Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Your credit score and debt-to-income ratio play a part in determining the rates you’ll be offered in Charlotte.
• Fixed rates offer the peace of mind that comes with a predictable monthly payment.
• To obtain the lowest rates, a credit score of 680 or above and a debt-to-income ratio under 36% are typically needed.
• One key to securing a home equity loan is to have at least 20% equity in your home.
• The interest on home equity loans may be tax-deductible if funds are used for significant home improvements.
A home equity loan is a popular way for homeowners to access cash using their home’s equity as collateral. This article will dive into the current home equity loan rates in Charlotte, NC, and explain how these rates are determined. We’ll cover the application process, how to best prepare for it, and the potential risks and benefits of taking out a home equity loan, which is technically a second mortgage. Whether you’re planning a home renovation or consolidating debt, this guide will help you understand how to secure the best rate and terms for your financial needs.
A home equity loan is a lump-sum loan that’s based on the amount of equity you have in your home — the difference between your home’s value and your home loan balance. Many lenders will let you borrow up to 85% of your equity. (To understand what a home equity loan is and how much you might be able to borrow, use a home equity loan calculator.) You begin paying the loan back, with interest, right after you receive it. Home equity loans typically come with fixed interest rates, which can provide peace of mind because the monthly payments are predictable. The rates are generally lower than what you’d get with a personal loan, but keep in mind that your home is the collateral.
The interest rates for home equity loans are influenced by both national and personal factors. The Federal Reserve’s policies play a significant role in how lending rates are determined, as lenders typically base their rates on the prime rate, which is influenced by the Fed. Your credit score and debt-to-income (DTI) ratio are also key factors in determining the interest rate you, personally, will be offered. In general, the better your credit score and the lower your DTI ratio, the lower your interest rate will be.
Now, let’s talk about interest rates and how they can impact the costs of your home equity loan. Even a small change in rates can make a big difference in the long run. The chart below will give you a sense of how the amount you borrow, the term over which you repay the loan, and your interest rate all factor into your monthly payments. Generally speaking, the longer the term, the lower the monthly cost — but the more interest you will pay over the life of the loan.
| Loan Amount | Loan Term | Interest Rate | Monthly Payment |
|---|---|---|---|
| $100,000 | 20 years | 8.00% | $836 |
| 7.00% | $775 | ||
| 10 years | 8.00% | $1,213 | |
| 7.00% | $1,161 | ||
| $50,000 | 20 years | 8.00% | $418 |
| 7.00% | $388 | ||
| 10 years | 8.00% | $607 | |
| 7.00% | $581 | ||
| $25,000 | 20 years | 8.00% | $209 |
| 7.00% | $194 | ||
| 10 years | 8.00% | $303 | |
| 7.00% | $290 |
The prime interest rate serves as a barometer for different types of home equity loans in North Carolina. As you can see from the graphic, that rate has seen quite a bit of fluctuation in recent years. For instance, it was as low as 3.25% in 2020 and as high as 8.50% in 2023. These changes can have a direct impact on the rates for home equity loans. While it’s impossible to predict the future with certainty, keeping an eye on the current trends can help you time your application (to the extent possible) to get the best rate possible.
| Date | Prime 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 | 5.50% |
| 9/27/2018 | 5.25% |
To secure the most competitive home equity loan rates, there are several things you can do before you ever file your first application. Consider this your to-do list:
To be eligible for a home equity loan, it’s essential to have at least 20% equity. Calculating your equity is simple: Find your home’s estimated value on a real estate site. Subtract from the estimated value the amount you still owe on your mortgage. Then divide the result by the estimated value to arrive at a percentage. If the number is greater than 20%, you’re good to go.
To land the most sought-after home equity loan rates, a solid credit score is your golden ticket. Lenders are often looking for a score of 680 or higher, but the real sweet spot is 700 or more. A higher score is like a financial high-five, showing you’re a responsible borrower. Want to take good care of your score? Make sure you’re paying your bills on time, keeping those credit card balances in check, and steering clear of new debt. It’s also a good idea to give your credit report a once-over for any errors and dispute them pronto.
Your debt-to-income (DTI) ratio is a key player when it comes to home equity loan eligibility. Lenders typically look for a DTI ratio under 50%, with an even better chance if you’re under 36%. To calculate this, they divide your total monthly debt payments by your gross monthly income. The lower this ratio, the better your chances of securing a loan with competitive rates. To improve your DTI, consider paying down existing debts, boosting your income, or both. A well-managed DTI can be the ticket to a home equity loan with favorable terms and lower interest rates.
Property insurance is a must-have for home equity loans, especially if you reside in areas prone to natural disasters. This insurance not only safeguards the lender’s investment but also your home. Be sure to have comprehensive coverage, including any additional protection mandated by your location. Don’t hesitate to touch base with a prospective lender to ensure your protection aligns with its needs.
Using calculators during your loan search process can help you determine your borrowing power and make decisions about which loan offer is right for you. Here are a few helpful tools:
Enter a few details about your home loan and we’ll provide you your maximum home equity loan amount.
Punch in your HELOC amount and we’ll estimate your monthly payment amount for your HELOC.
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.
Closing costs for home equity loans typically fall between 2% to 5% of the loan amount. You can expect line items to include the appraisal, credit report, document preparation, origination, notary, title search, and title insurance fees. Some lenders offer loans with no closing costs, but these tend to have higher costs elsewhere.
Good news: The interest on home equity loans can be tax-deductible if the funds are used to buy, build, or significantly improve your home. Thanks to current tax laws, which are in effect through 2025, couples filing jointly can deduct interest on home equity loans up to $750,000, while single filers can claim deductions on loans up to $375,000. To snag this deduction, you’ll need to itemize your deductions on your tax return, so talk with a tax advisor. This perk could make a home equity loan more appealing, helping to balance out costs.
Homeowners have a few different options when it comes to how to get equity out of your home. Each of these choices has its own set of pros and cons:
A home equity loan and a HELOC are often confused, so let’s focus on what is a home equity line of credit, and how it’s different from a home equity loan. A HELOC is like having a credit card that’s secured by your home’s equity. You can borrow up to a certain limit, as you need it, and you’ll only pay interest on the amount of credit that you actually use. During an initial “draw” period of as long as 10 years, you only pay interest. A HELOC interest-only calculator comes in handy at this time. After that, the repayment period begins and your payments increase. The interest rate on a HELOC is usually variable, which means it can change based on the market. A HELOC repayment calculator can help you see what payments might be at this time, based on various interest rates.
To get a HELOC, you’re typically looking at a minimum credit score of 680, but many lenders prefer to see 700. Your debt-to-income ratio should be below 50%, and ideally, below 36%. HELOCs are great for ongoing expenses and can give you access to up to 90% of your home’s equity. Here’s a quick look at a HELOC vs. a home equity loan.
| 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 plus interest; 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 |
A cash-out refinance is a special kind of mortgage refinance that can simplify your finances by consolidating debt into one payment. It also might give you a lower interest rate than a home equity loan or HELOC. To qualify for a cash-out refinance, you typically need to have a credit score of 620 or higher and a DTI ratio of 43% or lower. Most lenders will let you borrow up to 80% of your home’s value, although some may go higher. Variable rates may allow you to access more equity. As you think about a cash-out refinance vs. a home equity line of credit, one important difference is that the refinance leaves you with an entirely new home loan, and one payment instead of two.
If you’re considering a home equity loan in Charlotte, it’s crucial to keep your credit score robust, your DTI ratio in check, and your property insurance up to par. These elements will play a significant role in the rates you’re offered. Online calculators can be your best friend, helping you gauge your borrowing potential and make well-informed choices. And don’t forget to look into the tax benefits of home equity loan interest, and explore alternatives like a HELOC and cash-out refinance that might better suit your needs. Always remember to shop around and compare offers from multiple lenders to secure the best rates and terms for your unique financial situation.
SoFi now offers home equity loans. Access up to 85%, or $350,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.
Unlock your home’s value with a home equity loan from SoFi.
A home equity loan can be a smart way to finance a large purchase, fund a home improvement project, or cover a debt consolidation. The flexibility of these loans makes them a popular choice for homeowners. However, it’s important to use the funds responsibly and ensure the loan aligns with your long-term financial goals. Before applying, consider how the loan will impact your monthly budget and overall financial health.
The beauty of a home equity line of credit (HELOC) is its flexibility. During the draw period, which can last 5, 10, or even 20 years, you may only need to pay interest on the amount you’ve borrowed, which isn’t necessarily going to be the full $100,000. If you did use the entire credit line of $100,000, your interest rate for repayment would likely be a variable one. But at an average of 8.00% and a repayment term of 20 years, you would pay $836 per month.
The payment on a $30,000 home equity loan is determined by the interest rate and loan term. For a 20-year fixed-rate loan at 8.00%, for example, the monthly payment would be approximately $251.
There are a few things that might prevent you from getting a home equity loan, such as not having enough equity in your home, having a low credit score, or having a high debt-to-income (DTI) ratio. Lenders usually require at least 20% equity in your home and a credit score of 680 or greater. A DTI ratio of 50% — and ideally as low as 36% — is generally preferred. Failing to provide adequate property insurance or a history of missed payments can also impact your eligibility.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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