TEXAS HELOC RATES TODAY
Current HELOC rates in
Texas.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Compare HELOC rates in Texas.
Key Points
• Compare interest rates, fees, and repayment terms from multiple lenders before choosing a HELOC.
• It’s wise to prep your finances before applying for a HELOC: Check that your credit score, DTI ratio, and home equity position meet lenders’ requirements.
• A HELOC allows homeowners with substantial home equity to access funds as they are needed, pay down their balance, and borrow again.
• Alternative ways to get equity out of your home include a home equity loan and a cash-out refinance.
• Researching HELOC rates will help you get the most favorable terms your area has to offer.
Introduction to HELOC Rates
A HELOC is a revolving line of credit that works like a credit card but is secured by your home’s equity. HELOC rates are influenced by factors like economic conditions, the federal funds rate, and a borrower’s financial profile. Understanding these factors can help you navigate the market and get the best available deal on your home equity line of credit.
What Is a HELOC?
What is a home equity line of credit? A HELOC is a revolving line of credit that is similar to a credit card but is secured by your home’s equity. A HELOC isn’t like a traditional loan. It allows you to borrow and repay funds repeatedly during the draw period.
The Draw Period
A home equity line of credit’s draw period typically spans a decade. During that time, homeowners can access funds up to a preapproved credit limit. Interest payments are generally required only on the money withdrawn. Principal payments may be optional. The flexibility of HELOCs make them particularly appealing for addressing large financial obligations.
Recommended: HELOC Interest-Only Calculator
The Repayment Period
The repayment period of a HELOC is usually 10 to 20 years. During this period, the borrower pays back both the principal and interest. Using a HELOC repayment calculator will help homeowners plan and prepare, since variable interest rates can fluctuate and impact the overall cost of the loan.
Where Do HELOC Interest Rates Come From?
When you want to get equity out of your home, it’s important to understand a little something about interest rates. HELOC interest rates are tied to the prime rate, Federal Reserve rates, and broader economic factors.
How Interest Rates Impact HELOC Affordability
Interest rates have a significant impact on the affordability of any home loan. A 1% fluctuation in the interest rate can result in a borrower paying thousands of dollars in additional interest over the life of the loan. Here is a look at one example, a $50,000 HELOC repaid over 20 years at three different interest rates:
• At 6.00%: monthly payment $358, total interest paid $35,972
• At 7.00%: monthly payment $388, total interest paid $43,036
• At 8.00%: monthly payment $418, total interest paid $50,373
HELOC Interest Rate Trends
HELOC interest rates closely follow the prime interest rate. Understanding and anticipating potential rate fluctuations can help homeowners make informed decisions regarding when to apply for a HELOC.
Historical Prime Interest Rate
The prime rate’s fluctuations over the years, ranging from a low of 3.25% in 2020 to a high of 8.50% in 2023, have directly influenced HELOC rates in Texas.
| Date | U.S. Rate |
|---|---|
| 9/19/2024 | 8.00% |
| 7/27/2023 | 8.50% |
| 5/4/2023 | 8.25% |
| 3/23/2023 | 8.00% |
| 2/2/2023 | 7.75% |
| 12/15/2022 | 7.50% |
| 11/3/2022 | 7.00% |
| 9/22/2022 | 6.25% |
| 7/28/2022 | 5.50% |
| 6/16/2022 | 4.75% |
| 5/5/2022 | 4.00% |
| 3/17/2022 | 3.50% |
| 3/16/2020 | 3.25% |
| 3/4/2020 | 4.25% |
| 10/31/2019 | 4.75% |
| 9/19/2019 | 5.00% |
| 8/1/2019 | 5.25% |
| 12/20/2018 | 5.5% |
| 9/27/2018 | 5.25% |
Source: U.S. Federal Reserve
Historical U.S. Prime Rates
Factors Influencing HELOC Rates
In addition to the prime rate, HELOC rates in Texas are significantly influenced by a borrower’s home equity, credit score, income, and loan-to-value (CLTV) ratio. When these factors are optimal, they increase a homeowner’s chance of securing a favorable HELOC rate.
Home Equity
If you have significant equity in your home, you can usually score a favorable interest rate for a home equity line of credit. Homeowners who possess a minimum of 15% equity generally qualify for a HELOC. The higher your equity, the less risk your lender assumes.
Credit Score
To secure the most advantageous interest rates on HELOCs, maintain a credit score of 680 or higher — ideally, 700 or above. A higher score indicates you present lower risk to lenders.
Stable Income
Lenders assess your income to determine your ability to pay back a HELOC. A borrower with a steady income stream is less likely to default, and will almost always get a better interest rate. Be sure to provide documentation of your income when you apply.
Loan-to-Value Ratio
Many lenders require your combined loan-to-value ratio (mortgage balance + desired HELOC amount / appraised home value) to be 85% or less. For example, if your home is worth $500,000, your mortgage balance is $300,000, and your HELOC balance is $100,000, your combined LTV ratio is 80%.
Variable vs Fixed Interest Rates
HELOCs tend to have variable interest rates. That means, your rate may change throughout the life of the loan. Variable interest rates often start lower compared to typical fixed rates, but adjust upward or downward depending on market conditions. Understanding how variable rates work is key to managing a HELOC in Texas.
Tools & Calculators
Financial tools including a HELOC monthly payment calculator, a HELOC interest-only calculator, and a home equity loan calculator can be helpful resources. These widgets will help you to estimate payments and better understand the potential financial implications of a home equity line of credit.
Run the numbers on your HELOC.
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Home Equity Loan Calculator
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
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HELOC Payment Calculator
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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HELOC Interest Only Calculator
Use SoFI’s HELOC interest calculator to estimate how much monthly interest you’ll pay .
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
How to Qualify for a Competitive HELOC Rate
To obtain the most desirable HELOC rates available in Texas, homeowners should compare multiple lenders. Your credit score and debt-to-income ratio will be key factors when it comes to snagging a highly competitive HELOC offer.
Strengthen to Your Credit Score
Making payments on time and reducing credit card balances can improve your credit score. The higher your credit score, the less risky you appear to lenders.
Assess Your Home Equity
The first thing you need to do when you start a HELOC application is assess your home equity. If you’ve made timely mortgage payments, you’ve built home equity over time. Home renovations also boost the property’s value, and therefore your equity.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is important. To calculate, take how much you owe in monthly debt payments (auto loan, student loan, etc.), and divide by your gross monthly income. Home equity lenders often look for a DTI below 36% — the lower your DTI, the better. This ratio is crucial for determining HELOC eligibility.
Application Process for a HELOC in Texas
An application for a HELOC in Texas will require you to submit documents and obtain a home appraisal.
Step 1. Run the Numbers
Assessing your financial situation before you apply is essential. Check your credit scores and calculate your debt-to-income (DTI) ratio, which lenders use to determine your ability to repay the loan. A DTI below 36% will increase your chances of approval. Estimate your home equity to ballpark how much you can borrow. Some lenders offer helpful prequalification tools on their websites.
Step 2. Compare Lenders
See what offers and interest rates you might qualify for. Compare the lenders’ requirements, loan minimums and maximums, fees, and other factors. You’ll also want to note the duration of a lender’s draw, and the repayment periods.
Step 3: Gather Your Documents
Begin putting together all the necessary documents before you plan to apply. Required items are typically proof of income, employment history, credit reports, and documentation of your home’s value. Having these documents ready will speed up the application process.
Step 4: Submit Your Application
Once you have all your documents ready, you can file your HELOC application. This can often be done on the internet, by phone, or in person at the lender’s office. To avoid potential processing delays, make sure all information you provide is accurate.
Step 5: Get an Appraisal
After you submit your application, a lender may request a home appraisal. This is necessary to determine your home’s current market value. If an appraisal shows the value of your home exceeding your mortgage’s outstanding balance, the lender may approve you for a HELOC.
Step 6: Prepare for Closing
Before you’re granted access to funds from your HELOC, your lender will require you to sign loan documents and pay necessary fees. Certain lenders may make funds available within three days after closing. Make sure you understand all terms and conditions.
Tax Benefits and Considerations
HELOC interest qualifies for a tax deduction if the homeowner uses the funds to buy, build, or significantly improve 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).
Closing Costs and Fees
Good news! HELOC closing costs are lower than home-buying or cash-out refinancing costs. The appraisal fee is the largest expense — it may range from $150 to more than $500. Other costs to know about include application, loan origination, and administrative fees. Lenders may charge annual maintenance, transaction, inactivity, or early termination fees. Or they may waive closing costs, but in that case will usually charge a higher interest rate.
Alternatives to HELOCs
Financing options other than HELOCs include home equity loans, cash-out refinancing, and personal loans. Every option has advantages and considerations.
Home Equity Loan
Unlike HELOCs, home equity loans tend to put a lump sum in your pocket. You pay back different types of home equity loans at a set interest rate. Borrowers can usually access up to 85% of the equity they’ve built through a home equity loan. Here’s an at-a-glance comparison of a HELOC vs home equity loan:
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment |
| Disbursement | Charge only the amount you need. | Lump sum |
Cash-Out Refinance
Homeowners can also tap into home equity via a mortgage refinance. This means applying for a refinancing of your mortgage loan for the purpose of pulling out cash. This option, however, often comes with higher interest rates.
Recommended: Cash-Out Refinance vs Home Equity Line of Credit
Personal Loan
A personal loan is a flexible, typically unsecured loan. You pay it back in regular payments over a set term of two to seven years. Unlike certain home equity loans, personal loans do not require collateral. Evaluate whether a personal loan or a home equity loan better suits your needs.
Credit Cards
A HELOC comes with a lower interest rate than a credit card, making it a cheaper option for carrying large balances, such as for home renovations or debt consolidation.
The Takeaway
HELOCs make it easy to access the equity in your home. Competitive interest rates and flexible repayment options make a home equity line of credit a valuable financial tool. Make sure you understand the terms and conditions, though — especially concerning variable interest rates and the potential impact on your credit score.
SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.
FAQ
What is the monthly payment on a $50,000 HELOC?
A $50,000 HELOC’s monthly payment can fluctuate based on the interest rate and its repayment terms. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. The same 8.00% interest rate over a 20-year term will cost you $418 per month, although you’ll pay more total interest with the 20-year term.
Is a HELOC a good idea right now?
This depends on your financial situation and needs. HELOC interest rates are better than those on credit cards and can be useful for spendy projects. But it’s important to consider the variable interest rates down the road, as well as the potential impact on your home equity.
What is the monthly payment on a $100,000 HELOC?
You can estimate your monthly payment on $100,000 using a HELOC monthly payment calculator, which crunches your numbers based on the loan amount, interest rate, and repayment period to give you an estimated monthly payment.
For example, if you had a 20-year repayment term and a 6.00% interest rate, your monthly payment would be $716. At a 7.00% interest rate, your payment would jump to $775.
What are the benefits of a HELOC?
HELOCs offer several benefits, including low interest rates compared to credit cards and the flexibility to borrow and repay funds as needed during the draw period. A home equity line of credit can be used for home improvements, debt consolidation, or education expenses. Additionally, the interest paid on a HELOC may be tax-deductible.
Do you need an appraisal for a HELOC?
An appraisal is typically required for HELOCs to determine the value of your home and the amount of equity available.
What disqualifies you from getting a home equity loan?
Several factors can disqualify you from getting a home equity loan, including a low credit score, high debt-to-income ratio, insufficient home equity, or a history of late payments.
How difficult is it to get a HELOC?
It depends on your financial situation and the lender’s requirements. HELOCs typically require a good credit score, sufficient home equity, and a stable income. The application process involves providing thorough documentation and undergoing a home appraisal. Comparing lenders and understanding their qualification requirements can help you weigh the ease or difficulty of obtaining a home equity line of credit.
Does HELOC affect credit score?
It can, in several ways. Applying for a HELOC may result in a hard inquiry, which can temporarily lower your score. Also, high utilization of your credit line can negatively impact your score. But making timely payments on your HELOC can improve your score over time.
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More HELOC resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare