the interest you pay could be tax-deductible.

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-Q424-074

Compare home equity loan rates in Oregon.

Introduction to Home Equity Loan Rates

If you’ve been considering how to get equity out of your home to fund a costly project such as a kitchen renovation, you may be thinking about applying for a home equity loan. In this guide, you’ll find a thorough update on home equity loan rates in Oregon. We’ll cover how rates are decided and what you can do to obtain the best available rate. We’ve also got the lowdown on other borrowing options as there are different types of home equity loans.

Let’s learn the basics, for starters. What is a home equity, anyway?

How Do Home Equity Loans Work?

A home equity loan is a borrowing option that uses your home as collateral. So if you are still paying off your home loan, the home equity loan is a second mortgage. It’s a lump sum of cash upfront, with repayment over a term that can stretch from five to 30 years. These loans typically come with lower interest rates than unsecured personal loans, and you’ll usually get a fixed rate.

To qualify, you should have at least 20% equity in your primary residence. The funds can be used for a variety of purposes, from renovations to educational costs, medical bills, and debt consolidation. Wondering what borrowing will cost you? A home equity loan calculator can help you figure out how much you might be able to borrow and what the monthly payments will be.

Where Do Home Equity Loan Interest Rates in Oregon Come From?

Economic factors, such as the prime rate set by banks for their most creditworthy customers, as well as policy decisions made by the Federal Reserve, significantly influence home equity loan interest rates. Keeping up with the news on how the Federal Reserve is adjusting its rates and being aware of the current home equity rates in Oregon can help you determine whether the time is right to apply for a home equity loan.

How Interest Rates Impact Home Equity Loan Affordability

Understanding the impact of interest rates on loan affordability is key. Over a standard 20-year loan, a 1% variance in interest rate can translate to a noticeably higher monthly payment and a significantly greater amount of interest paid.

Let’s take a look at what happens if you borrow $30,000 with a 20-year term at three different interest rates:

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

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

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

Of course the more you borrow, the greater the difference in monthly payment and total interest will be.

Home Equity Loan Rate Trends

The prime interest rate is a key indicator of home equity loan rates and can fluctuate significantly, so you’ll want to keep an eye on this number. As you’re doing this, it’s helpful to have a sense of how the rate has changed recently, as well as over a longer period. Since 2018, the prime rate has moved from 3.25% in 2020 to a peak of 8.50% in 2023. The graphic below shows that it has not been above 10% since the 1980s.

Historical Prime Interest Rates

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

The prime rate isn’t the only factor guiding the interest rate you might be offered on a home equity loan. Fortunately, some of the other factors are within your control. Lenders take the following factors into account to assess your creditworthiness and the potential risk of the loan.

Credit Score

If you have a strong history of managing credit responsibly and a high credit score, you’re more likely to qualify for a lower interest rate and more favorable loan terms. Most lenders look for a credit score of 680 or higher when considering a home equity loan application. Many lenders prefer a credit score of 700 or higher because they consider these borrowers less risky.

Home Value

Lenders rely on independent appraisals to determine a home’s market value and set borrowing limits. This valuation process helps determine a homeowner’s equity and the maximum loan amount a lender is willing to approve. This protects the interests of both the borrower and the financial institution.

Loan-to-Value (LTV) Ratio

The loan-to-value (LTV) ratio is a key number that lenders examine when you apply for a home equity loan. It’s calculated by dividing the loan amount by the appraised value of your home. Most lenders won’t let you borrow more than 85% of your home’s value. The LTV ratio helps lenders figure out your interest rate and your loan terms.

Home Value Stability

The ebb and flow of home values in your part of Oregon directly impacts the equity you can tap into. When values are on the rise, lenders are more inclined to green-light larger loan amounts, seeing less risk in the game. But if values take a dip, lenders get a bit more cautious, which could mean smaller loan approvals.

Property Location

Where you live can impact your loan in another way, as well: If your property is in an area that is at high risk of extreme weather events or wildfires, a lender may be more cautious and impose a higher interest rate.

Lender Policies

Each lender has its own risk tolerance as well as its own policies regarding the interest rates and terms that are offered on home equity loans. So when you’re comparing lenders, make sure you take this into account.

How to Qualify for the Lowest Rates

To get the best home equity loan rate in Oregon, you’ll want to make sure you have a strong credit score, a low debt-to-income ratio, adequate property insurance, and enough home equity. Let’s look at the details so you’re prepared:

Build a Strong Credit Score

A higher credit score can lead to better rates on home equity loans. Paying bills on time is important for securing these favorable terms. But you’ll also want to look at your credit report now and then and correct any inaccuracies. And avoid using every line of credit that you have to the max — staying well within the limits shows you have mastered responsible financial management.

Manage Debt-to-Income Ratio

When you’re applying for a home equity loan, your debt-to-income (DTI) ratio is a big deal. Add up all your monthly debts (student loan, car loan, etc.) and divide by your gross monthly income. If your answer is below 36%, you’re in good shape. Some lenders will allow a DTI ratio up to 50%. A lower ratio tells them you’re in a strong position to manage your current debt and take on the additional monthly payments of a home equity loan.

Obtain Adequate Property Insurance

If you’re considering a home equity loan, it’s important to make sure you have enough insurance coverage on your property, especially if you live in an area that’s at risk for flooding or other disasters.

Maintain Sufficient Home Equity

You’ll need to have at least 20% equity in your home to qualify for a home equity loan. To ensure you meet this requirement, you should regularly check your home’s value and calculate your equity. Remember that your equity is computed based on current value, not what you paid for your home initially.

Fixed vs. Variable Interest Rates

In Oregon, and across the U.S., home equity loans typically come with fixed interest rates. This means you can count on your monthly payments to stay the same over the life of the loan. While fixed rates offer stability, they can also mean higher initial rates than variable rates, which start lower but can change over time.

Tools & Calculators

You can tell by now that preparing to apply for a home equity loan will involve some math. Online calculators make this easy. You can easily compute how different interest rates and loan terms can affect your monthly payments and the total amount of interest you’ll pay over the life of the loan. Here are a few of our favorite calculators for borrowing against your home equity with a home equity loan or its cousin, a home equity line of credit (HELOC).

Closing Costs and Fees

As noted above, each lender can have fees and policies that are slightly different. So it’s important to examine fees when you’re choosing a lender. Generally speaking, you can expect to pay closing costs ranging from 2% to 5% of the loan amount. These may include the appraisal, credit report, document preparation, origination, notary, title search, and title insurance. Exactly where each lender lands in the fee range will vary.

Tax Deductibility of Home Equity Loan Interest

Here’s some good news: You can deduct the interest from a home equity loan if it’s used for significant home improvements (just remember to save those receipts). The interest joint filers pay on the first $750,000 of their loan is deductible. For single filers, the number is $375,000. Just remember, you need to itemize deductions to claim this benefit. For the nitty-gritty on maximizing tax benefits, it’s always a good idea to chat with a tax advisor.

Alternatives to Home Equity Loans

In addition to traditional home mortgage loans, there are several alternative financing options available, each with its own distinct features and eligibility requirements.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is akin to a credit card, offering you the flexibility to borrow up to a certain limit and only pay interest on the amount you use. But like a home equity loan, a HELOC is secured by your home.

As you think about a HELOC vs. a home equity loan, another thing to keep in mind is that HELOCs usually have a variable interest rate. This can be a double-edged sword, potentially leading to increased costs if interest rates take an upward turn. A home equity loan, on the other hand, has a fixed interest rate.

Home Equity Conversion Mortgage (HECM)

A HECM, or home equity conversion mortgage, is a government-insured reverse mortgage that allows homeowners aged 62 and older to receive payments from the lender based on their home’s value. These payments can be received in various ways: as a lump sum, regular payments, or a line of credit. The beauty of an HECM is that you don’t need to make payments until you leave the home, unlike traditional home equity loans in Oregon. (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 replace your current mortgage with a new, larger one. You use the funds to pay off your old mortgage and keep the extra money for whatever big expense you have on the horizon.

As you consider a cash-out refinance vs. a home equity line of credit or home equity loan, remember that a refinance means an entirely new interest rate and term. So you’ll want to make sure the interest rate available to you with a refi is better than the one you currently have.

The Takeaway

Understanding home equity loan rates and the factors that influence them is crucial to making the best financial decision for your situation. By comparing lenders, taking good care of your credit score, and keeping an eye on the market, you can get the best rates and terms for your home equity loan, and improve your financial outlook.

FAQ

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

If you borrow $50,000 with a home equity loan and pay it back over 10 years, the monthly payments could range from $530 to $607, depending on your interest rate (this range is from 5.00% to 8.00%). The two main factors that govern your payments are the interest rate and the loan term, so changes in either of these will alter your payment.

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

How much interest you’ll pay on a home equity line of credit (HELOC) depends on how much of the credit line you use. But if you’ve used the entire $100,000 HELOC and are paying it back over 20 years at a rate of 7.00%, you can expect to pay $775 per month. You can use a HELOC repayment calculator to find the number for your exact interest rate.

What would the monthly payment be on a $25,000 home equity loan?

Assuming a 10-year term, an interest rate of 8.00% would mean a $303 payment each month. An interest rate of 6.00% would mean a $278 monthly payment. To make the math easier, use a home equity loan calculator to estimate the potential payment.

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

A $30,000 home equity loan with a rate of 8.00% and a 20-year term would cost you $251 each month. Changing the rate or loan term will alter the monthly payment amount.

What might prevent you from securing a home equity loan?

There are a few things that might make you ineligible for a home equity loan, such as lacking enough equity in your home, having a poor credit score, having a high debt-to-income ratio, or not having adequate property insurance.

What are the benefits of a HELOC?

HELOCs, or home equity lines of credit, offer several key benefits. You can borrow only what you need from the credit line — and you only pay interest on the amount that you borrow. They also typically have a lower interest rate than a credit card. Homeowners who need money for a project but aren’t exactly sure how much they will need find the flexibility of HELOCs attractive.

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-Q424-097