MEMPHIS HELOC RATES TODAY
Current HELOC rates in
Memphis, TN.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Key Points
• A home equity line of credit, referred to by lenders and borrowers as a HELOC, is a revolving line of credit that is secured by your home equity.
• The interest rate for a HELOC is tied to the prime rate and the individual borrower’s financial profile.
• A HELOC can be useful for managing expenses that are large and ongoing, like a home remodel, education costs, or paying off higher-interest debt.
• HELOCs almost always have variable rates, which means your monthly payment can fluctuate over time.
• It’s important to carefully consider your financial solvency when pursuing a HELOC, since defaulting can lead to foreclosure on your home.
Introduction to HELOC Rates
We’ve created this guide to HELOC interest rates in Memphis, Tennessee, to help you make informed decisions, whether you’re considering borrowing funds for a home renovation or another significant expense. This comprehensive guide can help you understand the many factors that influence HELOC interest rates, as well as the benefits and risks of opening a HELOC with a lender. It will equip you with the knowledge to understand the current market conditions, and know what you need to qualify for a great rate.
What Is a HELOC?
Before you start making decisions about borrowing, it’s helpful to understand what a home equity line of credit is and how to use it to your advantage. A HELOC is a line of credit that you can borrow against, as you need, up to a certain limit that your lender sets, based on your level of home equity. Your home serves as the collateral, which means that you must repay what you borrow or you could face foreclosure.
Your home equity level is easy to calculate — it’s the difference between your home’s value and the current balance on your home loan. To find it, subtract your current mortgage balance from the estimated value of your home. Divide the answer by that home value figure to arrive at your percentage of accrued home equity.
To qualify for a HELOC, you typically need at least 15% equity, and you can borrow up to 90% of the equity you’ve accrued. HELOC interest rates are often lower than the rates you’ll find on unsecured loans, as you look for options on how to get equity out of your home.
A HELOC has two main periods:
The Draw Period
During the HELOC’s initial draw period, which generally lasts 10 years, a borrower is able to access funds in increments, as needed. During this time, you’ll need to pay interest on what you borrow, but most lenders won’t require you to pay down the principal. You can do so, however, if you want to draw on the credit line again. A HELOC interest-only calculator is useful for figuring out how much interest you would pay during the draw period.
The Repayment Period
After the draw period ends, the repayment period — usually 10 to 20 years — begins. Your monthly payments will increase during this phase, as you’ll begin to repay the principal plus interest. HELOC interest rates tend to be variable, which means that the amount you pay each month may go up or down if rates fluctuate, and they often do. A HELOC monthly payment calculator can help you compute what your payment might be at any interest rate.
The Origins of HELOC Interest Rates
Lenders derive interest rates for HELOCs and different types of home equity loans using the prime rate as a baseline. This is a figure that moves up or down with the Federal Reserve’s economic maneuvers. Lenders start there and tack on margins to arrive at their offered rates, which is why advertised numbers can vary.
This is just one reason why it’s important to seek out multiple rate quotes from various lenders if you’re planning to apply for a HELOC. Your financial overview, including your credit score, level of debt, and the amount of equity you have in your home, also plays a role in the interest rate lenders will offer you. If you have a higher credit score and solid home equity, it can tip the scales in your favor.
How Interest Rates Impact HELOC Affordability
You’ll need to invest time and energy as you shop around for top HELOC interest rates, but the rate you get makes a big difference in what you’ll pay. Even a small rate advantage can mean a lot more interest over the lifetime of the HELOC. If you use $50,000 from a HELOC during your 10-year draw period, as an example, the difference in the monthly interest you’ll pay based on an 8.50% versus a 9.50% interest rate is $42 per month. Your monthly payments would be $354 or $396, respectively.
Doesn’t seem like a big difference? Keep crunching the numbers. Once you start paying off both principal and interest on the same $50,000 during a 20-year repayment period, your monthly payments would be $620 at the lower interest rate and $647 at the higher one. And over the entire repayment term, getting the higher interest rate would cost you an extra $3,000. Since HELOCs have variable interest rates, the real-world numbers will differ somewhat.
Check out this chart to compare HELOCs at different credit line amounts, terms, and interest rates:
| Repayment Amount | Term | Interest Rate | Monthly Payment | Total Interest Paid |
|---|---|---|---|---|
| $100,000 | 20 years | 8.00% | $836 | $100,746 |
| 7.00% | $775 | $86,072 | ||
| 10 years | 8.00% | $1,213 | $45,593 | |
| 7.00% | $1,161 | $39,330 | ||
| $50,000 | 20 years | 8.00% | $418 | $50,373 |
| 7.00% | $388 | $43,036 | ||
| 10 years | 8.00% | $607 | $22,797 | |
| 7.00% | $581 | $19,665 | ||
| $25,000 | 20 years | 8.00% | $209 | $25,186 |
| 7.00% | $194 | $21,518 | ||
| 10 years | 8.00% | $303 | $11,398 | |
| 7.00% | $290 | $9,833 |
HELOC Interest Rate Trends
While it’s not a sole predictor for HELOC rates, the prime interest rate can be a helpful gauge when you shop. Since 2018, the prime rate has bounced up and down, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023. Being aware of this history can give you perspective on the current rates you see in Memphis.
| Date | U.S. 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 | 5.5% |
| 9/27/2018 | 5.25% |
Source: U.S. Federal Reserve
Variable vs. Fixed Interest Rates
HELOCs most often come with variable rates, also known as adjustable rates. These rates go up or down over time based on market conditions, at intervals and according to caps that are spelled out in the HELOC agreement. That can mean that the interest amount you pay can change along with the market. Be aware of possible interest rate changes before you sign up for a HELOC. If you prefer a steady monthly payment, a home equity loan might be preferable for you — keep reading for an explanation of how those work.
Helpful Tools & Calculators
Before you jump on a HELOC offer, it’s a good idea to estimate what its costs will be. You can do this using some helpful online tools. Here are a few that we think are particularly useful.
Run the numbers on your HELOC.
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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.
How to Qualify for a Competitive HELOC Rate
To secure a desirable HELOC rate, take a look at your personal numbers. The most important ones here are your credit score, debt-to-income (DTI) ratio, and home equity percentage. Lenders will expect you to have at least 15% equity in your home — and more will be better. Here’s how to ensure your finances pass muster before you hit send on your application.
Improve Your Credit Score
Keeping your credit score at 700 or above is one key to unlocking the very best HELOC rates. The good news is, you can ratchet your number north if you pay your bills on time and chip away steadily at credit card balances you’re carrying. Also be sure to review your credit report for inaccuracies. Disputing and removing errors means your score will truly reflect your financial responsibility.
Calculate Your Debt-to-Income Ratio (DTI)
Knowing your DTI ratio just requires a simple calculation: Divide your total monthly payments (aka debts) by your gross monthly income. Most HELOC lenders are looking for a DTI under 50%, but for the most friendly HELOC interest rates in Memphis, you’ll want to get your DTI below 36%. Paying down your debt (or increasing your earnings) will make a positive difference.
Application Process for a HELOC in Memphis
You can prequalify online if you want a quick snapshot of the HELOC rates available and an estimate of the amount you could qualify for. Once you’ve investigated the various lenders and rates available to you in Memphis, you’ll be ready to move on to the full application, which requires more detailed financial information and specific details on your property.
Step 1: Run the Numbers
Before you press go on your quest for a HELOC, take a close look at your financial situation. Check your credit scores at all three major credit bureaus and calculate your debt-to-income (DTI) ratio. You’ll likely need a credit score of at least 640 to qualify. Also consider your home equity, and understand that it will slowly but surely grow as you make regular mortgage payments, and as your home’s value increases with time.
Again, to figure out your percentage, subtract your outstanding mortgage balance from your home’s estimated home value and divide the answer by that home value number. That’s your approximate percentage — a formal appraisal may shift it a bit. Remember, you need at least 15% equity to proceed.
Step 2: Compare Lenders
To find the best HELOC lenders in Memphis, you’ll want to size them up and see which ones are offering competitive rates and terms. Look at each institution’s interest rates, but also their qualification criteria, minimum and maximum amounts you can borrow, fees, and the lengths of their draw and repayment periods. HELOC terms can widely vary among lenders, so don’t rush past the fine print before committing.
Step 3: Submit Your Application
Take a deep breath and gather your paperwork. You will need government-issued identification, recent pay stubs, W-2 forms, and your last tax return. Are you self-employed? A lender may ask for a profit-and-loss statement, plus two years’ worth of tax returns. Property documentation will include the declaration page from your homeowners insurance. You can probably submit your HELOC application with a potential lender online, over the phone, or in person.
Step 4: Get an Appraisal
A home appraisal is a professional and objective analysis that will determine your home’s value. A home appraisal typically costs around $300 to $600. If your property appraises for, say, $225,000, and that is more than the balance you owe on your mortgage, a lender will have more incentive to approve you for a HELOC. This is an important step. It will help you determine the amount of equity you can potentially access, and will influence your HELOC agreement’s terms. Prospective lenders will tell you what kind of appraisal you need, so wait for instructions.
Step 5: Prepare for Closing
Once you’re approved, but before you can access funds from your HELOC, you’ll need to sign your agreement and pay closing costs. Some lenders will make the funds available to you right away after closing; others may take a few days.
Closing Costs and Fees
HELOCs often carry lower closing costs than home mortgage loans or cash-out refinancings. The appraisal fee is usually the most significant expense you’ll pay. Other fees you’ll likely have to pay are for the appraisal, a title search, origination, and other administrative items. Some lenders charge annual fees, which can be up to $250 per year. Be sure you’re aware of all costs involved with the HELOC. Also, keep in mind that if a lender offers to reduce or waive closing costs, it could indicate that they are assigning you a higher interest rate.
Recommended: HELOC vs. Home Equity Loan
Tax Benefits and Considerations
At this time, homeowners can deduct HELOC interest at tax time if they use the borrowed funds to improve their primary residence. To do this, you’ll have to itemize costs. Keep in mind that this policy may change. You should consult a tax advisor about your specific circumstances.
Alternatives to HELOCs
Other ways to get equity out of your home beyond a HELOC include home equity loans and cash-out refis, in addition to personal loans. It’s smart to consider all your options before you commit to a HELOC.
Home Equity Loan
What is a home equity loan? It offers you an all-at-once, lump-sum loan instead of a line of credit. This option usually has a fixed interest rate. It can often be for up to 85% of your home equity — a home equity loan calculator can help you see what you might be eligible to borrow.
Home equity loan lenders look for a credit score of 680 or higher if you want to qualify. The advantages here are the predictable fixed interest rate and a set payment schedule. One difference from a HELOC is that with a home equity loan, you get the money all at once and begin repaying principal plus interest right away. If you want a fixed interest rate, this could be a fit for you.
Cash-Out Refinance
A cash-out mortgage refinance lets you refinance for more than you owe on your mortgage right now, and then take the difference in cash. It’s a good option if the costs and terms of the new mortgage are better than those on your current home loan.
Things to think about with a cash-out refinance vs. a home equity line of credit: To do a refinance, you need a credit score of 620 or better and a DTI ratio under 43%. A refi is slightly easier to get and often lets you choose between fixed and variable interest rates, plus leaves you with one monthly payment instead of two.
Personal Loan
This option is an unsecured loan, and you repay it in regular, fixed installments over a period of two to seven years. The key benefit of a personal loan is, your home is not at risk of foreclosure should you encounter financial challenges and miss a payment. Lenders will likely look for a credit score of 610 or higher for this loan type. It is relatively quick to secure, but interest rates tend to be higher compared to a HELOC or a home equity loan.
The Takeaway
When considering a HELOC in Memphis, you’ll want to weigh both potential benefits and possible risks you’ll take on when initiating it. HELOCs offer flexibility and may come with more attractive interest rates than those on other borrowing options. That makes them well-suited for managing large and ongoing expenses. But keep in mind, those variable rates may change in time. And a HELOC comes with a risk of losing your home should you fall into default. Take time to assess your overall financial situation before you take out a loan.
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FAQ
Is a HELOC a wise move at this point?
If you want the flexibility to access funds in increments for big expenses and you feel comfortable with variable interest rates, a HELOC could be a smart move. This will especially be the case if current forecasts point to a prime rate drop, as occurs periodically — but is never guaranteed. If you prefer the stability of fixed payments, you might be better suited for a home equity loan, so consider that option, too.
What would the monthly payment be on a $100,000 HELOC?
Payments on a $100,000 HELOC can fluctuate. The number will be based on the line of credit’s interest rate, repayment terms, and the amount of the credit line you use. If you borrow the full $100,000 and have an 8.00% rate, for example, you might pay around $667 in interest each month during the draw period. Once the repayment phase arrives, you’ll start paying on the principal and your monthly payment would rise to more than $1,200. HELOCs have variable interest rates, so exact figures might vary and your rate could go up in time.
Do you need an appraisal to get a HELOC?
Yes, you will need a home appraisal if you want to obtain a home equity line of credit. Your best bet is to wait for your potential lender’s instructions on how your home should be appraised, so you know exactly what to do. This appraisal will help lenders verify your home’s current market value and the amount you’re eligible to borrow. Lenders also use the information to set the interest rate on your HELOC.
Will a HELOC impact your credit score?
Opening a HELOC involves a credit report hard inquiry, and that can cause a slight, temporary drop in your score. Missing payments on your HELOC will definitely hurt your credit score, but if you manage and make them responsibly, it will positively impact your score.
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More HELOC resources.
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What is a Home Equity Line of Credit
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