If you’re looking for home equity loan rates in Arizona, you’re in the right place. See below for the latest Arizona home equity loan rates available today from a wide variety of lenders.
A home equity loan is a type of home loan used by many homeowners in Arizona to borrow against home equity. A home equity loan offers access to cash that can be used to consolidate debt, pay for home repairs or improvements, or make a large purchase.
Home equity loans use your home as collateral, so they’re best used by financially responsible homeowners who have significant equity in their homes.
Today’s Arizona Home Equity Loan Rates
See below for today’s home equity loan rates in Arizona. Interest rates are subject to market conditions and can change at any time without notice.
Table of Contents
What is a Home Equity Loan?
A home equity loan enables you to borrow a lump sum of cash against the equity in your home. Home equity is the difference between your home’s market value and any outstanding mortgage balances.
Home equity loans are similar to personal loans and cash-out refinances because they usually come with fixed interest rates and a fully-amortized payment that pays off the loan at the end of the loan term.
Most home equity loans are written as second mortgages behind an existing primary mortgage, but you don’t need to already have a mortgage to get a home equity loan.
You may hear the term “home equity loan” used interchangeably with the term “home equity line of credit”, or “HELOC”. HELOCs are a type of home equity loan, but they’re usually revolving (like a credit card), have interest-only payments (during the draw period), and variable interest rates.
The home equity loan we’re referring to here typically comes with a fixed rate, lump sum payout, and a set repayment period (such as 10 years, 15 years, etc.).
There are several advantages to a home equity loan:
- Smaller loan amounts. A home equity loan may be a better option than a cash-out refinance if you don’t need a large amount of cash. Many lenders have minimum loan amounts of $50,000 to $75,000 for cash out refinances.
- Keep your primary loan. A home equity loan enables you to borrow against your equity without refinancing your existing mortgage. This is a big advantage if you have a low interest rate on your existing mortgage.
- Lower closing costs. Home equity loans usually have lower closing costs than cash-out refinances.
- Fixed rates and loan terms. Most home equity loans have fixed interest rates. Many homeowners prefer home equity loans over HELOCs for this reason. HELOCs usually have variable interest rates that change with the prime rate. When the prime rate increases, HELOC rates (and payments) increase as well.
- Simpler application process. The application process is usually simpler and faster for a home equity loan than for a cash-out refinance.
Home equity loans have some potential disadvantages:
- Higher rates than other loan options. Arizona home equity loan rates tend to be higher than cash-out refinance or HELOC interest rates.
- Shorter loan terms and higher payments. Home equity loans usually have higher payments because the loan terms are shorter. However, keep in mind that the shorter loan term also means you’re repaying the loan faster.
- You have to borrow the full amount up front. Most home equity loans have only a lump sum payout. You have to borrow the full amount up front even if you don’t need all the money right now. You may want to consider a HELOC if you need more borrowing flexibility than a home equity loan can offer.
If you have a low-rate mortgage already and don’t need a huge amount of cash, a home equity loan could be a good option for you.
What interest rate you qualify for depends on multiple factors, including credit scores, how much home equity you have, how much you’re borrowing, and other factors. Check out the rate table at the top of this page for the latest home equity loan rates in Arizona from a variety of lenders.
Home Equity Loan Vs Home Equity Line of Credit (HELOC)
Home equity loan rates in Arizona are usually fixed. The full loan amount is borrowed at closing and repaid on a monthly basis over a set loan term (such as 10 years, 15 years, etc.).
A home equity line of credit, or HELOC, usually has a variable rate (but not always). HELOCs are revolving credit lines (similar to credit cards) and the payments are usually interest-only.
Once the draw period ends, the lender recalculates the payment into a fully-amortized payment that pays off the loan balance in full at the end of the loan term. This so-called recast could make your payment increase significantly. It’s important to understand this risk before you get into a HELOC.
The following table summarizes the differences between a HELOC and a home equity loan.
|Home Equity Loan
|10 to 30 years
|10 to 25 years
|Fixed, includes principal and interest
|Variable, interest-only during draw period
|How Funds Are Borrowed
|The entire loan amount is borrowed as a lump sum at closing
|Funds are borrowed on a revolving basis as needed
|Usually fully-amortized and pays off in full at the end of the loan term
|Initially interest-only, but recasts to fully amortized payment at the end of the draw period
How to Get the Best Arizona Home Equity Loan Rates
If you want the best home equity loan rates in Arizona, you need to have strong credit scores. Arizona home equity loan rates are heavily dependent on credit scores.
Income sometimes matters as well, but the rate will be determined largely by your credit scores.
Credit scores range from a low of 350 to a high of 850. According to Credit.com, the average credit score in the United States was 711 in 2021. There are five main factors that influence your credit scores:
- Payment history: 35%. It’s very important for your credit scores that you make your payments on time.
- Credit utilization: 30%. If you have high utilization (i.e., you’re “maxed out”) on credit cards, expect your scores to suffer even if you make your payments on time. Keep your utilization below 30% of the credit limit.
- Credit age: 15%. Length of credit history is important. Avoid closing old accounts unless absolutely necessary.
- Credit mix: 10%. Lenders like to see a mix of different types of credit accounts, such as revolving (credit card) accounts and installment loans like mortgages, car loans, etc.
- New credit: 10%. Be careful when applying for new credit cards or loans. Too many new accounts can damage your scores.
How Can I Improve My Credit Scores?
Arizona home equity loan rates depend on credit scores, so you want to keep your scores strong.
The best way to improve your credit scores is to make your payments on time.
It’s also important to avoid overutilizing your revolving credit. High utilization can damage your credit scores even if you make your payments on time.
If you’d like to close a few accounts, close your newer accounts first. Length of credit history contributes to good scores.
Be careful not to open too many new accounts at one time. If you’re shopping aggressively for new loans, it may hurt your credit scores.
Are home equity loan rates higher than mortgage rates?
They can be, but not always. The rate you pay depends on your credit scores and credit history, how much you borrow, and how much equity you have in your home. If you have excellent credit and a lot of home equity, you’ll receive a lower rate than somebody with lower scores and more limited home equity.
How do home equity loans work in Arizona?
A home equity loan enables you to borrow a lump sum against your home’s equity and repay it over a set loan term, such as ten or fifteen years. Home equity loan rates in Arizona are usually fixed. A home equity loan can be a good alternative to a variable-rate HELOC.
What is the current interest rate on a home equity loan?
Arizona home equity loan rates vary depending on market conditions, credit scores, how much you’re borrowing, and how much home equity you have. Use the table at the top of this page to search for current home equity loan rates in Arizona.
What is a home equity loan?
A home equity loan enables you to borrow against your home’s equity. Most home equity loans have fixed rates and repayment terms of ten or fifteen years.