Compare Home Equity Loan Rates and HELOC Rates
Review current home equity loan rates and HELOC rates for August 18, 2018
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Mortgage Rates by Loan Product
Mortgage Rate ReportSaturday, August 18, 2018
Mortgage rates dipped lower for the second consecutive week after the Federal Reserve decided to keep interest rates unchanged at its August meeting. Although the Fed's statement reflected its more aggressive rate strategy, its move to stay put was widely expected after its June hike. The Fed's concise statement highlighted a strengthening economy including a strong labor market, household spending and business investment. Although some could interpret the use of more hawkish language as paving the way for future interest rate hikes, the mortgage market responded positively to the Fed's decision to hold the target Federal Funds rate at 1.750% to 2.000%.
Bullish telegraphing from the Fed as well as a string of favorable economic news had pushed mortgage rates higher for much of the summer but rates have pulled back the past two weeks, which is positive news for borrowers. Rates dipped last week on the news that the Fed left interest rates unchanged and slid again this week as turmoil in the global currency market led investors to buy U.S. treasuries, pushing yields lower. Lower treasury yields usually translates into lower mortgage rates, which is what happened this week.
The drop in rates may only be temporary in light of recent reports that show a tightening job market, although moderate wage growth could help keep inflation low and benefit mortgage rates. Although the real estate market is facing challenges due to a lack of affordable inventory and other factors, the overall strength of the economy is offering little reason for the Fed to change course which could lead to higher mortgage rates in the future despite the decline we saw this week.
The mortgage rate for a 30 year fixed rate loan slid 0.125% to 4.250% while the rate for a 15 year fixed rate mortgage dropped to 3.625%. The interest rate on a 5/1 adjustable rate mortgage (ARM) also declined 0.125% to 3.750%. FHA mortgage rates and VA mortgage rates both held steady at 3.875%, with both programs appealing to borrowers focused on low or no down payment programs, especially first-time home buyers. Jumbo mortgage rates dropped to 4.375% while non-owner occupied mortgage rates remained at 4.625%.
Although the Fed's decision to keep rates unchanged was anticipated, the mortgage market's reaction to the news was pleasantly surprising. After rising moderately over June and July, the drop in mortgage rates is welcome news for borrowers. While interest rates are impossible to predict, prospective borrowers looking to buy a home or refinance may be able to lock in a lower rate by acting sooner rather than later. As lenders react differently to dynamic market conditions, we have also seen greater fluctuations in mortgage rate pricing, which means borrowers benefit more by comparing several lenders.
Because rates change constantly, we continue to actively monitor the mortgage market for new developments. Borrowers should check the FREEandCLEAR rate tables regularly to review personalized, updated mortgage rates for lenders in their area. Our rate tables are free to use and require no personal information.
Why Select a Home Equity Loan or HELOC
Only Access the Amount of Money You Need.
A home equity loan or HELOC enables you to access the specific amount of money you need as compared to a full refinance of your mortgage. A smaller loan amount means that your monthly payment and total interest expense over the life of the loan are lower with a home equity loan or HELOC.
Flexible Financing Option.
Most lenders impose relatively few limits on how borrowers use the proceeds from a home equity loan or HELOC. You can use the money from a home equity loan or HELOC for any number of reasons including to pay-off expensive credit card debt, for home improvements or even school tuition. Although most lenders want to understand how you plan on using your loan proceeds, a home equity loan or HELOC provides you significant flexibility on how you use the equity in your home.
Less Expensive and More Efficient than a Refinance.
A home equity loan or HELOC is less costly and time-consuming compared to alternate ways of tapping the equity in your home including a cash-out refinance. Transaction expenses and fees for a home equity loan or HELOC are typically less than the closing costs to refinance your mortgage because the loan amount is smaller. Additionally, the application and closing process for a home equity loan or HELOC are shorter than the time frame for a refinance. Please note that home equity loan rates and HELOC rates are typically higher than first mortgage rates but the loan amount is smaller so your total interest expense is lower.
Increased Borrowing Capacity.
Lenders typically apply a higher borrower debt-to-income ratio for a home equity loan or HELOC than for a mortgage, which potentially enables you to borrower more money. For example, depending on multiple factors, the maximum debt-to-income ratio for a mortgage is typically 45% to 50% while the maximum debt-to-income ratio for a home equity loan or HELOC is usually 55% or possibly higher under certain circumstances. Using a higher debt-to-income ratio enables you to borrow more money. With a home equity loan or HELOC, to determine what size loan you qualify for lenders primarily focus on the value of your home and the combined loan-to-value (CLTV) ratio of your first mortgage plus your home equity loan or HELOC.
Why Borrowers Compare Home Equity Loan Rates and HELOC Rates on FREEandCLEAR
Comparing home equity loan rates and HELOC rates can save you thousands. Use our rate tables to find the lender offering the lowest rates and fees
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More FREEandCLEAR Mortgage Resources
Understand how a home equity loan works including interest rate, qualification requirements and other key loan terms
Review our comprehensive overview of of how a HELOC works including loan-to-value ratio limits, types of HELOC and other guidelines
Review our detailed comparison of a home equity loan and a HELOC to determine the financing option that is right for you
Review an informative explanation of the trade-offs between a home equity loan and a mortgage refinance