Compare home equity loan rates in Wisconsin.

Introduction to Home Equity Loan Rates

Welcome to our guide on Wisconsin home equity loan rates. We’re here to help you understand how to leverage the equity in your home, the interest rates you can expect, and tips on how to get the best deal. We’ll also discuss some alternatives to home equity loans that might be a good fit for your needs.

To begin, let’s look at what is a home equity loan.

How Do Home Equity Loans Work?

Home equity loans can be a smart financial move: By using your home as collateral, homeowners secure lower interest rates than on personal loans. If you’re still paying off your first home loan, a home equity loan is considered a second mortgage. These loans come with fixed interest rates and flexible repayment terms, typically ranging from 5 to 30 years.

To qualify, homeowners need at least 20% equity in their property. If you’re approved, the funds can cover an array of expenses, from renovations to education, medical bills, and debt consolidation.

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

Where Do Home Equity Loan Rates Originate?

Home equity loan interest rates are a product of multiple economic factors, with the prime rate playing a significant role. The prime rate is what banks charge their most creditworthy clients. Federal Reserve policy decisions on interest rates can also sway home equity loan rates. By understanding these influences, homeowners can better anticipate rate shifts and make well-informed decisions about the timing of your home equity options.

How Interest Rates Impact Home Equity Loan Affordability

The interest rate you secure can have a significant impact on your ability to afford a loan over its full term. Over a standard 20-year home equity loan, for example, a 1% difference in the interest rate can mean a higher monthly payment. Even more significant, that seemingly small difference can add up to an extra $11,000 in interest paid over the life of the loan, as illustrated in the chart below.

Home Equity Loan Rate Trends

The prime interest rate is a moving target, and its fluctuations are a crystal ball of sorts for predicting the future of home equity loan rates. By keeping a close eye on the prime rate, you can gain valuable insights into what the future holds for your borrowing options. This knowledge can empower you to make more informed financial decisions.

Historical Prime Interest Rates

Since 2018, the prime rate has dipped to a low of 3.25% in 2020 and peaked at 8.50% in 2023. This fluctuation is a reflection of the ever-changing economic climate and the Federal Reserve’s continuous efforts to keep things steady. These tweaks have a ripple effect, influencing the rates of adjustable-rate mortgages, credit cards, corporate loans, and various home equity options.

The graphic below shows that the prime rate has not been above 10% since the 1980s.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates

Besides the prime rate, a variety of other factors help determine your home equity loan rate, such as your credit score, loan-to-value ratio, home value, home value stability, property location, and lender policies. Lenders carefully consider these elements when setting the interest rate and terms of a home equity loan, as they provide a comprehensive view of your financial standing, the value of your property as collateral, and the overall risk of the loan.

These same factors also influence the rates and terms of a HELOC (home equity line of credit), which is another way to get equity out of your home.

Credit Score

The better your credit score, the more favorable your interest rates. Lenders often look for a minimum of 680, but many prefer 700 or higher. Why? Because a higher score means you’re less likely to default, which makes you a more attractive candidate for a loan.

Home Value

Lenders often use independent appraisals to help determine the value of a home and the amount of equity a homeowner has. This helps them set appropriate loan limits. The more equity you have, the more you may be able to borrow.

Loan-to-Value (LTV) Ratio

The LTV ratio is a critical factor in determining the maximum loan lenders will permit. In Wisconsin, most lenders cap your combined LTV (your mortgage balance plus loan amount divided by your home value) at around 85%.

Let’s say you currently owe $300,000 on your mortgage and you want to borrow $75,000 for a renovation project. Your home is appraised at $450,000:

$300,000 + $75,000 = $350,000

$375,000 / $450,000 = 83%

At 83% combined LTV, there is a good chance a lender will approve a home equity loan.

Home Value Stability

The ups and downs of home values impact the equity you’ve built in your home. When the housing market is on the upswing, lenders are often more willing to approve larger loans, as the increasing value of your property can act as a safety net. But when home values dip, lenders might tighten their belts, leading to more stringent criteria and potentially smaller loan amounts.

Property Location

Living in an area with a high risk of natural disasters or other hazards can lead to higher interest rates. Lenders may charge more in interest to offset the risk of lending in these areas. High-risk areas can include places that are prone to natural disasters, such as hurricanes, floods, and wildfires.

Lender Policies

When you’re looking at home equity options in Wisconsin, it’s important to consider lender policies. They can have a big impact on the interest rate you’re offered. To make sure you’re getting the best deal, compare interest rates, fees, and closing costs from several lenders. Do your homework, and you can get the most favorable terms for your home equity options in Wisconsin.

How to Qualify for the Lowest Rates

To qualify for the best home equity loan rates in Wisconsin, you’ll need to have a strong credit score, a low debt-to-income ratio, adequate property insurance, and a good amount of equity in your home. By making sure you meet these qualifications, you’ll be able to get the best loan terms for your needs and enjoy the financial flexibility and peace of mind that come with homeownership.

Build a Strong Credit Score

A robust credit score is your ticket to more attractive interest rates on home equity loans. On the flip side, a lower credit score might mean higher rates or even a rejection. That’s why it’s key to keep your credit score in tip-top shape by paying your bills on time, checking your credit report regularly, and not maxing out your credit cards.

Manage Debt-to-Income (DTI) Ratio

Your DTI ratio is a crucial factor in determining your eligibility for a home equity loan. This ratio, which compares your gross monthly income to your monthly debt payments (auto loan, student loan, personal loan, etc), gives lenders a clear picture of your financial health. Most lenders require a DTI of 36% or less to approve a home equity loan. However, some lenders may offer home equity loans to borrowers with a DTI between 36% and 50%, but charge higher rates and fees.

Obtain Adequate Property Insurance

It’s standard practice for home equity lenders in Wisconsin to require property insurance, especially in areas prone to flooding. These policies are designed to protect you and your lender from potential financial losses due to damage or destruction of your property. It’s a good idea to review your coverage before applying for a home equity loan or HELOC.

Maintain Sufficient Home Equity

To qualify for a home equity loan in Wisconsin, you’ll need to have at least 20% equity in your home. The 20% equity requirement is in place to protect borrowers from taking on more debt than they can handle and to protect lenders from the risk of default. A home equity loan calculator can help you determine your equity level.

Fixed vs. Variable Interest Rates

Home equity loans typically come with fixed interest rates, which means you can count on steady, predictable monthly payments for the life of the loan. While fixed rates offer peace of mind, they often start out higher than variable rates, which can be more affordable at the outset. This is something to consider if you’re looking for a home equity loan in Wisconsin and want to know exactly what your payments will be.

Tools & Calculators

Use the helpful tools and calculators to find out how much you can borrow and what your payments will be, and to compare different loan options. Here, in addition to the home equity loan calculator, you’ll find a HELOC repayment calculator and a HELOC interest only calculator.

Closing Costs and Fees

Home equity loan closing costs typically range from 2% to 5% of the loan amount. These include a variety of fees such as the appraisal, credit report, document preparation, origination, notary, title search, and insurance.

Loan origination fees may be around 0.5% to 1% of the loan amount, or a flat fee. Title insurance is another cost, typically 0.5% to 1% of the loan balance, with title search fees ranging from $100 to $250. Appraisal fees can be between $300 and $500, and credit report fees are usually $50 to $100. Make sure to factor these into your calculations when determining the cost of your home equity loan.

Tax Deductibility of Home Equity Loan Interest

Good news: The interest you pay on a home equity loan can be tax-deductible if it’s used for home improvements. If you’re married and filing jointly, you can deduct interest on loans up to $750,000. Single filers can deduct interest on loans up to $375,000. Just remember, you’ll need to itemize your deductions to claim this benefit.

Alternatives to Home Equity Loans

There are a few different types of home equity loans and lines of credit. Home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances all have unique features and requirements. Each option has its own pros and cons, so it’s important to consider your specific financial situation and needs.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) can be another smart financial move. You can borrow up to a certain limit and pay interest only on the amount you use. During the draw period, you can pay down the principal balance, making more money available to borrow. One drawback: Variable interest rates can change, so your monthly payments may go up. Here’s a HELOC vs home equity loan comparison at a glance:

Recommended: What Is a Home Equity Line of Credit?

Home Equity Conversion Mortgage (HECM)

An HECM, a government-insured reverse mortgage, is an option for those 62 and older to receive payments from the lender based on their home’s value. The funds can be received in various ways: a lump sum, regular payments, or a line of credit. Unlike Wisconsin home equity options and HELOCs, HECMs don’t require monthly payments, only becoming due when you leave the home. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)

Cash-Out Refinance

A type of mortgage refinance, cash-out refinance is a new mortgage that pays off your old one and lets you pocket the difference. Most lenders will let you borrow up to 80-85% of your home’s equity. Wisconsin home equity options and HELOCs require at least 20% equity, while reverse mortgages have no equity requirement but do have an age stipulation.

The Takeaway

In Wisconsin, home equity loans are a great way to leverage the equity in your home for a variety of financial needs. Understanding how home equity loans work and how to get the best interest rates are key to making a smart decision that’s right for your financial situation. Shopping around to compare rates, fees, and closing costs can also be enlightening and ensure you get the best available deal.

FAQ

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

With a $50,000 home equity loan, you have to consider the interest rate and loan term, as these will greatly affect how much you’ll pay each month. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month.

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

The monthly payment on a $100,000 HELOC will depend on the current market interest rate and how much of the line you have used. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month. To get a rough estimate of your monthly payment, you can use the calculator shown above.

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

When considering a home equity loan, it’s important to consider the current interest rate and the term of the loan, as they will affect your monthly payment. To give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment.

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

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

What might disqualify you from securing a home equity loan?

There are a few things that can prevent you from getting a home equity loan, including having a poor credit history, not having enough equity in your home, having a high debt-to-income ratio, and not having enough insurance on your home. These factors can make it harder for you to get a home equity loan, so it’s important to consider them before you apply.

What are the benefits of a HELOC?

Home equity lines of credit, or HELOCs, are a great way to access the equity in your home. They offer flexibility in borrowing, lower interest rates than most credit cards, and the option to pay interest only on the money you actually borrow. These features make HELOCs a popular choice for homeowners looking for a cost-effective way to borrow.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

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