Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Raleigh’s home equity loan rates are influenced by many factors, including the borrower’s credit score and debt-to-income (DTI) ratio, as well as the prime rate.
• If your credit score is 700 or more, you may be in a good position to get favorable rates.
• Even a small decrease in interest rates can mean big savings in the long run.
• Home equity loans usually come with fixed interest rates, which mean that the monthly payments never change.
• Online calculators can help you figure out what payments and total interest payments would look like on different loan options.
In Raleigh, home equity loan interest rates are a key factor for homeowners considering one of these loans. This article will help you understand the home equity loan rates you’re likely to be offered and how they’re determined. We’ll also cover the benefits and risks of home equity loans and explore different types of home equity loans, such as home equity lines of credit (HELOCs) and cash-out refinances. And of course, we’ll give you tips on getting the best available rates.
Whether you’re planning a big home project, paying for a college education. or trying to consolidate high-interest debt with a lump sum, understanding home equity loan rates can help you make smart financial choices.
If you’ve been a homeowner for a while and are wondering how to get equity out of your home, a home equity loan might be a good option. What is a home equity loan? Basically, it’s a loan that uses your home as collateral.
Typically, you receive a home equity loan in a lump sum, which you repay in monthly installments over a period of five to 30 years. Since the loan is secured by your property, it often has a lower interest rate than you’d get on an unsecured personal loan. The interest rate is usually fixed, meaning that budgeting for the monthly payments should be simpler.
To qualify for a home equity loan, you generally need to have at least 20% equity in your home. Equity is calculated by subtracting your mortgage balance from your home’s market value.
Raleigh’s home equity loan interest rates are influenced by a variety of factors, including trends in the economy and the details of the borrower’s financial profile. For instance, the Federal Reserve’s policies affect the prime rate, which many lenders use as the basis for home equity rates. When the prime rate drops, home equity loan rates will probably follow.
The credit score and debt-to-income (DTI) ratio of the borrower also play into determining the interest rates lenders will offer. In addition, the amount and repayment term of the loan can have an impact on the interest rate, with larger loans and longer terms resulting in higher rates because the risk is greater.
The interest rate has a major impact on the affordability of your home equity loan. Even a small change in the rate can lead to big differences in the total interest you’ll pay. For instance, say you’re contemplating a $100,000 home equity loan with a 15-year repayment term. With an interest rate of 8.50%, your monthly payment would be around $986, with total interest over the loan’s life adding up to $77,253.
But if that rate were 9.50%, your monthly payment would be about $1,044 and the total interest you’d pay would increase to approximately $87,960 — a $10,700 increase. That’s why it’s well worth it to secure the best rate possible.
This chart shares more about how changes in your loan amount, interest rate, and term can affect your monthly payments.
| 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 |
If you get a fixed rate on your loan, it means that your interest rate won’t change and the monthly payments you make will all be for the same amount throughout the duration of the loan. That stability can be very helpful as you budget and plan during the years you’re paying the loan off.
Adjustable rates, on the other hand, can be lower than fixed rates at first, but after the initial period, they can go up or down with the market. That potential volatility means that financial planning may be more difficult and the uncertainty may make borrowers uncomfortable, especially those on strict budgets.
Home equity loans most often come with fixed rates. However, some lenders do offer adjustable rates, and home equity lines of credit (HELOCs) and cash-out refinances can also have them. That’s why it’s a good idea to take a moment to consider what kind of rates might work well for you.
Predicting interest rate movements is no simple task, but recent history can be a guide. The prime rate, which is a reference point for many other interest rates, has seen significant ups and downs in recent years. It was at a low of 3.25% in 2020 and peaked at 8.50% in 2023. These changes have a direct impact on home equity loan rates.
| 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% |
If you’re a homeowner in Raleigh, it’s wise to keep an eye on the economic climate, with all its fluctuations, so you can be ready to time your application strategically to get the best deal on your home equity loan.
To be offered the most attractive home equity loan rates, you’ll want to impress lenders with your solid financial profile. There is a standard set of factors that lenders look at, including your credit score, your debt-to-income (DTI) ratio, and the amount of equity you have in your property, among others.
Even if you haven’t decided yet on a HELOC vs. a home equity loan or even a cash-out refinance, you can follow the same strategies to secure the most favorable interest rates and loan terms.
You’ll need to keep at least 20% equity in your home to be eligible for a home equity loan. To figure out your home equity, simply subtract your mortgage balance from your current home value. For example, if your mortgage balance is $300,000 and your home is valued at $450,000, your home equity is $150,000, which at 33% is more than enough to keep your lender happy.
If you’re interested in bolstering your equity, it’s a good idea to keep an eye on your home’s value to see if it’s appreciating, consider value-adding home improvements, and see if you can make extra payments on your mortgage.
When it comes to home equity loans, lenders generally look for a credit score of 680 or higher, with many favoring 700 or more. A good credit score can suggest a history of responsible financial behavior, such as making payments on time, which can make lenders feel you’re a good candidate for a loan.
To keep your credit score healthy, stay on top of bill payments, maintain low credit card balances, and don’t open multiple new credit accounts at once. Regularly reviewing your credit report for inaccuracies and disputing them, if necessary, can potentially also give your score a lift.
Your debt-to-income (DTI) ratio, which compares your monthly income to your monthly debt obligations, is a key factor in determining your loan eligibility and rates. The DTI requirement for a home equity loan is typically less than 50%, and ideally less than 36%. A lower DTI ratio shows lenders that you have a manageable debt load relative to your income.
Lenders will review your DTI along with other financial metrics to ensure you can handle the additional monthly payments without financial strain. To improve your DTI, consider paying down your existing debts, increasing your income, or working on both.
Property insurance is a must for home equity loans, particularly in areas prone to hurricanes and floods. In Raleigh, with its unpredictable weather, comprehensive property insurance is a smart move. Lenders may have specific coverage requirements, so it’s wise to review these carefully.
Financial tools and calculators that you can find online will help you estimate your borrowing power and options. For example, a home equity loan calculator will take into account your home’s value and mortgage balance to give you your equity breakdown.
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.
For home equity loans, the price of closing costs typically ranges from 2% to 5% of the loan amount. The fees you’re responsible for and what they’ll cost you can vary, but here’s the rundown on some of the most common.
| Service | Typical Fees |
|---|---|
| Appraisal | $300-$500 |
| Credit report | $30-$50 or more |
| Document prep | $100-$500 |
| Loan origination | 0.5%-1.0% of the loan amount |
| Notary | $20-$100 |
| Title insurance | 0.5%-1.0% of the loan amount |
| Title search | $75-$250 or more |
While no-closing-cost options are out there, they often come with higher interest rates. Be sure to compare lenders, as fees and terms can vary.
Here’s a tip that may save you some money: The interest on your home equity loan might just be tax deductible if you used the loan to improve your home. For single filers, interest is deductible on the first $375,000 of loan debt. Spouses filing together can deduct the interest on up to $750,000 of debt. Just remember, you’ll need to itemize to claim this deduction. Consult your tax advisor to get the most up-to-date advice.
If a home equity loan doesn’t seem like exactly what you need, there are a few other ways to tap your home equity, including a home equity line of credit (HELOCs) and a cash-out refinance, which is a type of mortgage refinance.
What is a home equity line of crdit? It’s like a lower-interest credit card that can give you access to cash up to a certain limit. In the initial “draw” period, you may only need to pay interest on what you withdraw; during the repayment period, you’ll pay back the principal and any additional interest. The interest rates are usually variable, which means your payments could increase over time.
For a HELOC, you’ll need a credit score of at least 680 to qualify, but a 700+ credit score is preferred. Your debt-to-income (DTI) should be less than 50%, but the lower the better, ideally under 36%.
HELOCs can be a good match for homeowners who are unsure of their exact borrowing needs or need to borrow over an extended period. To learn what your monthly payments for a HELOC would be, consider using a HELOC monthly payment calculator. And to find out how much interest you pay during the “draw” period of a HELOC, try a HELOC interest-only calculator.
This kind of refinance is a way to replace your existing mortgage with a new home loan and get a lump sum of cash by tapping into your home’s equity. Most lenders will let you borrow up to 80% of your home’s equity.
If you’re comparing the advantages of a cash-out refinance vs. a home equity line of credit, note that requirements for borrowing tend to be different. It’s generally easier to qualify for a cash-out refi: You’ll typically need a credit score of 620 or higher and a debt-to-income ratio of 43% or less. You can choose between a fixed or variable interest rate, with variable rates potentially allowing access to more equity.
When considering a home equity loan, it’s important to weigh the benefits and risks – and to prepare your credentials. A strong credit score, a well-managed debt-to-income ratio, and adequate home equity are key factors in securing a home equity loan with competitive rates. Alternatives like HELOCs and cash-out refinances offer different features and requirements, so it’s useful to compare all the options to find the best fit for your needs.
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 great way to pay for major purchases, fund home renovations, or consolidate high-interest debt. These loans are a popular choice for homeowners looking to access a lump sum of money without selling their property. Whether you need funds for a kitchen remodel, paying off credit card balances, or financing a college education, a home equity loan might be a good way to get the financial support you need.
To calculate the monthly payment on a $50,000 home equity loan, you’ll need to consider the loan’s terms and interest rate. For instance, with a 15-year fixed-rate loan at a 7.00% rate, your monthly payment would be about $449, which covers both principal and interest. To see what your payment might be at a different interest rate or over a different loan term, use a mortgage payment calculator.
Several things can prevent you from getting a home equity loan. One is not having enough equity in your home, which usually means less than 20%. Another is your credit score. You’ll typically need a credit score of at least 680 to get a loan. A high debt-to-income (DTI) ratio can also keep you from getting a home equity loan. Many lenders won’t offer a loan if your DTI ratio is above 43%.
Home equity loans offer multiple benefits, including the ability to borrow a large sum secured by your home equity and interest rates that are usually fixed. The fixed rate allows you to plan your monthly payments with confidence. Moreover, since the loan is secured, you may get a better interest rate on it than you would for an unsecured personal loan. And the interest on home equity loans may be tax-deductible if the loan is used for home improvements. Check with your tax advisor for the most up-to-date advice.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
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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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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