Arizona HOME EQUITY LOAN RATES TODAY
Current home equity loan rates in
Arizona.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current home equity loan rates in
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Compare home equity loan rates in Arizona.
Key Points
• Home equity loans offer a lump sum of money that you repay with fixed monthly payments, typically for 20 years.
• Because a home equity loan uses your home as collateral, the interest rate is lower than for unsecured personal loans; however, if you fail to make payments, you could face foreclosure.
• To qualify for the lowest rates, it’s important to build a strong credit score, manage debt-to-income ratio, obtain adequate property insurance, and maintain sufficient home equity.
• Home equity loans can be used for a variety of purposes, including home renovations, educational costs, and debt consolidation.
• Closing costs and fees for home equity loans can vary significantly and should be considered when budgeting.
Introduction to Home Equity Loan Rates
If you want to know your options for tapping your home equity, you’ve come to the right place. This guide focuses on how Arizona homeowners can get the best available rate on a home equity loan, also known as a “closed end” second mortgage.
We’ll also talk about how to calculate your home equity and different types of home equity loans, such as HELOCs and cash-out refis. And we’ll show you some handy online tools to help you zero in on the right repayment term.
Your home equity is a powerful financial tool, and understanding the rates in Arizona can help you make the most of it.
How Do Home Equity Loans Work?
What is a home equity loan? Usually, funds are distributed in a lump sum, which you start paying back right away with fixed monthly payments over 5 to 30 years. This predictability can be a big help when you’re planning your budget. And because it’s secured by your home, a home equity loan offers a lower interest rate than other, unsecured loans. The downside: Failing to make the monthly payments could result in foreclosure.
Most lenders require your combined loan-to-value ratio (CLTV) to be 85% — that’s your mortgage balance plus the amount you want to borrow, divided by the appraised value of your home. You can estimate your maximum loan amount with this two-step formula:
• Home Value x 85% = Maximum Mortgage + Loan Amount
• Maximum Amount – Mortgage Owed = Maximum Home Equity Loan Amount
Let’s say your home is appraised at $800,000 and your mortgage owed is $600,000.
• $800,000 X 85% = $680,000
• $680,000 – $600,000 = $80,000 Max loan amount
A home equity loan calculator can help you determine how much you can borrow, based on your home’s value and your existing mortgage balance.
Home equity loans are the Swiss Army knives of the financial world, ready to tackle a variety of needs, from sprucing up your home to unexpected medical bills to consolidating high-interest debt. They offer the kind of flexibility that can help you reach your goals faster. In Arizona, home equity loans are a particularly good option, thanks to the state’s strong housing market.
HELOCs vs Home Equity Loans
How do you decide between a HELOC vs. a home equity loan? Both can allow you to borrow a large sum at a relatively low interest rate, and with lower fees than a mortgage refinance. But there are significant differences, as the chart below shows.
| 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. |
Recommended: What Is a Home Equity Line of Credit?
How Are Home Equity Loan Interest Rates Determined?
Home equity loan interest rates are based on the prime rate, which is influenced by a variety of economic factors. Understanding these factors can help you predict whether home equity loan rates are likely to rise or fall in Arizona.
The prime rate is the interest rate that banks give to their most creditworthy customers. The prime rate influences the interest rates that banks offer on home equity loans.
When shopping around for home equity loans rates, remember that half a percentage point can make a big difference in affordability over the long term. In the table below, you’ll see how the interest rate on a $50,000 home equity loan affects the monthly payment and total interest paid over a 10-year term:
| Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|
| 8.50% | $620 | $24,391 |
| 8.00% | $607 | $22,797 |
| 7.50% | $594 | $21,221 |
Arizona Home Equity Loan Rate Trends
Like most interest rates, the prime interest rate has fluctuated over time. That has a direct impact on the rates for home equity loans. Keeping an eye on the benchmark prime interest rate can give you a heads-up on what’s to come with your home equity loan.
Historical Prime Interest Rates
Since 2018, the prime rate has fluctuated from a low of 3.25% in 2020 to a high of 8.50% in 2023.
| Date | Prime 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 | 5.50% |
| 9/27/2018 | 5.25% |
Source: St. Louis Fed
Factors Influencing Home Equity Loan Rates
A variety of factors can impact the interest rates you’re offered for a home equity loan in Arizona. Understanding these factors can help you secure a more competitive rate, which can help your financial situation and get you closer to your goals as a homeowner.
Credit Score
A strong credit score is your ticket to favorable interest rates and terms on Arizona home equity loans. It’s a reflection of your financial prudence and can lead to lower monthly payments, among other benefits. Lenders typically like to see a credit score of 680 or higher for home equity loans. Many lenders prefer 700+.
Loan-to-Value (LTV) Ratio
The loan-to-value ratio, or LTV, is a comparison of your loan size to the appraised value of your home. It’s a big deal because the lower your LTV, the better your interest rate. The maximum LTV most lenders allow for a home equity loan is 85%, though some lenders will allow you to borrow 100%.
Home Value
Lenders use professional appraisals to determine the market value of a home. This helps them decide how much money they can lend you and at what interest rate.
Home Value Stability
When home values are stable or on the rise, you stand to gain more equity. This is especially good news if you’re considering a home equity loan. Home value stability can translate to improved loan terms, lower interest rates, and better financial opportunities.
Property Location
Properties in high-risk areas, such as those prone to natural disasters, may have higher interest rates because lenders view them as riskier. This risk premium is added to the interest rate to compensate the lender for the increased risk of default and potential loss on the property.
Lender Policies
Lending institutions have different policies, criteria, and guidelines that influence the interest rates they offer to potential borrowers, especially for home equity loans. By comparing different lenders, borrowers can identify and secure the most favorable interest rates available.
Recommended: Cash Refinance vs Home Equity Line of Credit
How to Qualify for the Lowest Rates
To ensure you snag the best Arizona home equity loan rates out there, make it a priority to boost your credit score, manage your debt-to-income ratio wisely, get the right property insurance, and maintain a healthy amount of home equity.
Build a Strong Credit Score
You can take charge of your financial future by being proactive about your credit score. Making consistent, timely payments and managing your finances responsibly can help you secure more favorable interest rates on home equity loans, which could mean significant savings for you.
Keep Your Debt-to-Income Ratio in Check
A lower debt-to-income (DTI) ratio indicates your overall financial health. Not only does it make you look better to lenders, but it can also snag you more favorable home equity loan terms and interest rates. That can save you thousands of dollars in the long run. The DTI requirement for a home equity loan is typically 36% to 50%.
Obtain Adequate Property Insurance
Lenders often require comprehensive property insurance to protect their investment, especially in areas with increased risk, such as flood zones. This insurance helps ensure that you and your lender are financially protected in the event of property damage or loss due to natural disasters or other unexpected events.
Keep Your Equity Above 20%
Why the 20% benchmark? It’s a safety net, ensuring you have a financial cushion and that the lending institution is protected from potential losses.
Fixed vs. Variable Interest Rates
Understanding the difference between fixed and variable rates can help you make the best financial decision for your situation. Home equity loans are typically offered with a fixed interest rate. This means that your monthly payments will remain the same over the life of the loan, which can make it easier to budget.
Home equity loans are structured much like your first home loan. You borrow a specific amount and agree to repay it, with interest, over a set period of time (typically 20 years). The amount of the loan is secured by your home and paid back with a series of regular payments.
Tools & Calculators
SoFi has a wealth of financial tools and calculators that can help you determine whether a home equity loan may be right for you and what your monthly payments will be. These resources can help you plan for the future and make sure you’re making the most of your home’s equity. Here, in addition to the home equity loan calculator, you’ll find a HELOC repayment calculator and a HELOC interest only calculator.
Run the numbers on your home equity loan.
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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.
Closing Costs and Fees
Closing costs and fees for home equity loans can vary significantly from lender to lender. Understanding these costs and their potential impact on the overall loan amount can help you budget effectively and make informed decisions about your financing options.
Closing costs for home equity loans generally range from 2% to 5% of the loan amount. Your costs will likely include an application fee, title search, appraisal, and attorney’s fees.
• Loan origination fees, which are for processing the loan paperwork, are typically around 0.5% to 1% of the loan amount. Alternatively, this can be a flat fee that’s charged no matter how much you’re borrowing.
• Title insurance costs for home equity loans can range from 0.5% to 1% of the loan balance, with title search fees typically falling between $100 and $250. These fees can vary depending on the location of the property, the loan amount, and the lender’s requirements.
• An appraisal is an unbiased professional opinion of a home’s value. Appraisals are almost always used in purchase and sale transactions and commonly used in mortgage refinance transactions. Appraisals for home equity loans typically range between $300 and $500.
• The preparation of documents and legal fees associated with home equity loans can vary significantly, ranging from a minimum of $500 to a maximum of $2,000. The specific cost incurred is largely influenced by the level of complexity associated with the loan process.
• Credit report costs for lenders can vary significantly, usually falling between $50 and $100, depending on the number of credit bureaus that must be accessed. Lenders may also incur additional fees for specialized credit reports or expedited services.
You can find lenders who will waive the closing costs on a home equity loan. But the trade-off might be a slightly higher interest rate to cover the costs the lender would typically recoup at closing.
Tax Deductibility of Home Equity Loan Interest
The deductibility of home equity loan interest for tax purposes depends on how you use the loan. You can deduct the interest on your home equity loan only if the money is funneled directly into the acquisition, construction, or substantial improvement of your residential property. Other uses of the loan don’t make the cut for tax deductions.
For borrowers who are married and file jointly, you can deduct the interest on up to $750,000 of qualified home equity loans obtained after December 15, 2017. Single filers are allowed up to $375,000 of such loans for deduction.
To claim the home equity loan interest deduction, you’ve got to itemize your deductions on your tax return. Taking the standard deduction isn’t possible if you want to snag this benefit. (Also keep in mind, it’s the interest you pay that’s tax-deductible, not the principal.)
Speaking with an experienced tax advisor can be invaluable in helping you navigate the complexities of the tax code and make the most of potential tax benefits associated with home equity loan interest deductions.
Alternatives to Home Equity Loans
If you’re still wondering how to get equity out of your home, you should explore other options like home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances. Each of these comes with its own unique features and eligibility requirements. You should understand these options thoroughly to make an informed decision and choose the best financing solution that suits your specific needs and circumstances.
Home Equity Line of Credit (HELOC)
A HELOC is a lot like a credit card, but with much lower interest rates. It’s a flexible way to borrow money, because you can take out what you need, when you need it. And like a credit card, as you pay down the balance, your available credit is replenished.
As noted above, HELOCs have variable interest rates that can change with the market. If you’re considering a HELOC, it’s important to understand that your payments could go up if interest rates rise, which means you could end up paying more over the life of the loan.
Home Equity Conversion Mortgage (HECM)
HECMs are government-backed reverse mortgages specifically designed for homeowners aged 62 and above. HECMs provide retirees with cash borrowed against the value of their home, through a lump sum, monthly payouts, or a credit line. Borrowers make no monthly payments themselves, as long as they stay in their home. And because the money borrowed isn’t considered income, income taxes aren’t owed on it.
Because interest is building over time and not being repaid, however, HECMs can eat into the equity you’ve built in your home, which may be less than ideal if you’re planning to pass it on to an heir as an asset.
Cash-Out Refinance
A cash-out refinance involves securing a new mortgage loan to pay off the existing one and obtain a lump sum of cash. The amount of cash received is determined by the amount of equity that the homeowner has. This equity is calculated by subtracting the outstanding mortgage balance from the appraised value of the home.
The Takeaway
Home equity loans can be a great way to get the cash you need for a variety of uses. By understanding the details of your loan and taking the time to shop around, you can make the best decision for your situation and get the most out of your home equity loan.
Unlock your home’s value with a home equity loan from SoFi.
FAQ
What would the monthly payment be on a $50,000 home equity loan?
Your monthly payment on a $50,000 home equity loan will depend on the interest rate and the length of the loan. For a $50,000 loan with an 8.00% interest rate and a 10-year term, your monthly payment would be $607. Using a monthly payment calculator can help you get an accurate estimate based on current rates and terms, so you can figure out what your payment will be.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 home equity loan depends on the interest rate charged and the repayment term. For example, a $100,000 loan at 7.00% interest with a 20-year term would result in a monthly payment of $775. A monthly payment calculator can be a useful tool to estimate your payment amount.
What is the payment on a $25,000 home equity loan?
The monthly payment on a $25,000 home equity loan is determined by a number of factors, including the interest rate, loan term, and any fees involved. For example, a $25,000 loan with a 7.00% APR and a 5-year loan term has a monthly payment of $495. By using a loan calculator, you can get a good estimate of what your monthly payment will be, allowing you to make the best financial decision for your situation.
What would the payment be on a $30,000 home equity loan?
The interest rate and term of the loan will determine the monthly payment of a $30,000 loan. An 8.50% interest rate repaid over 10 years gives you a monthly payment of $372. Use our loan payment calculator to determine what your monthly payment might be based on the interest rate and term of the loan.
What might disqualify you from getting a home equity loan?
There are a few key factors that might make you ineligible for a home equity loan. These include a poor credit history, not enough equity in your home, a high debt-to-income ratio, or not having enough property insurance. Each factor can play a big role in your ability to get a home equity loan, so it’s important to consider them before applying.
What are the benefits of a HELOC?
The beauty of a HELOC is its flexibility. You can borrow what you need, when you need it, and you’ll only pay interest on the amount you’ve drawn — much like a credit card.
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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee. 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. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. 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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More home equity 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