MONTANA HOME EQUITY LOAN RATES TODAY
Current home equity loan rates in
Montana.
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 Montana.
Key Points
• The home equity loan interest rate you’re offered depends on your credit score, loan-to-value ratio, and lender policies.
• Home equity loans have fixed interest rates, providing stability and predictability in monthly payments.
• 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.
Home equity loans provide homeowners with a single, lump-sum payment that is repaid with fixed monthly payments over a term of 5 to 30 years. Home equity rates in Montana vary, so it’s important to compare offers from different lenders to find the best deal.
Let’s take a closer look at the factors that influence home equity loan rates — especially those that homeowners can control — so you can feel confident in taking this financial step.
How Do Home Equity Loans Work?
If you’re wondering how to get equity out of your home, home equity loans are a great option. Home equity loans are a type of second mortgage that uses your primary residence as collateral. They provide a lump-sum payment that is repaid in equal monthly installments over a term ranging from five to 30 years.
Because home equity loans use the equity in your home as collateral, they offer lower interest rates than unsecured personal loans. The interest rate is typically fixed, which can be advantageous for borrowers who prefer a consistent and reliable payment structure over the life of the loan.
To determine how much you can borrow with a home equity loan, lenders will calculate the combined loan-to-value ratio (CLTV): your mortgage balance plus the amount you want to borrow, divided by the appraised value of your home. Most lenders will require your CLTV to be 85% or less for a home equity loan or HELOC.
You can calculate your maximum loan using this two-step formula:
• Appraised home value x 85% = Maximum debt amount
• Maximum debt – Mortgage owed = Maximum loan amount
Now let’s use real numbers, assuming your appraised home value is $500,000 and your mortgage owed is $350,000.
• $500,000 x 85% = $425,000 max debt
• $425,000 – $350,000 = $75,000 max loan amount
If the math is less than crystal clear, don’t worry: home equity loan calculator can help you determine your home equity and maximum loan amount.
With their inherent flexibility, home equity loans empower homeowners to fund many kinds of big ticket expenses. These may include home renovations, educational costs, medical bills, and debt consolidation.
Where Do Home Equity Loan Interest Rates Come From?
Home equity loan interest rates are influenced by a variety of economic factors, including the prime rate. Understanding these influences can enable borrowers to anticipate rate fluctuations and make informed decisions about all kinds of home loans, including home equity loans.
The prime rate, which is the interest rate that banks charge their most creditworthy customers, has a direct impact on home equity loan rates. Federal Reserve decisions and broad economic conditions can also have an effect on rates.
How Interest Rates Impact Affordability
As you shop around for a home equity loan, remember that your interest rate can make a big difference in affordability over the long term. Below, you can 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:
• At 8.50%, your monthly payment is $620 and your total interest paid is $24,391.
• At 8.00%, your monthly payment is $607 and your total interest paid is $22,797.
• At 7.50%, your monthly payment is $594 and your total interest paid is $21,221.
While the difference between monthly payments isn’t astronomical, many of us could think of better ways to spend that extra $3K in total interest. As you see, it pays to look for the best available interest rates, whether you’re shopping for a home equity loan or a HELOC.
Montana Home Equity Loan Rate Trends
The prime interest rate serves as a barometer for different types of home equity loans in Montana. By examining the historical prime interest rate over an extended period of time, you can get some insight into the trajectory of home equity loan rates.
Historical Prime Interest Rates
| 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
In addition to the prime rate, a number of economic and consumer factors influence home equity loan rates. For those seeking the best deals on home equity loans in Montana, the following are particularly important to consider.
Credit Score
A robust credit score, reflecting a proven track record of punctual payments, can secure homeowners a more favorable interest rate on a home equity loan. Lenders typically like to see a credit score of 680 or higher for home equity loans, and many lenders prefer 700+. (For reference, a conventional mortgage refinance requires a credit score of 630 to 650.)
Loan-to-Value (LTV) Ratio
The loan-to-value (LTV) ratio – calculated by dividing the loan amount by the appraised value of the home — helps lenders determine what interest rate and loan term to offer a borrower. The maximum LTV most lenders allow for a home equity loan is 85%.
Home Value
Lenders rely on independent appraisals to ascertain the market value of a home. This valuation process determines a homeowner’s equity and the maximum loan amount a lender will approve.
Home Value Stability
Stable home values allow homeowners to tap into a larger portion of their property’s equity. In other words, a stable local housing market can increase the maximum loan amount lenders will approve.
Lender Policies
Lenders have some leeway in the interest rates they offer for home equity loans. By carefully comparing the interest rates and fees of multiple lenders in Montana, borrowers can secure the most favorable home equity loan rates.
Property Location
Properties in locations with a heightened level of risk — due to extreme weather or natural disasters — may be subject to elevated interest rates. This is due to the increased potential for default and the associated financial losses incurred by lenders in these areas.
How to Qualify for the Lowest Rates
Whether you’re shopping around for a HELOC vs home equity loan, the tactics are the same to secure the most favorable interest rates. Prospective borrowers should prioritize establishing a robust credit score, diligently managing their debt-to-income ratio, securing adequate property insurance coverage, preserving sufficient home equity, and demonstrating a consistent history of responsible financial management.
Build a Strong Credit Score
By making consistent and timely payments and exercising responsible credit use, you can elevate your credit score.
Manage Debt-to-Income Ratio
Maintaining a low debt-to-income (DTI) ratio makes you a more attractive candidate to lenders. The DTI requirement for a home equity loan is typically 36% to 50%.
Obtain Adequate Property Insurance
Make sure you have sufficient property insurance coverage in place. Not only does it safeguard your investment, it is frequently a prerequisite for obtaining a home equity loan.
Maintain Sufficient Home Equity
In the state of Montana and elsewhere, lenders commonly require borrowers to have a minimum of 20% equity in their homes before they can qualify for a home equity loan. This requirement helps to ensure that borrowers have a sufficient financial stake in their properties and are less likely to default on their loans.
Fixed vs. Variable Interest Rates
Home equity loans generally feature fixed interest rates, offering stability and predictability in monthly payments. Variable rates might offer lower initial rates but they have the potential to fluctuate over time, leading to higher costs in the long run.
Tools & Calculators
Many tools and calculators are readily available to assist borrowers in determining loan amounts, interest rates, and the calculation of monthly payments.
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, ranging from 2% to 5% of the total loan amount.
Home equity loan fees typically include an appraisal, credit report, document preparation, origination, notary, title search, and title insurance costs. These fees can vary depending on the lender and the specific loan terms, so it’s important to compare multiple lenders before choosing one.
Some lenders offer no-closing-cost home equity loans, but these options may come with higher interest rates to compensate for the waived fees. However, it’s important to note that these loans can be beneficial for borrowers who don’t have the upfront cash to cover closing costs.
Recommended: HELOC Interest Only Calculator
Tax Deductibility of Home Equity Loan Interest
Interest on home equity loans may be tax-deductible if the loan proceeds are utilized for residential property acquisition or renovation. Married couples filing joint tax returns can deduct interest paid on up to $750,000 of qualified home equity loans that were obtained after December 15, 2017, whereas single filers are permitted to deduct interest paid on loans of up to $375,000.
Qualifying home improvements that may be eligible for tax deductions encompass those that augment the home’s value, extend its usable lifespan, or adapt it to serve new purposes, thereby enhancing its overall functionality, liveability, and potential for energy efficiency, ultimately increasing its worth and desirability.
In the context of claiming the home equity loan interest deduction, taxpayers are obligated to meticulously itemize each and every deduction on their tax returns rather than opting for the standard deduction, which presents a simplified and generalized approach to tax deductions.
Consulting with a knowledgeable and experienced tax advisor can provide invaluable guidance on the intricate rules and regulations governing home equity loan interest deductions.
Alternatives to Home Equity Loans
In addition to home equity loans, other options include home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances. Each has unique features and eligibility criteria. These alternatives provide homeowners with various methods to access the equity they have built in their properties, offering financial flexibility and potential cost savings.
Home Equity Line of Credit (HELOC)
What is a home equity line of credit? Often referred to as a HELOC, it allows homeowners the flexibility to borrow up to a predetermined limit as needed, much like a credit card. Interest is only charged on the amount of credit that is actually drawn. HELOCs incorporate adjustable interest rates, potentially leading to higher monthly payments.
Recommended: HELOC Repayment Calculator
Home Equity Conversion Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage backed by the federal government. It permits homeowners who are 62 or older to access a portion of their home’s value in the form of a lump sum, regular payments, or a line of credit. As time passes, the outstanding debt on the mortgage increases. HECMs generally come with higher upfront costs and extended processing compared to other home equity financing options.
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. For details, check out our guide to Cash Refinance vs Home Equity Line of Credit.
The Takeaway
Home equity loans can be a relatively low cost method of using your home equity to fund a big ticket project, consolidate high-interest debt, or cover unexpected bills. By understanding how home equity loan interest rates are determined 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.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
What is the monthly payment on a $50,000 home equity loan?
When considering a $50,000 home equity loan, the interest rate and loan term will determine the monthly payment. For a $50,000 loan with an 8.00% interest rate and a 10-year term, your monthly payment would be $607. A reliable loan calculator can provide an estimate based on your own numbers.
What is the monthly payment on a $100,000 HELOC?
The monthly payment for a $100,000 Home Equity Line of Credit (HELOC) will vary depending on the interest rate and the repayment term. A $100K HELOC with a 6.00% interest rate and a 10-year term, for example, results in a monthly payment of $1,110. A HELOC Monthly Payment Calculator can be a useful tool to help determine the payment amount.
What is the payment on a $25,000 home equity loan?
To calculate the monthly payment on a $25,000 home equity loan, you need the interest rate and the duration of the loan. For example, a $25,000 loan with a 7.00% APR and a 5-year loan term has a monthly payment of $495. For an estimate of your payment amount, enter your loan terms into any loan calculator.
What would the payment be on a $30,000 home equity loan?
The monthly payment for a $30,000 home equity loan is determined by the interest rate and the chosen loan term. An 8.50% interest rate repaid over 10 years gives you a monthly payment of $372. Utilizing a reliable loan calculator can provide an accurate estimate of the payment amount.
What disqualifies you from getting a home equity loan?
Several factors can hinder or even disqualify your ability to obtain a home equity loan. These factors include an unfavorable credit history, insufficient equity in your property, a high debt-to-income ratio, and inadequate property insurance coverage.
What are the benefits of a HELOC?
HELOCs provide the flexibility to obtain funds as needed up to a predetermined borrowing limit. This means you pay interest only on the amount you use. The potential for more favorable initial interest rates compared to fixed-rate loans further enhances their appeal and affordability.
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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