Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners to borrow against their home’s equity for large expenses like renovations, education, or debt consolidation.
• Home equity loan rates depend on factors like the borrower’s credit score, and the loan-to-value ratio.
• Banks’ prime rates and housing market trends also influence what rate a borrower is offered.
• Home equity loan calculators and other tools can be useful for those considering a loan.
• Alternatives to home equity loans include a home equity line of credit (HELOC), a home equity conversion mortgage (HECM), and a cash-out refinance.
If you own a home in Nebraska and have been steadily making your mortgage payments, you may be interested in learning about home equity loan rates in the Cornhusker State. A home equity loan can help you tap into the equity you’ve built up in your property to achieve your goals, such as remodeling a kitchen or covering education expenses. In this guide, we’ll cover key factors that influence your rate, what to look for in a lender, and other ways to borrow.
A home equity loan is a second mortgage that, like your original home loan, leverages your home as collateral. The loan amount is issued in a lump sum, and you repay it in equal monthly installments over a period of anywhere from five to 30 years. These loans often come with lower interest rates than unsecured personal loans, and the rate is typically fixed. To qualify, homeowners should have at least 20% equity in their primary residence. When considering home equity options, it’s crucial to weigh the benefits and risks of using your home as collateral.
Now that you understand what a home equity loan is, it’s time to grasp where those all-important interest rates come from. Across the U.S., including in Nebraska, home equity loan interest rates are a product of economic factors, including the prime rate — the rate at which banks lend to their most creditworthy customers. Federal Reserve policy decisions also play a role as prime rates are set in response to rates set by the Fed. By understanding these factors, you can better anticipate rate fluctuations and make an informed decision when seeking a home equity loan.
The interest rate you get on your home equity loan can have a big impact on how much you can borrow and the monthly payment. Over a 20-year term, a 1% difference in interest rate could mean a substantial difference in the amount of interest you’ll pay on the loan. This is why it’s important to shop around and compare home equity rates in Nebraska.
Let’s take a look at how that plays out if you borrow $50,000 with a 10-year term:
• At 8.00% interest the monthly payment would be $607 and the total interest paid would be $22,797.
• At 7.00% interest the monthly payment would be $581 and the total interest paid would be $19,665.
• At 6.00% interest the monthly payment would be $555 and the total interest paid would be $16,612.
The prime interest rate’s ups and downs are one thing to watch if you’re trying to predict where home equity loan rates are headed. If you’re thinking about getting a home equity loan in Nebraska, it helps to have a sense of the history of the rate. Since 2018, the prime rate has seen its fair share of ups and downs, with a low of 3.25% in 2020 and 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% |
A wide variety of factors can influence the rate you receive on a home equity loan — and whether you’re able to get equity out of your home at all. By understanding these factors, you will be well-equipped to find the best rate for the loan you are looking for.
If you’ve been diligent in managing your credit and have a history of on-time payments, you’re more likely to get a lower interest rate. Most lenders in Nebraska prefer a credit score of 680 or higher when considering a home equity loan application, and many would rather see a score of 700 or above.
Lenders are very careful when it comes to loaning money on a home. They will only loan up to a certain percentage of the home’s value. So you can expect a lender to require an appraisal of your property during the loan application process.
Once you have your home value pinned down, the lender will be able to determine your LTV ratio, which is a big deal when it comes to home equity loans. Most lenders will let you borrow up to 85% of your home’s value, but the exact number can vary. The higher your LTV, the higher your interest rate is likely to be.
In the case of a home equity loan, the combined amount of your remaining first mortgage and your new home equity loan will need to be under 85%. You can calculate your combined loan-to-value ratio (CLTV) easily:
Here’s an example of how that looks for a home that appraised for $300,000. Let’s say the owner owes $100,000 on the existing mortgage and wants to borrow $50,000 with a home equity loan:
$100,000 + 50,000 = $150,000
$150,000 ÷ $300,000 = .50
With a CTLV of 50%, this owner is in a good position to obtain the desired $50,000 loan.
The stability of home values is also important. If your home’s value is on the rise, lenders are more likely to approve larger loan amounts, since the property’s increased value provides a stronger financial cushion. On the flip side, if home values in your area are declining, lenders may be more conservative in approving loans.
Where your property is located can also affect your interest rate. If you live in an area that’s considered at risk from extreme weather and natural disasters, such as wildfires, you may find that the interest rate you’re offered is higher.
Lender policies have a big impact on the interest rates offered for home equity loans in Nebraska. And because different lenders have different policies, it’s important to shop around and examine the fine print at various lenders.
If it’s starting to feel like what interest rate you’ll be offered is largely out of your hands, take heart: There is actually a lot you can do to help ensure you’re offered the best home equity loan rates. Let’s have a look at these smart money moves:
A robust credit score is your ticket to favorable rates on home equity loans, a testament to your financial trustworthiness. Keep the score high by being prompt with payments and not maxing out your credit. These habits don’t just open doors to home equity loans; they also contribute to your overall financial health.
Lenders look at your debt-to-income (DTI) ratio to see how much of your monthly income goes toward paying debts. The lower your DTI, the better your chances of getting approved for a loan. To qualify for the best home equity loans in Nebraska, you’ll typically need a DTI on the lower end of the spectrum: 36% or less. But some lenders may accept a DTI as high as 50%.
It’s not unusual for home loans of any kind to require adequate property insurance, especially in flood-prone areas. By making sure your property is properly insured, you can potentially get better loan terms, which can improve your overall financial situation and give you peace of mind.
If you’re in Nebraska, it’s a good idea to have at least 20% equity in your home before applying for a home equity loan. Keeping an eye on your home’s current value and assessing your equity position can help you get the best interest rates for your loan.
In Nebraska, as elsewhere in the U.S., home equity loans typically come with fixed interest rates. This means you can plan on making the same monthly payment for the entire life of the loan. While fixed rates provide peace of mind, they can sometimes start out higher than variable rates, which may begin lower but increase over time.
To figure out if a Nebraska home equity loan is within reach and to pinpoint your potential borrowing power, you’ll want to use a calculator. There are calculators for HELOCs, too.
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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 for home equity loans typically fall between 2-5% of the loan amount. These costs often include fees for an appraisal, credit report, document preparation, and title insurance. Appraisals can run $300-$500, and credit report fees $50-$100. Document preparation and attorney fees can vary widely, from $500-$2,000. Remember, no-closing-cost loans may seem appealing, but they often come with higher interest rates. It’s always wise to compare multiple lenders before making a decision.
The interest on your home equity loan could be tax-deductible if you’re using it to significantly improve your home. There are limits, though. You can deduct the interest you paid on the first $750,000 of your mortgage ($375,000 for couples filing separately). Just remember, you’ll need to itemize your deductions to snag this benefit. And it’s always a good idea to chat with a tax advisor about this or any deduction.
In Nebraska, you have a range of options beyond the traditional home equity loan. A home equity line of credit (HELOC) is just one example of the different types of home equity loans you’ll want to explore. Check out these options to find the best fit for your financial needs:
A HELOC is a nifty financial tool that works much like a credit card, but with the bonus of lower interest rates than you’ll see on a credit card or personal loan. If you’re approved for a HELOC (through a process much like the one used for a home equity loan), you can borrow up to a predetermined limit and only pay interest on the amount of the credit line you use. When thinking about HELOCs vs home equity loans, consider that the interest rate on a HELOC is often variable, while a home equity loan typically has a fixed rate.
An HECM, or Home Equity Conversion Mortgage, is a government-supported reverse mortgage that empowers homeowners aged 62 and older to receive payments from the lender based on their home’s value. The funds from an HECM can be received as a lump sum, regular payments, or a line of credit. Unlike home equity loans and HELOCs, HECMs don’t require monthly payments; repayment is only necessary when you leave or sell the home.
While HECMs generally have higher closing costs and a lengthier processing time than home equity loans and HELOCs, they offer unique benefits. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
A cash-out refinance is a form of mortgage refinance. You get a new mortgage for more than you owe on your existing mortgage. You pay off your original mortgage and take extra funds you’re borrowing in cash. One big difference between a home equity loan and a cash-out refi is that the home equity loan leaves you with two mortgage payments to make. The cash-out strategy leaves you with one payment. When weighing a cash-out refinance vs. a home equity line of credit, consider that the HELOC allows you to borrow only what you need when you need it, whereas the cash-out refi, like a home equity loan, provides you with a lump sum.
Nebraska homeowners who wish to take advantage of their home equity have several options: a home equity loan and a HELOC being two popular choices. To make the best financial decision, keep tabs on local home equity loan rates, take good care of your credit score, and do your research to compare the full cost profile (both interest charges and fees) from multiple lenders. It takes some time to do your homework, but it will ensure that you make the smartest financial move.
Unlock your home’s value with a home equity loan from SoFi.
The monthly payment on a $50,000 home equity loan will depend on your interest rate and term. The longer the term, the lower the monthly payment will typically be — but the more interest you will pay over the life of the loan. A lower interest rate, of course, means lower payments and interest overall. You can play with different rates in a home equity loan calculator to get a feel for how rates and terms impact the numbers.
The monthly payment on a $100,000 home equity line of credit (HELOC) will depend on whether you have used the full $100,000 credit line. If so, then your payment amount will depend on your term and interest rate. For example, a $100,000 HELOC with a 6.00% interest rate and a 10-year term will mean a monthly payment of $1,110.
Borrow $25,000 with an interest rate of 8.00% and a term of 5 years and you’re looking at a monthly payment of $507. Change either the interest rate or the term (or both) and your payment amounts will shift.
The monthly payment on a $30,000 home equity loan can vary depending on the interest rate and the length of the term you choose. To get an accurate idea of what your monthly payments could be, use a home equity loan calculator that allows you to type in rates and terms.
Factors that can disqualify you from getting a home equity loan include having a credit score below 680 and having a lot of debt payments to make each month relative to your income. Of course, not having much home equity or having inadequate insurance coverage on your home could be a factor as well.
A home equity line of credit (HELOC) gives you a line of credit that you can use as needed. Some borrowers prefer this over taking out a lump-sum loan — it’s particularly useful when you aren’t sure exactly how much money you need, such as when you’re doing a remodeling project. With lower interest rates than most credit cards and the ability to only pay interest on the amount of credit you use, a HELOC can be a great way to have financial flexibility.
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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.
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