Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners to borrow against the equity they have built up in their homes, using their homes as collateral for the loan.
• Home equity loan interest rates are influenced by the prime rate, economic conditions, and the borrower’s credit history.
• Home equity loans are typically characterized by fixed interest rates, ensuring a consistent and predictable pattern of monthly payments throughout the loan’s duration.
• Closing costs and fees associated with home equity loans can vary, but typically range between 2% and 5% of the loan amount.
• Alternatives to home equity loans include HELOCs, HECMs, and cash-out refinances, each with its own unique characteristics and eligibility criteria.
If you’re a homeowner in South Carolina, this guide is your ticket to understanding home equity loans and the interest rates you can expect. We’ll walk you through the current rates and the factors that will influence your loan’s affordability. With this information, you’ll be well-equipped to decide if a home equity loan is the right financial move for you.
First of all, what is a home equity loan anyway?
A home equity loan is a smart way to leverage your home’s value at a lower interest rate than most personal loans. If you are still paying off your home loan, the home equity loan is a second mortgage. You get a lump sum of cash upfront, with repayment over a term that can stretch from five to 30 years. The interest rate is typically fixed, so you’ll know what to budget for each month.
To be eligible, homeowners should have at least 20% equity in their primary residence. The funds from a home equity loan can be used for a variety of expenses like home improvements, education, medical bills, or debt consolidation.
If you’re wondering what is a home equity line of credit, we’ll get to that below.
Home equity loan interest rates are no mystery. They’re influenced by a variety of economic factors, including the prime rate. The prime rate is what banks charge their most creditworthy customers. Federal Reserve policy decisions regarding interest rates can also influence home equity loan rates.
Understanding the factors that influence home equity loan rates can enable borrowers to anticipate rate fluctuations and make informed decisions about how to get equity out of your home. That said, a loose understanding of where rates come from is all you need.
Your interest rate is a key player in the affordability of your loan. Over the course of a standard 20-year term, even a 1% change in interest means a higher monthly payment. It also means you could end up paying an extra chunk of interest — to the tune of $14,000+ — over the life of the loan.
Let’s take a look at what happens if you borrow $100,000 with a 20-year term at three different interest rates:
• 8.00%: the monthly payment would be $836; the total interest paid would be $100,746.
• 7.00%: the monthly payment would be $775; the total interest paid would be $86,072.
• 6.00%: the monthly payment would be $716; the total interest paid would be $71,943.
The prime interest rate is a good indicator of the direction of home equity loan rates. By keeping an eye on the prime rate, you can get a sense of what lenders are doing and how you might want to time your application for a home equity loan in South Carolina. If you see that the prime rate is about to go up, you might want to lock in your rate before it does. If it’s going down, you might want to wait a little longer to see if you can get an even better deal.
Since 2018, the prime rate has fluctuated significantly, from a low of 3.25% in 2020 to a high of 8.50% in 2023.
| 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% |
In South Carolina, your home equity loan rates are also influenced by you, the borrower, and your financial metrics. That includes your credit score, loan-to-value ratio, home value, home value stability, property location, and lender policies. Lenders carefully consider all these factors to determine the level of risk they take on with each loan, which in turn affects the interest rates they offer to borrowers.
Homeowners who have a history of managing their finances responsibly and making timely payments are often rewarded with more attractive interest rates. For home equity loans, lenders generally prefer a credit score of 680 or higher, with many leaning toward scores of 700 and above. The rationale is simple: A higher credit score is often associated with a lower risk of default.
Lenders often use independent appraisals to determine the market value of a home. This helps them set appropriate loan limits. Appraisals also help lenders understand a homeowner’s equity position, which can affect how much a lender is willing to loan.
The loan-to-value (LTV) ratio is a number lenders use to determine how much risk they’re taking on when they lend you money. To calculate your LTV, divide the amount of your loan by the appraised value of your property. Most lenders will let you borrow up to 85% of your home’s value, but the amount you can borrow may be lower depending on your financial situation.
The steadiness of home values is a key player in the equity game. When the market is on the up and up, lenders are often more open to approving larger loans, as the property’s value is a solid safety net. But if the market takes a dip, lenders get more cautious, and that could mean stricter criteria and lower loan amounts.
Living in high-risk areas, such as those prone to extreme weather conditions or natural disasters like storms, flooding, and wildfires, can often result in higher interest rates. These areas are considered more susceptible to property damage and financial losses, leading lenders to charge higher interest rates to compensate for the increased risk of default. This is particularly relevant for those considering a South Carolina home equity loan, as the state is known for its varied weather.
Lender policies can also impact the interest rate you’re offered. To make sure you’re getting the best deal, shop around and compare interest rates, fees, and closing costs from several lenders. By doing your homework and comparing your options, you can potentially save money and get more favorable loan terms.
To get the best home equity loan rates, you need to have a good credit score, a low debt-to-income ratio, and enough equity in your home. You can also get a better rate if you have a good amount of property insurance. Let’s look at the details so you’re prepared:
You probably know that having a higher credit score can help you get the best interest rate on a home equity loan. By building and maintaining a strong credit history — which includes paying your bills on time and not taking on more debt than you can handle — you can improve your chances of getting the most favorable terms and conditions on a home equity loan. And the better the terms, the more you could save over the life of the loan.
When you’re ready to apply for a home equity loan, keep your debt-to-income (DTI) ratio in mind. This is the number that compares your monthly income to your monthly debt obligations. Lenders in South Carolina usually look for a DTI ratio below 36% for home equity loans. This ratio gives them a sense of your ability to handle your current debt and still manage the added monthly payments of a home equity loan.
In the world of home equity loans, having enough property insurance is a big deal. This is especially true in areas like South Carolina that are at a higher risk for flooding. These insurance policies protect you and your lender by providing a way to pay for any damage or loss to your property. This is important to your lender because if something happens to your home, they want to make sure they can still sell it and get their money back.
In South Carolina, homeowners looking to apply for a home equity loan should have at least 20% equity in their home. You can use a home equity loan calculator to see if you have enough equity to qualify for a loan.
A home equity loan typically comes with a fixed interest rate, which means you’ll make the same monthly payment over the life of the loan. A fixed rate can be a good thing, because it gives you predictable payments. But fixed rates can sometimes start out higher than variable rates. Variable rates can start out lower, but they can also go up (or down) over time.
Make the most of our suite of tools and calculators to get a solid grasp on what your payments might look like with different home equity loan rates. It’s about more than just the numbers on the page — it’s about finding the right fit for you, both now and down the road. Below you’ll also find a HELOC monthly payment calculator as well as a HELOC interest only calculator.
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 range from 2% to 5% of the loan amount. These costs can include a variety of fees, such as those for appraisals, credit reports, document preparation, origination, notary, title searches, and title insurance. Origination fees for home equity loans can range from 0.5% to 1% of the loan amount, while title insurance can cost between 0.5% and 1% of the loan balance.
Here’s some good news: The interest you pay on a home equity loan can be a tax write-off if it’s used for home improvements. You can deduct the interest on up to $750,000 in loans for joint filers, and $375,000 for single filers. You’ll need to itemize your deductions to claim the benefit. For the nitty-gritty on how to maximize this perk, a sit-down with a tax advisor is a smart move.
When it comes to different types of home equity loans and lines of credit, the possibilities are quite diverse. You’ve got HELOCs, home equity conversion mortgages (HECMs), and cash-out refinances to consider. Each of these options comes with its own set of features and eligibility requirements that you’ll need to weigh up.
A home equity line of credit (HELOC) is like a credit card. You can borrow up to a certain amount and you only have to pay interest on the amount you use. HELOCs have variable interest rates, which means that your costs could go up if the rate rises. Our HELOC vs home equity loan chart below spells out the differences at a glance.
| 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. |
If you’re 62 or older — and want money to pay off your mortgage, supplement your income, or pay for health care expenses — you may consider an HECM. It allows you to convert a portion of your home equity into cash. Unlike a traditional home equity loan, no repayment is required until the borrower(s) no longer use the home as their principal residence. (While SoFi does not offer HECMs at this time, we do offer home equity loans and HELOCs.)
This type of mortgage refinance pays off your old mortgage and lets you borrow extra cash. Lenders usually cap cash-out refinances at 85% of your home’s equity. Our guide to Cash-Out Refinances vs Home Equity Lines of Credit can give you the details.
Understanding South Carolina home equity loan rates and the factors that influence them can help you make smarter financial decisions. By carefully comparing lenders, using online tools and calculators, and exploring other ways to borrow against your equity, you can find the best financing for your immediate needs and future goals.
Unlock your home’s value with a home equity loan from SoFi.
When you’re considering a big $50,000 home equity loan, it’s important to carefully consider how the interest rate and loan term will affect your monthly payments. An 8.00% interest rate and a 10-year term would mean a monthly payment of $607. Score a 6.00% rate and choose a 20-year term and you’d pay $358 per month. To get an estimate of what your monthly payments might be, it’s a good idea to use a loan calculator.
If you’re contemplating a $100,000 HELOC, it’s crucial to consider both the interest rate and the amount drawn, as these will determine your monthly payment. If you used the entire $100,000 and repaid it over 20 years at 7.00% interest, you would need to come up with $775 per month. To get a better handle on your potential payments and make smarter financial choices, a HELOC calculator is a fantastic resource.
When you’re pondering a $25,000 home equity loan, consider how the interest rate and loan term will shape your monthly payments. To give you an idea, an 8.50% interest rate repaid over 10 years would give you a $310 monthly payment. For a precise picture of what to expect, turn to a dependable loan calculator.
When you’re looking at a $30,000 loan, it’s important to understand how the interest rate and loan term will affect your payment. But if you had a 7.00% interest rate and repaid the loan over 10 years, you’d pay about $348 per month.
There are a few factors that could prevent you from being approved for a home equity loan. These include a less-than-stellar credit history, not enough equity in your home, a high debt-to-income ratio, and inadequate property insurance. Recent bankruptcies or foreclosures, delinquency on child support or alimony payments, or a home in disrepair could also be red flags for lenders.
A home equity line of credit (HELOC) offers homeowners a number of significant advantages, including flexible borrowing options, lower interest rates compared to most credit cards, the ability to pay interest only on the amount borrowed, and the potential for tax deductions on the interest paid. These benefits make HELOCs an attractive financial tool for homeowners looking to access additional funds for various purposes.
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*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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
