Home equity loans are a popular option for homeowners who want to access the value of property without selling it. But how much interest would you have to pay on a $75000 home equity loan in 2023? In this blog post, I will explain factors that affect interest rates and give you some tips on how to get the best deal.
The interest rate on a home equity loan depends on several factors, such as:
– Your credit score: The higher your credit score, the lower interest rate you can qualify for. A good credit score is above 700, while a poor one is below 620.
– Your loan-to-value ratio (LTV): This is a percentage of your home’s value that you are borrowing. lower your LTV, the lower the interest rate you can get. For example, if your home is worth $300000 and you borrow $75000, your LTV is 25%.
– term of loan: This is how long you have to repay the loan. shorter term, lower interest rate you can get. However, a shorter term also means higher monthly payments.
– the type of loan: thare are two types of home equity loans: fixed-rate and variable-rate. A fixed-rate loan has a constant interest rate for the entire term of the loan, while a variable-rate loan has an interest rate that changes according to market conditions. A fixed-rate loan offers more stability and predictability, while a variable-rate loan may offer lower initial rates but more risk of fluctuations.
According to Bankrate.com, the average interest rate for a 15-year fixed-rate home equity loan in New York City was 5.51% as of November 2023. Assuming you have a good credit score and a low LTV, you could expect to pay around this rate or slightly lower. Using an online calculator, I found that a $75000 home equity loan with a 15-year term and a 5.51% interest rate would have a monthly payment of $617.32 and a total interest cost of $36118.80 over the life of the loan.
However, if you have a poor credit score or a high LTV, you may have to pay a higher interest rate or even be denied for loan altogether. For example, if your credit score is 620 and your LTV is 80%, you could end up paying an interest rate of 8.51% or more. In that case, your monthly payment would be $741.61 and your total interest cost would be $58389.80 over the life of the loan.
Therefore, it is important to shop around and compare different lenders and loan options before you apply for a home equity loan. You should also try to improve your credit score and reduce your debt before you apply, as this will increase your chances of getting a lower interest rate and saving money on interest.