Compare HELOC rates in Washington.

Introduction to HELOC Rates

If you’re considering how to get equity out of your home in Washington State and researching the best HELOC interest rates, you’ve come to the right place. Our goal is to help homeowners understand all the factors influencing interest rates and how to secure the best deal on a home equity line of credit. You’ll learn about the application process, how to use online tools to predict your monthly payments and total interest paid, and alternatives like home equity loans and cash-out refis.

But first, let us explain what is a home equity line of credit so you can make sure this is the right financing option for you.

What Is a HELOC?

A home equity line of credit, or HELOC, is a revolving credit line (similar to a credit card) based on your home equity. Interest rates are typically lower than for unsecured personal loans because your home serves as collateral. However, HELOC interest rates are usually variable, meaning they can rise or fall with the market.

One advantage of a HELOC is that you withdraw from it only what you need at a given time — and you pay interest only on what you withdraw. Homeowners can borrow up to 90% of their equity, which is determined by an appraisal.

A HELOC has two phases: the draw period and the repayment period.

The Draw Period

During the draw period of a home equity line of credit, typically lasting 10 years, you can access funds up to your credit limit, make payments to reduce your balance, and borrow again. Interest-only payments are usually required during this period, but principal payments may be optional. Using a HELOC interest-only calculator can help you predict your minimum monthly payment during the draw period.

The Repayment Period

The repayment period of a HELOC usually lasts 10 to 20 years, during which borrowing ends and the principal is repaid with interest. However, the variable interest rate fluctuates, making repayment somewhat unpredictable. You can use a HELOC repayment calculator to estimate your payments and plan accordingly.

Recommended: HELOC vs Home Equity Loan

Where Do HELOC Interest Rates Come From?

HELOC interest rates are linked to “the prime rate,” which in turn is influenced by Federal Reserve policy decisions. Having a loose understanding of how interest rates are set can help borrowers anticipate rate fluctuations and make well-informed decisions about the optimal time for a HELOC.

How Interest Rates Impact HELOC Affordability

Interest rates can significantly affect the affordability of a HELOC. When it’s time to repay a $60,000 HELOC, having an interest rate of 7.00% would mean a payment of $465. With an 8.00% rate, your payment jumps to $502. Even more important, over the entire term, the customer with the 8.00% rate would pay almost $9,000 more in interest. The more you borrow and the higher the interest rate, the larger these numbers get. This is why it pays to research the best HELOC rates in Washington.

HELOC Interest Rate Trends

Fluctuations in the prime interest rate can give you a sense of where HELOC rates are headed. So it’s helpful to have a sense of the average prime rate’s recent trends. Since 2018, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023. The chart and graphic below will show you how much the prime rate typically swings.

Historical Prime Interest Rate

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

Broad economic trends can affect HELOC interest rates, but so can you, the borrower. Your home equity, credit score, income, and loan-to-value (CLTV) ratio significantly influence the HELOC rate you’re offered. By understanding how you factor into the equation, you can position yourself to secure the most competitive rates for your home equity line of credit — and potentially save a lot of money.

Home Equity

Having substantial equity in your home is important with HELOCs and all different types of home equity loans. Homeowners generally need a minimum of 15% equity in their property to qualify for a HELOC. The more equity you have, the better interest rate you may be offered.

Credit Score

Maintaining a credit score of 680 or higher is important when seeking to qualify for a HELOC. And lenders reserve better interest rates for credit scores exceeding 700. As with home equity, the higher the better: A higher credit score serves as a reliable indicator of reduced risk to the lender.

Stable Income

Lenders assess your overall income to determine your ability to honor your HELOC obligations. A steady income stream is indicative of a diminished risk of default. Documenting your income, via pay stubs and W-2s, is an important part of the application process.

Loan-to-Value Ratio

Most lenders require your combined loan-to-value ratio (mortgage balance + desired HELOC amount / appraised home value) to be 90% or less, although some will allow you to borrow 100% of your home’s value. The ratio is a key metric in determining your credit limit. If your home value is $700,000, your mortgage balance is $450,000, and your HELOC balance is $150,000, then your LTV ratio is 86%.

Variable vs Fixed Interest Rates

HELOCs are characterized by variable interest rates, which fluctuate over the course of the repayment term. Initially, variable interest rates are lower compared to typical fixed rates, but they can adjust up or down with prevailing market conditions. For some homeowners, the uncertainty of variable interest rates makes them lean toward a home equity loan, which typically has a fixed interest rate.

Tools & Calculators

SoFi provides a comprehensive suite of financial tools. These can assist you in estimating your payments and gaining a thorough understanding of the financial implications associated with your home equity line of credit. Below you’ll find a home equity loan calculator as well as two HELOC calculators mentioned above.

How to Qualify for a Competitive HELOC Rate

To qualify for a competitive home equity line of credit rate in Washington, focus on improving your credit score, maintaining a steady income, and ensuring that your loan-to-value ratio remains low. These factors significantly influence the interest rates offered for your home equity line of credit. Let’s take a closer look:

Improve Your Credit Score

Maintaining timely payments and making an effort to reduce credit card balances can substantially build your credit score. Another thing you can do is check your credit report for errors. They do happen and fixing them can help your score recover. A higher credit score makes you a more desirable candidate for obtaining a HELOC.

Assess Your Home Equity

Regular mortgage payments help in building home equity over time. Home equity can be enhanced through renovations that boost the property’s value. You need at least 15% equity in your home for a HELOC. Take a few minutes to look up your home’s estimated value on a real estate web site. Subtract from that amount whatever you owe on your mortgage. Then divide the result by the estimated value. That’s your home equity percentage.

Calculate Your Debt-to-Income Ratio (DTI)

Your DTI ratio is how much you owe in monthly debt payments (car loan, student loans, etc) divided by your gross monthly income. Home equity lenders generally look for a DTI that’s below 36%, but the lower your DTI, the better.

Application Process for a HELOC in Washington

The application process for a HELOC in Washington State entails a series of well-defined steps. By gaining a thorough understanding of this process, you can navigate the application for your HELOC with ease and efficiency.

Step 1. Run the Numbers

Check your credit scores (above 700?), calculate your DTI (below 36%?), and get a good estimate of your home equity (above 15%?) before you apply for a HELOC. Some lenders allow borrowers to prequalify for a HELOC online, streamlining the application process.

Step 2. Compare Lenders

When you shop around, of course pay close attention to interest rates, but also compare their qualification requirements, draw minimums and maximums, fees, the length of the draw and repayment periods they’re offering, and other factors. It’s OK to prequalify with multiple lenders to nail down your top offers.

Step 3: Gather Your Documents

When applying for a HELOC, ensure that all the necessary documents are readily available. These typically include proof of income (pay stubs and W-2s), bank statements, employment history, and detailed property information, including proof of homeowners insurance. Having these organized and easily accessible will ensure a smooth and efficient application process for your HELOC application.

Step 4: Submit Your Application

Submitting your HELOC application takes place online, by phone, or in person. Be sure to attach all requested documents at this stage.

Step 5: Get an Appraisal

A home appraisal is an indispensable step in the HELOC process. If your home appraises for an amount that is higher than your mortgage balance, the lender may approve you for a HELOC loan.

Step 6: Prepare for Closing

Before accessing your HELOC funds, you must sign documents and pay necessary fees. Some lenders are quite prompt in making the funds available, with some even disbursing them within three days of the closing.

Tax Benefits and Considerations

Homeowners can deduct HELOC interest if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). Consult a tax advisor to navigate the specific tax implications and confirm eligibility for deductions related to a HELOC.

Closing Costs and Fees

HELOC closing costs are generally lower than home-buying or cash-out refinance costs. The appraisal fee is usually the highest expense, ranging from $150 to $500. Other costs may include application, origination, and administrative fees. Some lenders charge a maintenance fee, transaction fee, inactivity fee, or early termination fee. Many lenders offer to reduce or waive closing costs but may charge a higher interest rate.

Alternatives to HELOCs

Other financing options besides HELOCs include home equity loans, cash-out refinancing, and personal loans. Consider the pros and cons of each option to determine the best fit for your financial needs.

Home Equity Loan

Unlike HELOCs, home equity loans provide a lump sum amount and are paid back at a fixed interest rate, so your monthly payment never changes. Borrowers can usually access up to 85% of the equity built in their home through a home equity loan.

Cash-Out Refinance

A type of mortgage refinance, a cash-out refi lets homeowners pay off their existing mortgage plus take a lump sum of cash. This option may have higher interest rates than traditional refinancing.

If you’re considering a cash-out refinance vs. a home equity line of credit, you should know that the refinance means you’ll end up with only one monthly payment, as opposed to two if you take on a HELOC while paying off your mortgage. A cash-out refi also means a new interest rate and loan terms. If rates have risen since you initially financed your home, this may not be a good move.

Personal Loan

A personal loan is a flexible, typically unsecured loan that you pay back in regular payments over a term of 2 to 7 years. They can be used for almost anything and do not require collateral. They are a viable alternative to a home loan for those who prefer not to use their home as collateral. However, personal loan interest rates can be significantly higher than HELOCs.

Credit Cards

Because credit cards come with high interest rates, they’re better reserved for smaller purchases that can be paid off before the end of the billing cycle. HELOCs offer significantly lower interest rates than credit cards, making them suitable for larger expenses like home renovations or debt consolidation.

The Takeaway

When searching for the best HELOC rates in Washington State, it’s important to compare multiple lenders and consider factors like repayment terms, fees, and borrowing limits. HELOCs can be a valuable financial tool for homeowners looking to leverage their home equity for various purposes, from home improvements to debt consolidation. However, it’s important to understand the potential drawbacks of variable interest rates, and the consequences if you default.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the monthly payment on a $50,000 HELOC?

The monthly payment on a $50,000 HELOC varies based on the interest rate and repayment terms. Assuming you draw the full amount and make interest-only payments during the draw period, your monthly payment over 10 years could range from $581 (at 7.00% interest) to $661 (at 10.00%). A repayment term of 20 years will mean lower monthly payments but significantly more interest paid over the life of the loan.

Is a HELOC a good idea right now?

Whether a HELOC is a good idea right now depends on your financial situation and goals. HELOCs can be beneficial for homeowners looking to fund home improvements, consolidate debt, or cover other large expenses. However, it’s important to consider the current interest rates and your ability to repay the loan.

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

The monthly payment on a $100,000 HELOC is based on how much of the credit line you have used, and on your repayment term and interest rate. If you use the entire $100,000 and pay it back at 8.50% interest over 20 years, your monthly payment would be $868. If you had a 7.00% interest rate, you would pay less: $806.

What are the benefits of a HELOC?

The benefits of a HELOC include financial flexibility, lower interest rates compared to credit cards, and potential tax advantages. HELOCs allow you to borrow and repay as needed during the draw period, making them ideal for ongoing projects or unexpected expenses. Additionally, a HELOC can be used for various purposes, from home improvements to debt consolidation.

Do you need an appraisal for a HELOC?

An appraisal is typically required for a HELOC. The appraisal determines the value of your home, which directly influences the maximum amount you can borrow.

What disqualifies you from getting a home equity loan?

Several factors can disqualify you from getting a home equity loan, including poor credit history, high debt-to-income ratio (above 50%), and insufficient home equity (under 15%).

How difficult is it to get a HELOC?

The difficulty of getting a HELOC depends on your financial situation and the lender’s requirements. HELOCs typically require good credit, sufficient home equity, and a stable income. The application process involves submitting documentation, undergoing a home appraisal, and waiting for approval. A HELOC can be a valuable financial tool, but you’ll need to meet the qualification criteria to secure one.

Does HELOC affect credit score?

Yes, a HELOC can affect your credit score. Applying for a HELOC will result in a hard inquiry on your credit report, which can temporarily lower your score. Additionally, using a large portion of your available credit can increase your credit utilization ratio, potentially impacting your score. However, making timely payments on your home equity line of credit can help improve your credit score over time.

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-Q424-057

Compare HELOC rates in Rhode Island.

Introduction to HELOC Rates

This guide provides an overview of home equity line of credit (HELOC) interest rates in Rhode Island. Readers will learn about how HELOCs work, the key factors influencing their rates, and how to secure the best available HELOC offers. By understanding the dynamics of HELOC interest rates, homeowners can make informed decisions about their home loan options and maximize their financial benefits.

To begin, what is a home equity line of credit?

What Is a HELOC?

A HELOC is a credit line, similar to a credit card, with an upper limit determined by your home equity. Homeowners can borrow up to 90% of their home’s value, minus the mortgage. HELOC interest rates are often variable, meaning they can increase or decrease over time with market conditions. The rates are lower than for credit cards and personal loans, because they’re secured by your home. The downside of that: Homeowners risk foreclosure if they default on the HELOC.

HELOCs have two phases: the draw period and the repayment period.

The Draw Period

During the HELOC’s draw period, which typically spans 10 years, you can access funds up to your credit limit, make payments to reduce your outstanding balance, and borrow again as needed. Typically, interest payments are required during this period, while principal payments can be deferred. A HELOC interest-only calculator can show you what your minimum payments might be based on the amount you borrow and your interest rate.

The Repayment Period

During the repayment period (typically 10 to 20 years), borrowing ends, and you pay back the principal with interest. You pay interest only on the amount borrowed, not the whole credit line.

Where Do HELOC Interest Rates Come From?

HELOC interest rates are tied to the prime rate and influenced by economic and housing market conditions. The prime rate is the benchmark interest rate that banks set for their most creditworthy customers. Although the Federal Reserve (aka “the Fed”) doesn’t set the prime rate, its interest rate decisions do have an influence on other rates, including HELOC rates.

This is all to say that many factors go into determining the interest rates you’re offered by lenders. Understanding how interest rates are set can help borrowers anticipate rate fluctuations and make informed decisions about the best time for a HELOC.

How Interest Rates Impact HELOC Affordability

Interest rates have a substantial impact on the affordability of your HELOC. Over the course of a 20-year repayment term, a mere 1% difference in interest rate can result in thousands of dollars in additional interest paid. That’s why watching interest rates has become something of a sport, with headlines speculating about and reacting to the Fed’s regular rate announcements.

The chart below shows how a change in the interest rate or the repayment term affects your monthly payments, as well as the total amount of interest paid over the life of the HELOC.

HELOC Interest Rate Trends

Rhode Island HELOC rates closely follow the prime interest rate. By keeping a watchful eye on these trends, you can strategically time your HELOC application to maximize your chances of securing favorable terms and conditions.

Historical Prime Interest Rate

Since 2018, the prime rate has experienced considerable fluctuations, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023. The graphic below offers a long view of the average prime rate over the past 50 years.

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

When applying for a HELOC in Rhode Island, it’s helpful to know that some factors influencing interest rates are tied to the borrower and the specific property. These include your home equity stake, credit score, income, and loan-to-value (LTV) ratio. This is true no matter how you get equity out of your home — whether via a HELOC or home equity loan.

Home Equity

Significant home equity enhances your financial standing in the eyes of lenders, potentially resulting in more favorable interest rates. Typically, homeowners require a minimum of 15% equity in their property to qualify for a HELOC. While some lenders will allow you to borrow 100% of your equity, many will cap it at 90%.

Credit Score

Maintaining a credit score of 700 or higher may be needed to secure a more favorable interest rate. Notably, many lenders require a score of 680 just to qualify for a HELOC. A higher credit score serves as a strong indicator of lower risk to lenders, which can translate into more advantageous terms and potentially lower interest rates.

Stable Income

Lenders evaluate your overall income to determine your ability to repay the HELOC. But they also look at the steadiness of your income, which is indicative of a diminished risk of default. That may mean being employed with the same company or in the same role for a number of years works to your advantage. And if you’re self-employed, you may be asked for additional income documentation.

Loan-to-Value Ratio

Most lenders require your combined loan-to-value ratio (mortgage balance + desired HELOC amount / appraised home value) to be 90% or less, although some will allow you to borrow 100% of your home’s value. The ratio is a key metric in determining your credit limit. If your home value is $500,000, your mortgage balance is $300,000, and your HELOC balance is $120,000, then your combined LTV ratio is 84%.

Variable vs Fixed Interest Rates

HELOCs are characterized by variable interest rates, which are subject to change over the course of the loan. Initially, variable interest rates are lower than conventional fixed rates, but they adjust, upward or downward, in response to prevailing market conditions. When you compare HELOCs vs. home equity loans, this is a primary point of difference. Home equity loans tend to have a fixed rate.

Tools & Calculators

Loan calculators can help would-be borrowers determine what type of home equity loan or line of credit works best for your financial situation. The interest-only calculator below can show you what your minimum payment might be during a HELOC’s draw period, while the repayment calculator will compute the higher payment you’ll make when borrowing is done. For each, you’ll need to choose an interest rate and a repayment term.

How to Qualify for a Competitive HELOC Rate

To secure the most advantageous Rhode Island HELOC rate, it pays to do some advance work. Consider this your To Do list, and it will make your HELOC application process go smoothly and efficiently.

Cultivate Your Credit Score

Consistently making bill payments on time and paying down credit card balances can significantly boost your credit score, which is of utmost importance when seeking lower interest rates. Regularly reviewing your credit report and immediately addressing any errors can also help improve your score and strengthen your overall credit profile.

Assess Your Home Equity

Regular mortgage payments help in building home equity over time. Home equity can also be enhanced through renovations that boost the property’s value. To determine whether you’ve hit that 15% mark, look up your home’s value on a real estate site. Subtract whatever you owe on your mortgage. Then divide that number by the home value. The more equity you have, the better terms and higher HELOC limit you will likely qualify for.

Calculate Your Debt-to-Income Ratio (DTI)

Your DTI ratio is how much you owe in monthly debt payments divided by your gross monthly income. Home equity lenders generally look for a DTI that’s below 36%, but the lower your DTI, the better. A lower DTI can help you qualify for more favorable HELOC rates.

Application Process for a HELOC in Rhode Island

The application process for a HELOC in Rhode Island involves several steps, including reviewing your financial health, comparing Rhode Island HELOC rates, preparing documentation, submitting an application, undergoing a home appraisal, and waiting for approval. Each step is crucial for securing the best possible terms.

Step 1. Run the Numbers

Check your credit score: Is it above 680? (And ideally, above 700?) Now calculate your DTI: Is it below 36%? What’s your home equity? If you don’t have at least 15%, you’ll have a hard time qualifying for a HELOC.

Step 2. Compare Lenders

See what offers you might qualify for when it comes to interest rates, but also compare their qualification requirements, credit line minimums and maximums, fees, the length of the draw and repayment periods they’re offering, and any other details the lenders offer.

Step 3: Gather Your Documents

When applying for a HELOC loan, you’ll need to document every number discussed in Step 1, and more. It can significantly streamline the application process and greatly increase your chances of approval if you pull together your paperwork now, including proof of income (W-2s, pay stubs), employment history (a resume or CV), credit reports, and documentation of your home’s value and homeowners insurance.

Step 4: Submit Your Application

Submitting your HELOC application takes place online, by phone, or in person. Ensure that all required documents are included and all application fields are completed to avoid any delays in the processing of your application.

Step 5: Get an Appraisal

A home appraisal is a pivotal step in the HELOC process. It determines your current home value, which helps determine your equity level, which then allows lenders to set your credit limit. In the event that the valuation of your home surpasses the outstanding balance of your mortgage, the lender may choose to approve your HELOC application.

Step 6: Prepare for Closing

Before accessing your HELOC funds, you must sign loan documents and pay necessary fees. Some lenders may release funds within three business days of the HELOC’s closing.

Tax Benefits and Considerations

Homeowners may be able to deduct HELOC interest if the funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor can help you navigate the specific tax implications and confirm eligibility for deductions.

Closing Costs and Fees

HELOC closing costs are usually lower than for home buying or a mortgage refinance. The appraisal fee, from $150 to $500, is often the highest expense. Other costs may include application, origination, and administrative fees. Some lenders charge annual maintenance fees and transaction fees for withdrawals. Lenders may waive closing costs but may increase the interest rate.

Alternatives to HELOCs

In addition to HELOCs, other financing options include home equity loans, cash-out refinances, and personal loans. Each option provides distinct advantages and considerations, making it a good idea to know a little about each one.

Home Equity Loan

A home equity loan provides homeowners with a lump-sum amount that is repaid in regular monthly installments. Typically, borrowers can access up to 85% of the equity accumulated in their home through a home equity loan, as opposed to 90% with a HELOC. The chart below gives more details on what is a home equity loan.

Recommended: Home Equity Loan Calculator

Cash-Out Refinance

A cash-out refi allows homeowners to tap into their home equity by refinancing their existing mortgage for more than they owe and taking the difference in cash. Cash-out refinancing may come with higher interest rates compared to traditional refinancing options. Some borrowers lean toward the cash-out refi option because they like rolling everything into one monthly payment — as opposed to the two payments you have with a mortgage and a HELOC or home equity loan.

When comparing a cash-out refinance vs. a home equity liine of credit, one thing to keep in mind is that with a new mortgage, you’ll also have a new interest rate. If current rates are higher than your existing rate, you’ll want to carefully tally the costs to make sure refinancing makes sense.

Personal Loan

Like a home equity loan, a personal loan gives you a large lump sum that you pay back in equal installments plus interest. Repayment takes place over 2 to 7 years. But because a personal loan isn’t backed by collateral, the interest rate is usually higher. However, some borrowers think that’s a fair trade for not putting their home on the line.

Credit Cards

Credit cards typically come with much higher interest rates than HELOCs, which can make them much more expensive if you carry a large balance from month to month. While credit cards offer flexibility for smaller purchases, HELOCs are better suited for larger expenses such as home improvements or debt consolidation.

The Takeaway

When searching for the best HELOC rates in Rhode Island, it’s important to consider factors like interest rates, fees, and lender reputation. Maintaining a good credit score and comparing offers from multiple lenders can help borrowers secure the best rates. Just keep in mind that a HELOCs variable interest rate means that monthly payments can be somewhat unpredictable. Homeowners should be careful to understand how much their rate may fluctuate and how that will affect their monthly payments.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the monthly payment on a $50,000 HELOC?

Let’s assume you draw the full amount and make interest-only payments during the draw period. With an 8.50% interest rate and a 10-year term, your monthly payment will be about $620. An 8.50% interest rate over a 20-year term would cost $434 per month, but you’ll pay almost $30,000 more interest in the long run.

Is a HELOC a good idea right now?

Only the borrower can decide whether a HELOC is a good match for their financial profile and goals. HELOCs can be advantageous for large expenses like home renovations or debt consolidation, but it’s important to carefully evaluate the current interest rates and potential repercussions on your home equity and overall financial well-being.

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

The monthly payment on a $100,000 home equity line of credit is determined by the interest rate and repayment term. If you draw the full amount, have an 8.50% interest rate, and repay what you borrowed (plus interest) over a 20-year term, your monthly payment should be about $868.

What are the benefits of a HELOC?

HELOCs provide numerous advantages, including the flexibility to access funds when needed, generally lower interest rates when compared to credit cards, and the potential for favorable tax benefits. These loans are particularly well-suited for homeowners seeking to finance home improvement projects or consolidate existing debts.

Do you need an appraisal for a HELOC?

Yes, an appraisal is typically required for a HELOC. The appraisal determines the current market value of your home, which is needed to calculate your home equity position. Lenders will base your HELOC credit limit on those figures.

What disqualifies you from getting a home equity loan?

Various factors can impede your ability to obtain a home equity loan, including a spotty credit history, insufficient home equity, and a high debt-to-income ratio.

How difficult is it to get a HELOC?

Obtaining a home equity line of credit (HELOC) can be a complex process, requiring a deep dive into your financial records. Lenders meticulously assess an applicant’s credit score, home equity, and income to determine eligibility. But if a borrower runs the numbers in advance, there should be no surprises during the application process.

Does HELOC affect credit score?

Yes, it is true that HELOCs can indeed impact your credit score. Submitting an application for a HELOC results in a hard inquiry, which can cause a temporary reduction in your score. The manner in which you manage your HELOC, including making timely payments, can have a positive effect on your credit score over time.

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.

SOHL-Q424-049

Compare HELOC rates in South Dakota.

Introduction to HELOC Rates

This comprehensive guide provides a thorough overview of HELOCs, or home equity lines of credit, and their interest rates. If you’re a homeowner investigating how to get equity out of your home, you’re in luck. We’ll explain in plain language how HELOC rates are set, the HELOC application process, and effective strategies for securing competitive rates in South Dakota. Armed with this information, you can make well-informed decisions that align with your budget and aspirations.

First step: Wrap your head around what is a home equity line of credit:

What Is a HELOC?

A HELOC is a revolving credit line based on your level of home equity. Equity is the difference between a home’s value and the mortgage owed. Borrowers may qualify for up to 90% of the home’s value, minus the mortgage.

HELOCs are secured by your home, so they generally offer lower interest rates than unsecured personal loans. And because they have a variable interest rate, the entry level rate on a HELOC is usually lower than the fixed rate you would get on a home equity loan. From there, though, the rate can rise or fall according to market conditions.

A HELOC has two phases: draw and repayment.

The Draw Period

During the draw period, which typically lasts 10 years, borrowers can access funds up to their credit limit. While monthly interest-only payments are generally required, principal payments may be optional. If you do pay down the principal, you can borrow that money again. Don’t need your full credit line after all? Then you don’t have to use it. And you pay interest only on the amount that you are using.

A HELOC interest-only calculator can show you your minimum payment for the draw period based on your HELOC amount and interest rate.

The Repayment Period

During the repayment period (usually 10 to 20 years), borrowing ends and the principal is repaid with interest. The variable interest rate will fluctuate, making repayment somewhat unpredictable. But a HELOC repayment calculator can help you plan ahead for rate changes.

Where Do HELOC Interest Rates Come From?

We’ll keep this simple: South Dakota HELOC interest rates are tied to something called the prime rate, which is the benchmark interest rate that banks give customers with a stellar credit history. HELOC rates are also influenced by economic conditions, the Federal Reserve’s policy decisions, and the housing market in your part of the state.

Having a loose understanding of where interest rates come from can help borrowers anticipate rate fluctuations and make informed decisions about the best time for a HELOC.

How Interest Rates Impact HELOC Affordability

Why the laser focus on interest rates? Rates have a significant impact on the affordability of any home loan. A 1% difference in interest rate may seem small — and it’s true your monthly payment may not change much. But over a 10-year draw period and 20-year repayment period, that 1% adds up. The table below shows how different interest rates and repayment terms affect the total interest you’ll pay. That 1% difference can mean thousands of dollars in additional interest.

HELOC Interest Rate Trends

Given that HELOC rates are tied to the prime interest rate, getting a sense of the history of the average prime rate (shown in the chart and graphic below) can help you understand where today’s HELOC rates in South Dakota fall on the spectrum. Since 2018, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023.

Historical Prime Interest Rate

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

Now that you’re well-versed in the economic factors that influence HELOC interest rates, get ready for a curveball. HELOC rates in South Dakota are also influenced by the borrower’s financial profile. That means you. Many of your past financial decisions are reflected in your credit score. Let’s take a look at what else lenders are interested in:

Home Equity

Substantial home equity makes borrowers appear less risky to lenders, often leading to more favorable interest rates. Typically, homeowners need to have at least 15% equity to qualify for a HELOC.

Credit Score

You need to maintain a credit score of 680 or higher to qualify for a HELOC, but a score of 700+ will get you better rates. A higher credit score indicates lower risk for the lender.

Stable Income

Lenders assess your overall income to determine your ability to repay the HELOC. A stable income indicates a lower risk of default. This is why documenting your income, via pay stubs and W-2s, is an important part of the application process.

Loan-to-Value Ratio

Lenders often require a combined loan-to-value (LTV) ratio of 90% or less, though some will allow you to borrow 100% of your home’s value. Your LTV ratio is a key factor in determining your credit limit. If your home value is $400,000, your mortgage balance is $225,000, and your HELOC balance is $100,000, then your combined LTV ratio is 81%. The formula is simple: mortgage balance + desired HELOC / home value.

Variable vs Fixed Interest Rates

HELOCs feature variable interest rates, which will fluctuate throughout the loan term. Variable interest rates start out lower than typical fixed rates but will adjust up and down with market conditions. Understanding the difference can help you plan your financial strategy.

Tools & Calculators

SoFi provides numerous online tools to assist you in estimating your payments and gaining insight into the financial implications of a HELOC. Below you’ll find a home equity loan calculator as well as two HELOC calculators mentioned above.

How to Qualify for a Competitive HELOC Rate

To obtain the most favorable HELOC rates in South Dakota, homeowners are advised to build their credit score and compare offers from multiple lenders. The goal is to get the lowest rate possible with your financial profile.

Care for Your Credit Score

Making timely payments and reducing credit card balances can significantly boost your credit score. The higher your score, the better the interest rates you’ll be offered. Regularly checking your credit report and addressing any issues can also help.

Assess Your Home Equity

The first step when you’re considering different types of home equity loans and lines of credit is to assess your equity stake. Just subtract your mortgage balance from your home’s value, then divide the result by the home value to get a percentage. For this purpose, you can use an online estimate of your home’s value, such as what you see on real estate sites.

Calculate Your Debt-to-Income Ratio (DTI)

Your DTI ratio is how much you owe in monthly debt payments divided by your gross monthly income. Home equity lenders generally look for a DTI that’s below 36%, but the lower your DTI, the better.

Application Process for a HELOC in South Dakota

The application process for a HELOC in South Dakota involves several steps, including reviewing your financial health, comparing rates, preparing documentation, submitting an application, and undergoing a home appraisal. Understanding each step can help you navigate the process smoothly, and maybe even save you some needless worry.

Step 1. Run the Numbers

Check your credit score, calculate your DTI, and get a good estimate of your home equity before you apply for a HELOC. If you’ve been following our advice so far, you already have your numbers. Ideally, they’re over 680, under 36%, and over 15%.

Step 2. Compare Lenders

Prequalifying with multiple lenders can give you a good idea of what interest rates you qualify for. But also compare qualification requirements, credit line minimums and maximums, fees and penalties, and the length of the draw and repayment periods.

Step 3: Gather Your Documents

When applying for a HELOC, it helps to gather all the necessary documents beforehand. This typically includes proof of income, employment history, and identification.

Step 4: Submit Your Application

Submitting your HELOC application can take place online, by phone, or in person. Remember, submitting an accurate and complete HELOC application will save time and hassle.

Step 5: Get an Appraisal

A home appraisal is an important step in determining the value of your property. If an in-person visit is required, scheduling it quickly will help move along the application process.

Step 6: Prepare for Closing

Before accessing your HELOC funds, you must sign loan documents and pay necessary fees. Some lenders make funds available within three days following this closing process.

Tax Benefits and Considerations

Homeowners can deduct HELOC interest on the federal tax return if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor might be a good idea the first year of your HELOC.

Closing Costs and Fees

HELOC closing costs are usually lower than home-buying or cash-out refinance costs. The appraisal fee, typically the highest expense, ranges from $150 to $500. Other costs may include application, origination, and administrative fees. Some lenders charge annual maintenance fees and transaction fees. Inactivity and early termination fees may also apply.

Alternatives to HELOCs

In addition to HELOCs, other financing options that may be available to homeowners include home equity loans, cash-out refinancing, and personal loans. Carefully consider the terms and conditions of each option, and choose the one that best aligns with your financial goals and circumstances.

Home Equity Loan

Home equity loans offer a lump sum at a fixed interest rate. Borrowers can typically access up to 85% of their home’s accumulated equity through a home equity loan. Comparing a HELOC vs home equity loan can help you grasp their distinct features and advantages.

Cash-Out Refinance

A type of mortgage refinance, a cash-out refi lets homeowners tap home equity by refinancing their existing mortgage for more than what they owed and taking the difference in cash. Some borrowers lean toward the cash-out refi option because they like rolling everything into one monthly payment — as opposed to the two payments you have with a mortgage and a HELOC or home equity loan.

When comparing a cash-out refinance vs. a home equity line of credit, one thing to keep in mind is that with a new mortgage, you’ll also have a new interest rate. If current rates are higher than your existing rate, you’ll want to carefully tally the costs to make sure refinancing makes sense.

Personal Loan

A personal loan is a versatile, typically unsecured loan that you repay in regular monthly payments that stay the same over a term of two to seven years. Personal loans are preferred by borrowers who don’t want to use their home as collateral. But because they are unsecured, they usually have higher interest rates than home loans.

Credit Cards

Credit cards typically come with higher interest rates than HELOCs, which can make them much more expensive if you carry a large balance from month to month. While credit cards offer flexibility for smaller purchases, home equity loans and HELOCs are often more suitable for larger expenses such as home renovations or debt consolidation.

The Takeaway

When considering a home equity line of credit (HELOC) in South Dakota, it’s smart to do your research and compare multiple HELOC offers. By taking proactive steps such as building your credit score and paying down debt, you can significantly enhance your chances of securing highly competitive rates and favorable terms for your HELOC.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the monthly payment on a $50,000 HELOC?

Let’s assume you draw the full amount and make interest-only payments during the draw period. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. An 8.00% interest rate over a 20-year term would cost $418 per month, but you’ll pay more interest in the long run. A HELOC calculator can show you how much you’d pay with different interest rates and repayment terms.

Is a HELOC a good idea right now?

A home equity line of credit, or HELOC, can be a practical solution when seeking funds for large renovation projects or debt consolidation. However, obtaining the lowest available HELOC interest rate makes a big difference in the overall affordability.

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

The monthly payment on a $100,000 home equity line of credit is determined by the interest rate and repayment term. If you draw the full amount, have an 8.50% interest rate, and repay what you borrowed (plus interest) over a 20-year term, your monthly payment should be about $868.

What are the benefits of a HELOC?

HELOCs provide flexible access to funds, competitive interest rates, and the potential for tax benefits. These credit lines are ideally suited for homeowners seeking to finance substantial expenses ($25,000+), enabling them to tap into the home equity accumulated in their properties.

Do you need an appraisal for a HELOC?

Indeed, it is standard practice for a home equity line of credit (HELOC) to necessitate an appraisal, the purpose of which is to ascertain the current market value of your property. Some lenders may offer options that do not require an in-person appraisal, but they’ll need to determine your home value and equity position one way or another.

What disqualifies you from getting a home equity loan?

Factors that could potentially disqualify you from securing a home equity loan include a history of poor credit, insufficient home equity, and a high debt-to-income ratio.

How difficult is it to get a HELOC?

The level of difficulty in obtaining a home equity line of credit hinges upon your financial circumstances. Key factors that lenders consider include a history of good credit, sufficient home equity, and a consistent source of income. If you have your ducks in a row and don’t mind the somewhat lengthy application process, you won’t find it difficult to get a HELOC.

Does HELOC affect credit score?

A HELOC may impact your credit score either positively or negatively. Applying for one can cause a temporary dip due to a hard inquiry. High credit utilization from using a large portion of your available credit line can also ding your score. On the other hand, making timely payments can build a positive credit history.

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.

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Compare HELOC rates in Minnesota.

Introduction to HELOC Rates

If you’re wondering how to get equity out of your home and considering a home equity line of credit (HELOC), this guide will make your application process easier and help you get a competitive interest rate. You’ll learn the key factors influencing Minnesota HELOC rates and how to effectively utilize this information to make an informed decision. Let’s start with the basics:

What Is a HELOC?

A home equity line of credit enables homeowners to borrow against equity they’ve built in their home. You can borrow up to 90% of your home’s value, minus what you still have to pay on your mortgage. Because a HELOC works somewhat like a credit card, you don’t have to borrow the entire amount at once. You can draw money as you need it. The HELOC is secured by your home, so it may have a better interest rate than a credit card or a personal loan.

HELOCs have two phases: first the draw period, followed by the repayment period. It’s important to understand them and their differences.

The Draw Period

During a HELOC’s draw period (10 years is standard), you can access funds up to your credit limit, make payments on your balance, and borrow the money again if you want to. As a borrower, you’ll usually be required to make interest payments in the draw period, but paying back the principal may be optional.

The Repayment Period

During the 10- to 20-year period of repayment, borrowers pay off the principal with interest. Experiment with a HELOC repayment calculator for help understanding your monthly payments and overall interest.

Where Do HELOC Interest Rates Come From?

Interest rates on HELOCs are variable, meaning they change over the life of the credit line. They’re influenced by the prime rate, which is the rate banks and other lenders charge borrowers they perceive to be at the lowest risk of default.

How Interest Rates Impact HELOC Affordability

Interest rates can have a significant impact on the costs surrounding a HELOC. When it’s time to repay a $60,000 HELOC, having an interest rate of 6.00% over a 20-year term would mean a monthly payment of $430. An interest rate of 7.00% would require a $465 payment. Over the entire term, a customer with a 7.00% rate would pay $8,477 more in interest. The more you borrow and the higher your interest rate, the larger the numbers.

HELOC Interest Rate Trends

HELOC rates are tied to the prime interest rate set by banks, so getting to know the history of the average prime rate (shown in the chart and graphic below) may help you understand where current HELOC rates in Minnesota fall on the spectrum.

Since 2018, the prime rate has ranged from 3.25% at its lowest in 2020 to 8.50% at its highest in 2023. These fluctuations can have a impact on HELOC vs. home equity loan considerations, in part because, while HELOC rates are variable, home equity loan rates tend to be fixed (more on that below).

Historical Prime Interest Rate

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

The prime rate is important, but it’s not the only thing influencing HELOC interest rates in Minnesota. A number of key factors specific to an individual borrower also matter. Understanding them can help you secure the most favorable rates for your loan or line of credit.

Home Equity

Having a sizable amount of equity in your residential property makes you an attractive prospect for lenders, potentially scoring you reduced interest rates. Homeowners typically need a minimum of 15% equity to qualify for a HELOC.

Credit Score

When it comes to securing a desirable interest rate for a HELOC, maintaining your credit score at 680 or higher is a good move. Many lenders even prefer a credit score of 700 or above.

Stable Income

Lenders look hard at your income. They are going to carefully evaluate your ability to repay the HELOC, so stability is important to them. It’s a good idea to use a HELOC monthly payment calculator to make sure you’re able to make the monthly payments.

Loan-to-Value Ratio

Most lenders require your combined loan-to-value ratio (CLTV) to be 90% or less. You can compute your CLTV by adding the existing balance on your mortgage to the amount you hope for your HELOC to be, and then dividing by your appraised home value. Here’s an example:

A homeowner’s property appraises at $500,000. They still owe $300,000 on the mortgage. They are applying for a $120,000 HELOC.

   $300,000 + $120,000 = $420,000

   $420,000 / $500,000 = .84 (aka an 84% CLTV)

Variable vs Fixed Interest Rates

As you read above, HELOCs often carry variable interest rates, subject to change over the loan’s duration. To begin with, variable interest rates often look lower when compared to fixed rates, but by design, they increase or decrease in accordance with market conditions.

Tools & Calculators

Time-saving online tools can assist you in calculating approximate payments and the interest you’ll pay on a HELOC. Our favorites include a HELOC interest-only calculator, which can determine the payments you’ll need to make during the draw period.

How to Qualify for a Competitive HELOC Rate

A checklist for securing a competitive rate on your HELOC can help you get started. These “to dos” will help you to think about factors that lenders will scrutinize when determining your eligibility and interest rate. A solid financial standing can enhance your ability to secure different types of home equity loans and lines of credit.

Cultivate Your Credit Score

When you applied for your home loan, your credit score was paramount. Its importance when you apply for a HELOC is equal. You can build your credit score over time by paying your bills on or before the due dates. Reducing or eliminating credit card balances is also essential. Review your credit report regularly and address errors promptly.

Assess Your Home Equity

Timely mortgage payments help homeowners build home equity. Renovations not only make your home happier — they can enhance your equity by boosting the property’s value. If your home equity is in the single digits or teens, getting approved for a HELOC may be difficult.

Calculate Your Debt-to-Income Ratio (DTI)

Your DTI ratio is how much you pay monthly on debt — like student loans, a car loan, or a personal loan — divided by your gross monthly income. Home equity lenders tend to look for a DTI below 36%. Some allow up to 50%. Calculating your DTI ratio is important, as it can help you determine your eligibility for a HELOC, and whether you’ll qualify for favorable terms.

Application Process for a HELOC in Minnesota

A HELOC application in Minnesota involves several key steps. If you understand the process, your application journey will be smooth and hopefully fruitful.

Step 1. Run the Numbers

Check your credit scores, crunch your DTI, and get an estimate of your home equity before you apply for a HELOC. Some lenders have website options that let you prequalify for a HELOC online, streamlining the application process.

Step 2. Compare Lenders

Look at multiple lenders’ interest rates. Also compare qualification requirements, minimums and maximums, fees, and the lengths of their draw and repayment periods.

Step 3: Gather Your Documents

Putting together your paperwork or digital documentation is a crucial step in applying for a HELOC. Typically you need to present proof of income such as pay stubs and tax returns, documentation of your home’s value, and stubs verifying your mortgage balance . Lenders may ask for your homeowner’s insurance policy and a list of your current debts and assets, too.

If you are self-employed, a lender may ask you for a profit-and-loss statement and two years’ worth of tax returns. Having these documents prepared can make the application process go faster and boost your chances of grabbing a competitive HELOC rate.

Step 4: Submit Your Application

If you find a potential lender that offers an online HELOC application portal, it will make the process that much more efficient. You can also likely submit by phone, or in person if the lender has a brick-and-mortar branch.

Step 5: Get an Appraisal

After you submit your application, the lender will schedule a home appraisal. This is to determine the current value of your property. If your home appraises higher than your outstanding mortgage balance, there’s a good chance the lender will approve your HELOC. The appraisal process might take a few weeks.

Step 6: Prepare for Closing

Before you can access and spend your HELOC funds, you will need to sign loan documents and most likely pay some fees. Your lender may make funds available as quickly as three days following closing. Make sure you understand your loan’s terms and conditions before you sign.

Tax Benefits and Considerations

Before you can access and spend your HELOC funds, you will need to sign loan documents and most likely pay some fees. Your lender may make funds available as quickly as three days following closing. Make sure you understand your loan’s terms and conditions before you sign.

How Much Does a HELOC Cost?

HELOC’s do have costs, but they tend to be lower than those of a typical home loan or mortgage refinance, which can range from 2% to 5% of the loan amount. With a HELOC, the appraisal fee, which can reach $500, is the biggest line item. Application and administrative fees may represent additional charges. Some lenders bill for annual maintenance, as well as transaction, inactivity, and early termination fees. Some lenders may reduce or waive fees but charge a higher interest rate.

Alternatives to HELOCs

HELOCs have competition! Other financing options you could consider include home equity loans, cash-out refinancing, and personal loans. Each has benefits and drawbacks.

Home Equity Loan

Unlike a HELOC, a home equity loan hands you a lump sum. More on what is a home equity loan: Often, you can tap into up to 85% of your home’s equity with one of these. The qualification process is similar to a HELOC, requiring an appraisal.

Another factor in any HELOC vs. home equity loan comparison: You must begin repaying a home equity loan immediately, and because it will have a fixed interest rate, the payments will remain the same over the loan term of 5–30 years. Use a home equity loan calculator to get an idea of what you could borrow and compare the two options.

Here’s a quick look at the two:

Cash-Out Refinance

Homeowners can use cash-out refinancing as another way to leverage a home’s value. This mortgage refinance option is a good one for those who need a large sum of money at once.

When comparing cash-out refinance vs. a home equity line of credit, be sure to note that cash-out refinancing might come with a higher interest rate than other home loans. Cash-out refis draw some borrowers because they prefer to have one payment to keep track of instead of two.

Personal Loan

A personal loan has fixed payments made over 2–7 years. It can be used for almost anything and you won’t have to offer your home as collateral to get one. However, personal loans are likely to have higher interest rates than HELOCs or home equity loans.

Credit Cards

Credit cards carry steeper interest rates than HELOCs, and that factor can balloon your costs if you juggle a big balance. Credit cards are definitely handy for everyday buys, but HELOCs may be a better pick to pay for big-ticket items like a home upgrade or consolidating debt.

The Takeaway

HELOCs offer a helpful, flexible way to tap your home equity. They’re especially useful if you need to borrow money but aren’t sure exactly how much you need, since you’ll only have to pay interest on the amount you use at a given time. With good preparation and efforts to build your credit score and drop your debt level, you can submit an application that will get you a great rate in Minnesota.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

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

An 8.00% interest rate and a 10-year term would require a monthly payment of about $607. The exact amount you’ll pay will always depend on your interest rate and loan term. The same 8.00% rate over a 20-year term would cost you about $418 per month, although you would pay significantly more total interest in the end.

Is a HELOC a smart move for you?

Whether a HELOC is a good idea at this moment depends on your financial scenario and your longer-term goals. HELOCs can help you accomplish home improvements, consolidate debt, or cover other large expenses. But it’s important to consider interest costs, fees, and the potential impact on your home equity before making a decision.

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

Monthly payments on a $100,000 HELOC depends on the interest rate and length of term for the line of credit you’ve chosen. At 6.00% over 20 years, the payment would be $716 monthly. An 8.00% interest rate and the same term would mean a payment of $836.

What are the benefits of a HELOC?

A HELOC is a flexible way to borrow. Rather than taking out a lump sum, you can pull money in smaller increments according to your needs, and at a lower rate than you’d get with a credit card. Plus, you only pay interest on what you borrow.

Do you need an appraisal for a HELOC?

Yes, you do. The appraisal is crucial to the process, since it helps to establish your home’s value, and that in turn determines the amount you’ll be able to borrow. Lenders want to make sure your loan is secured by enough home equity, and will provide details on what type of appraisal is required.

What might prevent you from getting a home equity loan?

Several factors can disqualify you from getting a home equity loan. These include bad credit, a lack of equity in your home, and a high level of debt relative to your income.

How hard is it to get a HELOC?

If you can meet lenders’ requirements of a healthy credit score and optimal debt levels, and you have a minimum of 15% equity in your home, it shouldn’t be hard to get a HELOC. Hardest for many would-be borrowers is compiling the financial documents required for the application. But taking the time to do it carefully and accurately will help move your application process along.

Does HELOC affect credit score?

When you apply for a HELOC, a lender will perform a hard inquiry on your credit report. That could cause a small decrease in your credit score, but it will be temporary. Carrying a large balance on your HELOC could negatively impact your credit utilization ratio and lower your credit score, too. But if you make regular payments to your HELOC account, it will demonstrate that you can use credit responsibly. That should reflect favorably on your score.

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.

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