A home equity loan is a second mortgage that allows you to borrow against the value of your property. It is a fixed-rate loan that you pay back over a set length of time. The average interest rates provided by national and regional home equity lenders are listed in the table below.
What Are Today’s Average Interest Rates For Home Equity Loans?
|LOAN TYPE||BORROWER||FIXED INTEREST RATE|
|Home equity loan||5.96%||3.25% – 7.94%|
|10-year fixed home equity loan||6.02%||3.50% – 7.94%|
|15-year fixed home equity loan||6.08%||3.75% – 8.04%|
|HELOC||4.27%||1.99 – 7.24%|
To conduct the National Average survey, we have obtained rate information from the 10 largest banks and thrifts in 10 large U.S. markets. The rates shown above are calculated using a loan or line amount of $30,000, with a FICO score of 700 and a combined loan-to-value ratio of 80 percent.
The rate averages are calculated for home equity loans with terms of five, ten, and fifteen years. (This refers to the amount of time you have to pay back the loan in equal monthly installments.) A borrower with a good credit score, $200,000 inequity on a $400,000 single-family home and a desire to borrow $75,000 is assumed in the rate survey.
The Best Home Equity Loan Rates
The finest home equity loan providers offer flexible repayment options, low-interest rates, and minimal costs. Because each lender evaluates your eligibility in their own way, browsing around might help you get the best deal. Your rate will be determined by your credit score, income, home equity, and other factors, with the most creditworthy borrowers receiving the lowest rates.
|LOAN TYPE||LOAN AMOUNT||LOAN TERM||APR RANGE||BEST FOR|
|Discover||$35,000 – $300,000||10 to 30 years||3.49% – 11.99%||Low rates|
|BMO Harris Bank||$25,000 – $150,000||5 to 20 years||Starting at 4.24% (with autopay)||Different loan options|
|KeyBank||$25,000 – $250,000||1 to 30 years||Starting at 2.10% (with client discount)||Homeowners with limited equity|
|Spring EQ||Up to $500,000||Not specified||Starting at 5.205%||Fast funding|
|Flagstar Bank||$10,000 – $500,000||10 to 20 years||Starting at 6.53% (with autopay)||Flexible loan terms|
|U.S. Bank||$15,000 – $750,000||Up to 30 years||Starting at 3.8% (with autopay)||Low fees at a national bank|
|Third Federal||$10,000 – $200,000||5 to 20 years||Starting at 3.29%||Customer service|
|Frost||Starting at $2,000||7 to 20 years||Starting at 4.49% (with autopay)||Low fees at a regional bank|
|Connexus Credit Union||Starting at $5,000||5 to 20 years||Starting at 3.49%||Branch network|
|Regions Bank||$10,000 – $250,000||7 to 20 years||3.00% (with autopay)||Customer experiences|
Best Home Equity Loan Rates in April 2022. Bankrate. (n.d.). Retrieved April 13, 2022, from https://www.bankrate.com/home-equity/home-equity-loan-rates/
What Exactly Is A Home Equity Loan And How Does It Function?
A home equity loan is a lump sum borrowed against the value of your house’s equity. Most lenders will allow you to borrow up to 80% to 85% of your home’s equity, which is the difference between the value of your property and the amount you still owe on your mortgage.
These loans feature set interest rates and repayment durations ranging from five to thirty years. A lender can foreclose on your property if you fail to make payments on a home equity loan since it acts as collateral. The lender will inform you how much you may borrow, your interest rate, your monthly payment, your loan duration, and any costs after examining your application and checking your credit. The financial institution will disburse funds in one lump amount once you have agreed to the loan terms. The loan is then repaid over time in predetermined monthly installments.
Calculating The Value Of Your Home
Divide the amount you owe by the value of your property to see how much equity you might be able to borrow.
Let’s imagine you owe $200,000 on a house that’s worth $400,000. That’s $200,000 divided by $400,000 equals 0.50, or a loan-to-value ratio of 50%. (LTV). This indicates that your home is worth 50% of what you paid for it. To check if you qualify for a home equity loan, compare that amount to your lender’s maximum LTV ratio.
Then, multiply your home’s worth by the lender’s maximum LTV and deduct your mortgage balance to see how much you can borrow.
Let’s say your lender permits you to borrow up to 85% of the value of your home. In this case, $400,000 multiplied by 0.85 equals $340,000. You would next subtract your mortgage balance: $340,000 – $200,000 = $140,000 as the maximum amount you could borrow.
What Are The Best Uses For A Home Equity Loan?
While home equity loans can be used for nearly anything, borrowing money for something you can pay for elsewhere or something you don’t need might be costly in the long run. As a result, most financial experts suggest being cautious about what you utilize borrowing money for.
The following are some of the finest ways to make the most of your loan:
- Home Improvements: Using the worth of your home to raise the value can be beneficial because these can often add value over time.
- Student Loans: Home equity loans offer a lower interest rate than student loans in general.
- Debt Consolidation: Using your home equity to consolidate your debts may result in lower interest rates, allowing you to get your finances back on track.
- Emergency Expenses: If you don’t have the money right away, a home equity loan can provide you with money at a significantly lower interest rate than a payday loan.
- Investments: While hazardous, putting your home equity into investments might help you build a larger financial portfolio over time.
What Are My Options For Obtaining A Home Equity Loan?
Home equity loans are available from a number of banks and credit unions. If you have an existing relationship with a bank, it may be best to start your search there, but it’s always a good idea to shop around with a few lenders to compare rates, fees and loan terms. Prequalification forms, which allow you to check your possible rates and eligibility with a lender without affecting your credit score, are a smart way to achieve this.
If you have any questions or concerns regarding home equity rates and the options that are available to you, please don’t hesitate to reach out to our team of helpful professionals at Fairfax Mortgage Investments for more details and information.