Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loan rates in Winston-Salem, North Carolina, are influenced by a variety of factors, including broad economic trends and the individual borrower’s financial standing,
• A fixed interest rate gives you the stability of predictable monthly payments.
• Home equity loans do carry risks, such as the possibility of foreclosure if you can’t make your payments.
• To get a good home equity loan rate, it helps to have a strong credit score and a low debt-to-income ratio.
• Comparing offers from several lenders will help you find the best terms available to you.
Our guide to Winston-Salem home equity loan rates offers a thorough look at what you can expect when you’re looking for your best options for a home equity loan.
We’ll delve into the factors that play a role in determining these rates, from Federal Reserve policy to your credit score and the amount you want to borrow. You’ll also learn how to effectively compare offers from different lenders and what steps you can take to secure the most favorable rates. And you’ll find out about different types of home equity loans, like HELOCs and cash-out refis, so you can decide which one best fits your needs.
Whether you’re dreaming of home improvements, planning for your child’s education, or considering debt consolidation, being well-informed about your financial options and how to make the most of them is key to taking control of your future.
What is a home equity loan? Simply put, it’s a way you can borrow money and secure your loan with the equity you’ve built up in your home. The amount of equity you have is the market value of your home minus the balance of your existing mortgage.
For instance, if your home is valued at $500,000 and you owe $350,000 on your mortgage, you have $150,000 in equity.
Lenders generally let you borrow up to 85%, or sometimes 90%, of your home equity. In this example, you might be able to borrow as much as $135,000.
A home equity loan calculator can help you determine your home equity and maximum loan amount in other scenarios.
Home equity loan rates are usually fixed and the loan term can be anywhere from five to 30 years. Because the loan is secured by your home, home equity loan rates are usually lower than rates for unsecured personal loans. If you’ve been wondering how to get equity out of your home, a home equity loan could be a good answer.
Interest rates for home equity loans are influenced by a variety of factors, including larger economic trends and the details of your own personal financial situation.
One of the most important factors is the Federal Reserve’s monetary policy, which includes changes to the federal funds rate. Lenders typically base their home equity loan rates on the prime rate, which is influenced by the federal funds rate, so if the funds rate and prime rate rise, typically you can expect to see home equity loan rates in Winston-Salem rise, too.
In terms of your personal finances, other factors that can impact your home equity loan rate include your credit score and your debt-to-income ratio (how much monthly debt you have compared to your monthly income). Additionally, the amount you borrow and the repayment term you choose can also affect your rate.
The rates you secure for your home equity loan play a pivotal role in how affordable the loan will be for you over the long term. Even a seemingly small difference in interest rates can lead to significant savings or added costs over the life of the loan.
For instance, consider a $100,000 home equity loan with a 15-year repayment term. With a 8.50% interest rate, you’re looking at a $986 monthly payment and a total interest cost of $77,253. But if your interest rate is just one percentage point higher, at 9.50%, your monthly payment jumps to $1,044, and the total interest paid rises to $87,960. That’s a difference of more than $10,700 in interest over the loan’s life, which underscores the importance of hunting down the best home equity loan rates.
The chart below illustrates further how changes in your loan amount, interest rate, and term interact to result in different 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 |
Home equity loans typically come with fixed interest rates, though they can occasionally have adjustable rates. Fixed interest rates offer a consistent monthly payment every time. That stability can help make budgeting a more straightforward task.
Other kinds of loans, including HELOCs, more typically have adjustable rates, which start out with a fixed rate for a defined period, and then adjust in accordance with the market. Once they start adjusting, the rates and payments can feel unpredictable.
If you’re deciding what kind of rate is right for you, think about how flexible your budget is likely to be in future years and also what your tolerance for risk and unpredictability is.
Predicting what interest rates may be coming down the road is tricky at best — an enormous number of factors come into play to determine the trends. Still, there are some indicators that can be helpful.
Let’s take a look at the prime rate, which, as we’ve discussed, is a major factor in home equity loan interest rates. Its recent history shows just how variable the prime rate is. As you can see from the chart below, it plummeted to 3.25% in 2020 and rose to 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% |
Fluctuations like these have an impact on Winston-Salem home equity loan rates, so it’s a good idea to stay on top of current market conditions. While nobody can predict the future with perfect accuracy, understanding past patterns as well as today’s trends may help you time your application to get a more favorable rate.
To be offered the most favorable home equity loan rates, you’ll need to meet your lender’s requirements, like an appropriate credit score and debt-to-income (DTI) ratio.
Here’s what lenders are generally looking for: a credit score of 700 or higher, a DTI ratio of no more than 50% (or better yet, 36% or less), and a combined loan-to-value ratio (what you’ll owe divided by the value of your home) that doesn’t top 80%.
Even if you haven’t decided yet on a HELOC vs. a home equity loan or maybe even a cash-out refinance, the strategies below can help you get your financial profile in shape to secure the most favorable interest rates and loan terms.
Generally, you need to have at least 20% equity in your home to qualify for a home equity loan. Don’t know how much equity you have? Calculating it is easy. Just subtract your mortgage balance from your current home value. For example, if your mortgage balance is $400,000 and your home is now worth $550,000, you’ve got $150,000 in equity.
The amount of equity you have helps determine the maximum loan amount you can get and the rates you can secure. Most lenders let you borrow as much as 85%, or sometimes 90%, of your available equity. In the example above, that translates to a loan of up to $135,000.
A home equity loan calculator can help you evaluate exactly how large a loan you may be able to access.
For the most favorable home equity loan rates, you’ll probably need a credit score of 680 or higher. Many lenders are looking for 700 or above. The higher your score is, the greater the level of financial responsibility it signals. You can bolster your credit record by consistently making timely payments, keeping credit card balances in check, and not taking on major new debts.
Your debt-to-income (DTI) ratio is a critical factor when it comes to securing a home equity loan. Lenders generally look for a DTI ratio that’s under 50%, but the sweet spot is often 36% or lower. You can estimate your DTI ratio with a simple calculation: your total monthly debt payments divided by your gross monthly income.
A lower DTI ratio shows a lender that you’re in a better position to handle your monthly payments, and that reassurance can potentially lead them to offer you more attractive loan rates. To improve your DTI, work on paying down some of your existing debts, finding ways to boost your income, or a combination of both. A well-managed DTI could be the key to unlocking a home equity loan with favorable terms and lower interest rates.
Property insurance is often a prerequisite for home equity loans, especially in areas susceptible to natural disasters. Sufficient insurance can save you from additional costs and complications if the unexpected occurs, of course. But it’s important for a home equity loan because lenders want to ensure that the property securing the loan is safeguarded against potential damage.
When you’re applying for a home equity loan, be ready to provide proof of insurance. This might include a policy covering the full value of your home and any additional coverage stipulated by the lender. Having the right insurance can also empower you to negotiate better rates and terms for your home equity loan.
When it comes to making decisions about home equity loans, online tools and calculators are your best friends. A home equity loan calculator can give you a sense of your monthly payments based on the loan amount, interest rate, and term.
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.
When it comes to making decisions about home equity loans, online tools and calculators are your best friends. A home equity loan calculator can give you a sense of your monthly payments based on the loan amount, interest rate, and term.
These costs can include a variety of different expenses, including home appraisals, credit reports, document preparation, loan origination fees, notary fees, and the costs associated with title searches and insurance. Here are some typical line items:
• Appraisal fee: $300-$500
• Credit report fee: $30-$50 or more
• Document preparation: $100-$500 (may also be billed on an hourly basis if an attorney is involved or be built into the loan origination fee)
• Loan origination fee: 0.5%-1.0% of the loan amount
• Notary fee: $20-$100
• Title insurance fee: 0.5%-1.0% of the loan amount
• Title search fee: $75-$250 or more
Some lenders may offer no-closing-cost home equity loans, but they often come with higher interest rates.
If you’re considering a home equity loan, there may be another factor to consider. If you’re taking out the loan in order to improve your home, the interest on your home equity loan may be tax deductible. 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. But remember that you can’t take the standard deduction if you want to claim this – you’ll need to itemize. Consult your tax advisor to get the most up-to-date information and advice.
Home equity loans are a popular choice among homeowners, but there are other options to consider if you’re in a position to draw on your home equity, and they’re worth considering to see if they’ll better meet your financial needs.
What is a home equity line of credit? A HELOC is somewhat like a credit card, but it’s backed by the equity you have in your home. It provides a flexible way to borrow funds up to a set limit, and interest payments are typically required only on the amount you withdraw. You generally start off with a “draw” period, during which you can borrow funds as needed. Following that is a period of years during which you pay back the principal you’ve borrowed plus interest. HELOCs usually come with variable interest rates, which can feel unpredictable, especially if you’re on a strict budget.
Lenders generally want to see a credit score of 680 or higher (700 is even better) and a debt-to-income ratio below 50% (though less than 36% is the sweet spot) when they’re evaluating a candidate for a HELOC . If you’re comfortable with the ebb and flow of variable rates, a HELOC could be a good choice, allowing you to borrow up to 90% of your home equity.
To figure out how much monthly payments for a HELOC would be, consider using a HELOC monthly payment calculator. And to calculate how much interest you pay during the “draw” period of a HELOC, try a HELOC interest-only calcuclator.
This is a kind of mortgage refinance that allows you to replace your existing mortgage with a new home loan that has a higher balance.
If you’re considering the benefits of a cash-out refinance vs. a home equity line of credit, take into account the fact that requirements for borrowing tend to be different. It’s usually easier to qualify for a cash-out refi than for a home equity loan or a HELOC. Cash-out refinances typically require a minimum credit score of 620 and a DTI ratio of 43% or less. They may have either fixed or variable interest rates. One more advantage: a cash-out refi results in a single monthly payment, which can make it easier to manage.
When you’re ready to pursue a home equity loan in Winston-Salem, remember to focus on preparing those key factors: your credit score, debt-to-income ratio, and property insurance. These will all play a part in influencing the rates you’re offered. Use the tools at your disposal to estimate payments and compare lenders. Understanding how the different types of home equity financing work and what affects their interest rates will help you find the best options and arrive at the right financial decision for you.
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Home equity loans are often used to pay for big-ticket items, to make home improvements, or to consolidate higher-interest debt. These loans provide a way to access a substantial lump sum and pay the funds back over time. If you’re considering a home equity loan, be sure to weigh the benefits against the potential risks, like the possibility of foreclosure if you can’t make your payments.
The monthly payment you’d see for a $30,000 home equity loan varies depending on your loan term and interest rate. A 7.00% interest rate over a 15-year term yields a payment of about $271 per month. If you get an 8.00% interest rate and a 20-year term, the monthly payment would be around $251. A home equity loan calculator can give you estimates customized to your situation.
The payment on a $25,000 home equity loan will vary, depending on the interest rate and the term of the loan. For example, at an 8.00% interest rate over a 15-year term, the monthly payment would be approximately $239. If the interest rate is 9.00%, the monthly payment increases to about $254.
There are a few potential roadblocks to securing a home equity loan. For starters, lenders generally look for a minimum credit score of 700 for the most competitive rates, so a low credit score can be a red flag for lenders. A high debt-to-income ratio, generally more than 50%, may also create a problem. And of course, you’ll need to have a healthy amount of home equity, usually at least 20%. If you can, it’s a good idea to take some time to evaluate your financial picture, work on your credit score, and manage your debts before applying.
Home equity loans have a number of advantages for homeowners. They typically come with fixed interest rates and therefore have predictable monthly payments. Because the loan is secured by your home, the interest rates are often lower than those for unsecured loans, such as credit cards or personal loans. This can be particularly helpful if you’re consolidating high-interest debt or financing a large expense.
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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.
SOHL-Q225-275
