SOUTH DAKOTA HELOC RATES TODAY
Current HELOC rates in
South Dakota.
Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Current HELOC rates in
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Compare HELOC rates in South Dakota.
Key Points
• South Dakota offers competitive HELOC rates for homeowners seeking to consolidate debt, renovate their home, or cover other large expenses.
• To secure the best HELOC rates in South Dakota, homeowners should build their credit score, pay down credit-card debt, and shop around with multiple lenders.
• HELOC rates in South Dakota are influenced by the prime rate, housing market conditions, and a borrower’s credit profile.
• Understanding the factors that influence HELOC rates, such as sufficient home equity and a low DTI ratio, is important for homeowners in South Dakota who want to get the best possible rate.
• The biggest downside to HELOCs is that they’re secured by your home, so if you default, you could face foreclosure.
Introduction to HELOC Rates
This comprehensive guide provides a thorough overview of HELOCs, or home equity lines of credit, and their interest rates. If you’re a homeowner investigating how to get equity out of your home, you’re in luck. We’ll explain in plain language how HELOC rates are set, the HELOC application process, and effective strategies for securing competitive rates in South Dakota. Armed with this information, you can make well-informed decisions that align with your budget and aspirations.
First step: Wrap your head around what is a home equity line of credit:
What Is a HELOC?
A HELOC is a revolving credit line based on your level of home equity. Equity is the difference between a home’s value and the mortgage owed. Borrowers may qualify for up to 90% of the home’s value, minus the mortgage.
HELOCs are secured by your home, so they generally offer lower interest rates than unsecured personal loans. And because they have a variable interest rate, the entry level rate on a HELOC is usually lower than the fixed rate you would get on a home equity loan. From there, though, the rate can rise or fall according to market conditions.
A HELOC has two phases: draw and repayment.
The Draw Period
During the draw period, which typically lasts 10 years, borrowers can access funds up to their credit limit. While monthly interest-only payments are generally required, principal payments may be optional. If you do pay down the principal, you can borrow that money again. Don’t need your full credit line after all? Then you don’t have to use it. And you pay interest only on the amount that you are using.
A HELOC interest-only calculator can show you your minimum payment for the draw period based on your HELOC amount and interest rate.
The Repayment Period
During the repayment period (usually 10 to 20 years), borrowing ends and the principal is repaid with interest. The variable interest rate will fluctuate, making repayment somewhat unpredictable. But a HELOC repayment calculator can help you plan ahead for rate changes.
Where Do HELOC Interest Rates Come From?
We’ll keep this simple: South Dakota HELOC interest rates are tied to something called the prime rate, which is the benchmark interest rate that banks give customers with a stellar credit history. HELOC rates are also influenced by economic conditions, the Federal Reserve’s policy decisions, and the housing market in your part of the state.
Having a loose understanding of where interest rates come from can help borrowers anticipate rate fluctuations and make informed decisions about the best time for a HELOC.
How Interest Rates Impact HELOC Affordability
Why the laser focus on interest rates? Rates have a significant impact on the affordability of any home loan. A 1% difference in interest rate may seem small — and it’s true your monthly payment may not change much. But over a 10-year draw period and 20-year repayment period, that 1% adds up. The table below shows how different interest rates and repayment terms affect the total interest you’ll pay. That 1% difference can mean thousands of dollars in additional interest.
| HELOC Amount | Repayment 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
Given that HELOC rates are tied to the prime interest rate, getting a sense of the history of the average prime rate (shown in the chart and graphic below) can help you understand where today’s HELOC rates in South Dakota fall on the spectrum. Since 2018, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023.
Historical Prime Interest Rate
| 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
Historical U.S. Prime Rates
Factors Influencing HELOC Rates
Now that you’re well-versed in the economic factors that influence HELOC interest rates, get ready for a curveball. HELOC rates in South Dakota are also influenced by the borrower’s financial profile. That means you. Many of your past financial decisions are reflected in your credit score. Let’s take a look at what else lenders are interested in:
Home Equity
Substantial home equity makes borrowers appear less risky to lenders, often leading to more favorable interest rates. Typically, homeowners need to have at least 15% equity to qualify for a HELOC.
Credit Score
You need to maintain a credit score of 680 or higher to qualify for a HELOC, but a score of 700+ will get you better rates. A higher credit score indicates lower risk for the lender.
Stable Income
Lenders assess your overall income to determine your ability to repay the HELOC. A stable income indicates a lower risk of default. This is why documenting your income, via pay stubs and W-2s, is an important part of the application process.
Loan-to-Value Ratio
Lenders often require a combined loan-to-value (LTV) ratio of 90% or less, though some will allow you to borrow 100% of your home’s value. Your LTV ratio is a key factor in determining your credit limit. If your home value is $400,000, your mortgage balance is $225,000, and your HELOC balance is $100,000, then your combined LTV ratio is 81%. The formula is simple: mortgage balance + desired HELOC / home value.
Variable vs Fixed Interest Rates
HELOCs feature variable interest rates, which will fluctuate throughout the loan term. Variable interest rates start out lower than typical fixed rates but will adjust up and down with market conditions. Understanding the difference can help you plan your financial strategy.
Tools & Calculators
SoFi provides numerous online tools to assist you in estimating your payments and gaining insight into the financial implications of a HELOC. Below you’ll find a home equity loan calculator as well as two HELOC calculators mentioned above.
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 obtain the most favorable HELOC rates in South Dakota, homeowners are advised to build their credit score and compare offers from multiple lenders. The goal is to get the lowest rate possible with your financial profile.
Care for Your Credit Score
Making timely payments and reducing credit card balances can significantly boost your credit score. The higher your score, the better the interest rates you’ll be offered. Regularly checking your credit report and addressing any issues can also help.
Assess Your Home Equity
The first step when you’re considering different types of home equity loans and lines of credit is to assess your equity stake. Just subtract your mortgage balance from your home’s value, then divide the result by the home value to get a percentage. For this purpose, you can use an online estimate of your home’s value, such as what you see on real estate sites.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is how much you owe in monthly debt payments divided by your gross monthly income. Home equity lenders generally look for a DTI that’s below 36%, but the lower your DTI, the better.
Application Process for a HELOC in South Dakota
The application process for a HELOC in South Dakota involves several steps, including reviewing your financial health, comparing rates, preparing documentation, submitting an application, and undergoing a home appraisal. Understanding each step can help you navigate the process smoothly, and maybe even save you some needless worry.
Step 1. Run the Numbers
Check your credit score, calculate your DTI, and get a good estimate of your home equity before you apply for a HELOC. If you’ve been following our advice so far, you already have your numbers. Ideally, they’re over 680, under 36%, and over 15%.
Step 2. Compare Lenders
Prequalifying with multiple lenders can give you a good idea of what interest rates you qualify for. But also compare qualification requirements, credit line minimums and maximums, fees and penalties, and the length of the draw and repayment periods.
Step 3: Gather Your Documents
When applying for a HELOC, it helps to gather all the necessary documents beforehand. This typically includes proof of income, employment history, and identification.
Step 4: Submit Your Application
Submitting your HELOC application can take place online, by phone, or in person. Remember, submitting an accurate and complete HELOC application will save time and hassle.
Step 5: Get an Appraisal
A home appraisal is an important step in determining the value of your property. If an in-person visit is required, scheduling it quickly will help move along the application process.
Step 6: Prepare for Closing
Before accessing your HELOC funds, you must sign loan documents and pay necessary fees. Some lenders make funds available within three days following this closing process.
Tax Benefits and Considerations
Homeowners can deduct HELOC interest on the federal tax return if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor might be a good idea the first year of your HELOC.
Closing Costs and Fees
HELOC closing costs are usually lower than home-buying or cash-out refinance costs. The appraisal fee, typically the highest expense, ranges from $150 to $500. Other costs may include application, origination, and administrative fees. Some lenders charge annual maintenance fees and transaction fees. Inactivity and early termination fees may also apply.
Alternatives to HELOCs
In addition to HELOCs, other financing options that may be available to homeowners include home equity loans, cash-out refinancing, and personal loans. Carefully consider the terms and conditions of each option, and choose the one that best aligns with your financial goals and circumstances.
Home Equity Loan
Home equity loans offer a lump sum at a fixed interest rate. Borrowers can typically access up to 85% of their home’s accumulated equity through a home equity loan. Comparing a HELOC vs home equity loan can help you grasp their distinct features and advantages.
| HELOC | Home Equity Loan | |
|---|---|---|
| Type | Revolving line of credit | Installment loan |
| Interest Rate | Usually variable-rate | Usually fixed-rate |
| Repayment | Repay only what you borrow; you may have the option to make interest-only payments during the draw period. | Starts immediately at a set monthly payment |
| Disbursement | Charge only the amount you need. | Lump sum |
Cash-Out Refinance
A type of mortgage refinance, a cash-out refi lets homeowners tap home equity by refinancing their existing mortgage for more than what they owed and taking the difference in cash. Some borrowers lean toward the cash-out refi option because they like rolling everything into one monthly payment — as opposed to the two payments you have with a mortgage and a HELOC or home equity loan.
When comparing a cash-out refinance vs. a home equity line of credit, one thing to keep in mind is that with a new mortgage, you’ll also have a new interest rate. If current rates are higher than your existing rate, you’ll want to carefully tally the costs to make sure refinancing makes sense.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular monthly payments that stay the same over a term of two to seven years. Personal loans are preferred by borrowers who don’t want to use their home as collateral. But because they are unsecured, they usually have higher interest rates than home loans.
Credit Cards
Credit cards typically come with higher interest rates than HELOCs, which can make them much more expensive if you carry a large balance from month to month. While credit cards offer flexibility for smaller purchases, home equity loans and HELOCs are often more suitable for larger expenses such as home renovations or debt consolidation.
The Takeaway
When considering a home equity line of credit (HELOC) in South Dakota, it’s smart to do your research and compare multiple HELOC offers. By taking proactive steps such as building your credit score and paying down debt, you can significantly enhance your chances of securing highly competitive rates and favorable terms for your HELOC.
SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.
FAQ
What is the monthly payment on a $50,000 HELOC?
Let’s assume you draw the full amount and make interest-only payments during the draw period. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. An 8.00% interest rate over a 20-year term would cost $418 per month, but you’ll pay more interest in the long run. A HELOC calculator can show you how much you’d pay with different interest rates and repayment terms.
Is a HELOC a good idea right now?
A home equity line of credit, or HELOC, can be a practical solution when seeking funds for large renovation projects or debt consolidation. However, obtaining the lowest available HELOC interest rate makes a big difference in the overall affordability.
What is the monthly payment on a $100,000 HELOC?
The monthly payment on a $100,000 home equity line of credit is determined by the interest rate and repayment term. If you draw the full amount, have an 8.50% interest rate, and repay what you borrowed (plus interest) over a 20-year term, your monthly payment should be about $868.
What are the benefits of a HELOC?
HELOCs provide flexible access to funds, competitive interest rates, and the potential for tax benefits. These credit lines are ideally suited for homeowners seeking to finance substantial expenses ($25,000+), enabling them to tap into the home equity accumulated in their properties.
Do you need an appraisal for a HELOC?
Indeed, it is standard practice for a home equity line of credit (HELOC) to necessitate an appraisal, the purpose of which is to ascertain the current market value of your property. Some lenders may offer options that do not require an in-person appraisal, but they’ll need to determine your home value and equity position one way or another.
What disqualifies you from getting a home equity loan?
Factors that could potentially disqualify you from securing a home equity loan include a history of poor credit, insufficient home equity, and a high debt-to-income ratio.
How difficult is it to get a HELOC?
The level of difficulty in obtaining a home equity line of credit hinges upon your financial circumstances. Key factors that lenders consider include a history of good credit, sufficient home equity, and a consistent source of income. If you have your ducks in a row and don’t mind the somewhat lengthy application process, you won’t find it difficult to get a HELOC.
Does HELOC affect credit score?
A HELOC may impact your credit score either positively or negatively. Applying for one can cause a temporary dip due to a hard inquiry. High credit utilization from using a large portion of your available credit line can also ding your score. On the other hand, making timely payments can build a positive credit history.
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More HELOC resources.
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What is a Home Equity Line of Credit
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Different Types of Home Equity Loans
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HELOC vs Home Equity Loan: How They Compare