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By Liz Young Thomas |
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Comments Off on Liz Looks at: AI Spending
Spending Bender
Every earnings season, investors wait with bated breath to hear how much the big tech companies plan to spend on AI-related initiatives. Stock prices seem to react more to the outlook on that than the earnings data itself. Needless to say, AI spending continues to be the focus and that doesn’t appear to be changing anytime soon.
Analysts expect capital expenditures (CapEx) for the hyperscalers (Amazon, Alphabet, Meta, and Microsoft) to grow 53.5% in 2025 and 19.4% in 2026. Translating that into dollar terms, $333 billion of CapEx is expected this year from just these four companies.
Hyperscaler CapEx Consensus
In absolute terms, these are eye-popping numbers. Skeptics will tell you the companies have already overspent and it could all come crashing down. Enthusiasts will tell you the companies have to invest in order to innovate, and this is just the beginning.
Off the Rails?
In theory, both could be right. But in order to arrive at an opinion of where we stand today, it’s worth exploring how this spending era compares to prior spending eras, namely the internet supercycle in the 90s and the railroad spending era of the industrial revolution. Both eras changed the way we lived, traveled, and conducted business, and many expect AI to do the same.
To level the dollar amounts over time, we’re looking at spending as a percentage of GDP in the applicable periods. Despite how enormous today’s absolute numbers sound, when we compare percentages, AI spending is only slightly above that of the internet era and well below that of the railroad period, which is surprising.
Infrastructure CapEx as a % of GDP, by Era
Since the railroads were so long ago and arguably a very different type of innovation, the next section excludes that era and focuses on the comparison between the internet era and today.
Blowing Bubbles
There’s been a lot of talk over the last week about the air possibly seeping out of the AI balloon as some of the big tech momentum stalls out. Many are drawing comparisons to the late 90s when the Nasdaq was near all-time highs and the Federal Reserve started cutting rates on the heels of economic jitters. Some concern over a potential repeat is predicated on the high spending rates and high valuations of a small number of names.
To put it in context, the chart below shows annual spending data as a percent of GDP for the internet era versus AI spending of today, including projections of AI spending from 2025 onward. We can see that the proportion of spending on data centers is higher than the spending on telecom was in the late 90s (though not perhaps alarmingly so until much further out.) If the hyperscalers are in fact overspending, those projections could change materially.
Dot-Com Era and Now: CapEx as a % of GDP
At present, this doesn’t seem like something that’s out of hand or off the rails. Not to mention that the companies doing this spending are stronger than many of those in the late 90s if you measure by business maturity and cash positions. It is, however, something to heed as investors — Markets tend to overshoot on both the upside and the downside. It’s possible, therefore, that markets have gotten a bit ahead of themselves and need this breather.
Resizing the Pie Slices
As we know, markets are not the economy, and in the next few weeks investors will be hyper-focused on economic data and messages from the Fed. A large driver of growth in the U.S. is consumer spending, which has been a topic of debate since pesky inflation began sending prices higher. Many feared that the consumer would eventually pull back and create a drag on GDP, but GDP has held up quite well.
Interestingly, consumer spending has slowed, but the spending on AI has likely made up for the shortfall. Our economy has actually gotten less reliant on the consumer and more reliant on business investment over recent quarters.
2-Quarter Contribution to GDP
That begs the question: Is that good or bad? Right now, I think it’s actually been a good thing. We have always been heavily reliant on consumer spending to drive our economy forward, and we will remain that way. The possibility that other sectors of the economy could start to drive growth is a positive, in my opinion.
If this is in fact a bubble of sorts, and enthusiasm wanes, the risk is that CapEx spending could evaporate quickly. That’s the nature of things though, isn’t it? We depend on sources of growth and know that those sources could dry up if circumstances change.
The increased worry right now stems from the speed and magnitude of this spending increase, and the possibility that it went too far too fast. But even if markets have gotten ahead of themselves — and companies spend more slowly than projected — that doesn’t mean the whole era ends and the theme dies. It would just mean a reset in expectations and an adjustment to the timeline.
Those adjustments can be painful if you’re overexposed to the market reactions, but if you can keep your eye on the long-term and diversify in the near-to-medium term, the stops and starts feel less turbulent.
Want more insights from Liz? The Important Part: Investing With Liz Thomas, a podcast from SoFi, takes listeners through today’s top-of-mind themes in investing and breaks them down into digestible and actionable pieces.
SoFi can’t guarantee future financial performance, and past performance is no indication of future success. This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Thomas is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Form ADV 2A is available at www.sofi.com/legal/adv.
• The rates you’ll be offered for a home equity line of credit are influenced by your home equity, credit score, and debt-to-income ratio.
• HELOCs are used a bit like a credit card, but the interest you pay on a HELOC may be tax deductible.
• HELOCS have variable rates that can change with the market, which might impact your monthly payments and the total interest you pay.
• Online calculators will help you estimate payments.
• You can use a HELOC for a variety of reasons, such as home improvements, personal expenses, and consolidating debt.
Introduction to HELOC Rates
If you’re a homeowner looking to borrow some money, this article will guide you through the process of securing a good home equity line of credit (HELOC) rate in Williamsville, Missouri. This comprehensive guide is designed to help you, the homeowner, understand the factors that influence these rates and how to qualify for the best terms. You’ll learn about the benefits and risks of HELOCs, how to compare different lenders, and the tools available to estimate your costs. By the end, you’ll be better equipped to decide if a HELOC is the right financial tool for you and to navigate the application process.
What Exactly is a HELOC?
A HELOC is a revolving credit line that uses your home’s equity (the difference between your home value and your home loan balance) as collateral. To qualify, most lenders will require you to have at least 15% equity in your home. You can typically borrow up to 90% of your equity. Remember that when your home is used as collateral, a lender can foreclose if you fail to make payments on schedule. HELOCs have two main phases: a draw period and a repayment period:
The Draw Period
During the draw period (often 10 years), you can withdraw funds as needed. At this time, you’ll have to pay interest on what you borrow, but most lenders won’t require you to make payments on the principal — although you can do so if you want to utilize the full credit line again. A HELOC interest-only calculator can help you find out how much you owe in interest.
The Repayment Period
After the draw period concludes, the repayment period begins. It might be 10 or 20 years. Monthly payments will increase as you begin to pay down the principal as well as the interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. A HELOC monthly payment calculator is useful at this stage.
The Origin of HELOC Interest Rates
HELOC interest rates are tied to the prime rate, which is influenced by the Federal Reserve’s actions. Each lender adds a margin to the prime rate, which is why HELOC rates can differ. Lenders also consider individual factors such as credit score, debt-to-income (DTI) ratio, income, and the amount of equity in your home. Understanding these factors can help you anticipate rate fluctuations and make informed decisions about the best time to apply for a HELOC.
How Interest Rates Impact HELOC Affordability
The interest rate on your HELOC can make a big difference in how much you pay over the life of the loan. Even a small increase in the interest rate can increase your monthly payments and the amount of interest you will pay over the life of the loan. For example, let’s say you borrow $50,000 with a HELOC and have a 10-year repayment term. If your interest rate was 8.00%, your monthly payment would be $607 and total interest paid would be $22,797. But if you instead had a 7.50% rate, your monthly payment would be $581 and total interest $19,665. The lower rate saves you more than $3,000 in interest!
As you are thinking about how to get equity out of your home, the prime rate may give you a sense of where interest rates are headed. It’s also helpful to understand the history of the rate: It has gone from a low of 3.25% in 2020 to a high of 8.50% in 2023. This can help put current interest rates in Williamsville into perspective. You may not be able to wait for a rate as low as 2020’s rock-bottom one, but there are things any HELOC applicant can do to get the best available rate. We’ll dig into that below.
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
Variable vs. Fixed Interest Rates
Whatever interest rate you might initially capture for your HELOC, you likely won’t have it for the duration of the line of credit. HELOCs usually have variable (also called adjustable) interest rates, which rise or fall with the market. How often they can change and how high or low they can go will be spelled out in your HELOC agreement. Understanding this and reading the fine print on rate changes is important if you’re obtaining a HELOC.
Helpful Tools & Calculators
Before you apply for a HELOC, use our online tools to estimate your monthly payments and interest costs. It’s an easy way to see if a HELOC fits with your budget and financial goals.
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
Meeting the requirements for a competitive HELOC rate is within your grasp if you can spend some time cultivating a strong financial profile before you file your application. Verify that you have at least 15% equity in your home by subtracting your mortgage balance from your home’s estimated market value, then dividing the result by your home value. Then, work on your credit score and DTI ratio:
Improve Your Credit Score
To ensure you’re in the best position to secure a favorable HELOC rate in Williamsville, aim for a credit score of 700 or higher. Making timely payments and reducing your credit card balances will help your number rise. Setting up automatic payments can help you avoid late payments. Also check your credit report regularly for any inaccuracies, and avoid closing old credit cards or opening new ones in the months leading up to your HELOC application.
Calculate Your Debt-to-Income (DTI) Ratio
Your DTI ratio is a simple equation: Divide your total monthly debt payments by your gross monthly income. Most HELOC lenders prefer a DTI ratio below 50%, but below 36% will get you the best rates. To spruce up your DTI number, reduce your debts, increase your income, or do both.
Current HELOC rates by state.
Compare current HELOC interest rates by state and find a HELOC rate that suits your financial goals.
Select a state to view current rates:
Application Process for a HELOC in Williamsville
Streamline your application for a HELOC in Williamsville by prequalifying online. This lets you see potential HELOC rates and get a better idea of the terms you might qualify for before you start the full application. When you’re ready to apply, follow these steps:
Step 1: Run the Numbers
Make sure your equity level is 15%, your credit score is at least 640 (and ideally 700), and your DTI ratio is below 50% (hopefully well below) using the instructions above.
Step 2: Compare Lenders
Take a look at the rates available to you in Williamsville. Carefully compare qualification requirements, credit minimums and maximums, any associated fees, and the length of both the draw and repayment periods. Keep an eye out for lenders that offer competitive rates and flexible terms. Reading customer reviews and thoroughly checking lender reputations can also help you make a more informed decision.
Step 3: Submit Your Application
Gather your proof of identification, income verification documents, and property insurance information. For income verification, you’ll need to provide your most recent pay stubs, W-2 forms, and complete tax returns from the previous year. If you’re self-employed, you may also need to provide a profit-and-loss statement and your tax returns from the past two years. Additionally, you’ll need to provide a homeowners insurance declaration page as part of the property documentation. Once you have everything you need, you can submit your application online, over the phone, or in person.
Step 4: Get an Appraisal
An appraisal is an objective, professional analysis that determines the value of your home. This in turn helps establish whether you can qualify for a HELOC and how much you might be able to borrow, in addition to influencing the rate you are offered. The typical cost for an appraisal is between $300 and $600. An accurate appraisal is key to unlocking the equity in your home.
Step 5: Prepare for Closing
Before you can access the funds from your HELOC, you will need to sign all of the necessary documents and pay any fees. Many lenders will make the funds available to you by the third business day after the closing. Before you sign, be sure you understand the terms of the HELOC and have a repayment strategy in place.
Closing Costs and Fees
The good news is that HELOC closing costs are generally more affordable than those associated with a new home purchase or a refinance. The most significant expense is usually the appraisal fee. There may also be a title search fee (typically $100 to $450), an application fee, loan origination fee, and administrative fees. Some lenders may also charge a maintenance fee of up to $250 annually, as well as transaction fees for each withdrawal. Keep in mind that while some lenders may offer to reduce or waive certain closing costs, this could mean a higher interest rate for you.
Tax Benefits and Considerations
Homeowners have the opportunity to deduct HELOC interest on their 2025 taxes, but only if the borrowed funds are specifically used for the purpose of significantly improving their primary residence. Consult with a qualified tax advisor to confirm your individual eligibility for any deduction related to the HELOC, and to see how the IRS might look at HELOC interest in years to come.
While HELOCs are a popular choice for tapping into your home’s equity, there are other options to consider, including a home equity loan. If there’s any reason you’re unsure about a HELOC, or you just want to have all your options on the table, consider this list of alternatives:
Home Equity Loan
With a home equity loan, funds come all at once and you begin paying them back, with interest, immediately. The repayment term might be from 10 to 30 years and the interest rate will be fixed, so monthly payments will be nicely predictable. Usually, you can tap into 85% of your home equity. Lenders look for a credit score of 680 or more, but a score of 700+ could bring better rates. A home equity loan calculator can show you what size loan you might qualify for.
Cash-Out Refinance
A cash-out mortgage refinance replaces your existing mortgage with a new, larger one; you take the difference in cash. This might be the right option for you if you can score an interest rate that is an improvement on your current one (remember to factor in closing costs). To qualify, you need a 620 credit score and a DTI ratio under 43%. When comparing a cash-out refinance vs. a home equity line of credit, note that a refinance will leave you with a single monthly payment.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a term of two to seven years. The key advantage here is that your home is not on the line should you face financial challenges. Many lenders look for a credit score of 610 or more for a personal loan. While they are relatively quick to secure, do note that these loans often come with higher interest rates than either a HELOC or a home equity loan.
The Takeaway
When you’re pondering a HELOC, it’s wise to consider the benefits and potential pitfalls. A HELOC does often have a lower interest rate than a credit card or personal loan, and unlike a home equity loan, it provides the convenience of borrowing as you go. But remember, your home will be on the line if you fall behind on payments, just as it would be with a mortgage or home equity loan. Always take a moment to check in with your financial health and goals before making a decision. And if you opt for a HELOC, seek out rates from multiple lenders before locking in your choice.
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Whether a HELOC is a good fit for you at this moment depends on your personal finances. A HELOC is one of the more affordable ways to borrow money, and if you have ongoing expenses that are somewhat unpredictable, it might be the best solution for you, provided you have a clear understanding of the costs of a HELOC during both the draw and repayment period, and a plan in place to repay what you borrow.
How hard is it to get a HELOC?
Gaining approval for a HELOC is within reach if you meet the lender’s criteria. Lender requirements vary, but the basic prerequisites are a credit score of at least 620, a debt-to-income ratio below 50%, and a home equity level of 15%. The best interest rates go to those with a credit score of at least 680 and a DTI ratio of 36%. The application process includes submitting financial records and arranging for a home appraisal.
Will a HELOC impact your credit score?
The mere act of opening a HELOC can cause a slight dip in your credit score due to the necessary hard credit inquiry by a prospective lender. But use your HELOC responsibly — make timely payments and keep balances in check — and you may actually see an improvement in your score. On the flip side, missing payments or maxing out your HELOC can be detrimental.
Will you need an appraisal for a HELOC?
An appraisal will be key when applying for a HELOC. It helps your lender establish the current market value of your home, which in turn determines the amount of equity you can tap into. Most lenders set your HELOC limit at up to 85% of your equity. The lender will provide you with information about the appraisal process.
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• Home equity line of credit interest rates are influenced by the prime rate and borrower qualifications.
• HELOCs are a flexible way to borrow, with a revolving line of credit and interest-only payments during the draw period.
• Borrowers can often borrow up to 90% of their home equity with a HELOC.
• HELOCs are a popular choice for home improvements, education expenses, and consolidating debt.
• HELOC interest may be tax-ductible if funds are used for home improvements.
Introduction to HELOC Rates
Welcome to your comprehensive guide to home equity line of credit (HELOC) interest rates in Omaha, Nebraska. Whether you’re considering tapping into your home equity for a renovation, to fund education, or to consolidate debt, understanding the current landscape can help you secure the best rate. In this guide, we’ll walk you through the factors that influence HELOC rates, the benefits and potential risks of HELOCs, and how to effectively compare different lenders. Armed with this knowledge, you’ll be well-prepared to make a sound financial decision.
What Is a HELOC?
A HELOC is a revolving credit line that uses your home’s equity (the difference between your home’s value and your home loan balance) as collateral. To qualify, you generally need at least 15% equity in your home. You can borrow up to 90% of that equity, although this can vary by lender. HELOCs typically have two periods: a draw period and a repayment period:
The Draw Period
During the HELOC’s draw period (usually 10 years), you can access funds as needed, using the credit line much as you would a credit card. You’ll have to pay interest on what you borrow, but most lenders won’t require you to repay the principal, though you can do so if you wish to draw on the full credit line again. A HELOC interest-only calculator can compute monthly interest.
The Repayment Period
After the draw period ends, the repayment period of 10 to 20 years begins. Monthly payments will increase as you begin to repay the principal plus interest. HELOC interest rates are usually variable, which means the amount you pay each month may go up or down as rates change. A HELOC monthly payment calculator is useful at this stage in your borrowing experience.
The prime rate, which is influenced by the Federal Reserve’s policies, is the number lenders use to guide their interest-rate decisions. Each lender then adds its own margin to the prime rate, creating a unique rate for their HELOC. (This is why it’s so important to shop around and seek out rate quotes from multiple lenders before you sign on to a HELOC.) When you apply for a HELOC, your individual financial profile — credit score, debt-to-income ratio, income, and home equity level — will also influence the rate you’re offered.
How Interest Rates Impact HELOC Affordability
The interest rate on a home equity line of credit can dramatically affect how much you pay to borrow money. Even a small difference in the interest rate can lead to a large difference in costs. During a 10-year repayment period, when you’re paying down the principal plus interest, if you had an interest rate of 8.50%, your monthly payment would be $620. If your interest rate was 9.50%, your monthly payment would be $647. The difference might not seem that substantial, but over a decade, you would pay several thousand dollars more in interest with the higher rate.
HELOC Interest Rate Trends
Keeping an eye on the prime interest rate can give you a sense of where HELOC rates in Omaha are headed. Taking a look at historical data on the prime rate can also help you get a sense of whether today’s rates are high or low — or more likely somewhere in between.
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
Variable vs. Fixed Interest Rates
Your initial HELOC interest rate is important, but it’s also good to note that HELOCs, unlike some other financing methods, have variable (also called adjustable) interest rates. A HELOC agreement will spell out how often the rate can adjust, and by how much. It will usually also show the rate cap. If you’re unsure how you feel about variable rates, use an online calculator to compute your interest costs at the low and high end of the range to see if you think you can manage the payments.
Helpful Tools and Calculators
Your initial HELOC interest rate is important, but it’s also good to note that HELOCs, unlike some other financing methods, have variable (also called adjustable) interest rates. A HELOC agreement will spell out how often the rate can adjust, and by how much. It will usually also show the rate cap. If you’re unsure how you feel about variable rates, use an online calculator to compute your interest costs at the low and high end of the range to see if you think you can manage the payments.
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 snag the most competitive HELOC rate, you’ll want to keep your credit score at 700 or above, your debt-to-income (DTI) ratio under 36%, and ensure you have at least 15% equity in your home — and ideally more. First step? Check your equity level. Subtract your mortgage balance from your home’s estimated value. Divide the product by the home value to get your equity percentage. Then move on to the next two tasks:
Improve Your Credit Score
A credit score of 700 or higher will help you qualify for the best available HELOC rates in Hampton. Making timely payments and chipping away at credit card balances can work wonders. It’s also wise to give your credit report a once-over, catching any inaccuracies and rectifying them pronto. Avoid closing old credit accounts or opening new ones in the months leading up to your application.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is a simple equation: your total monthly debt payments, divided by your gross monthly income. Most HELOC lenders prefer a DTI under 50%, but for the best rates, you’ll want to go below 36%. You can do this by paying down debts, increasing your income, or both.
Current HELOC rates by state.
Compare current HELOC interest rates by state and find a HELOC rate that suits your financial goals.
Select a state to view current rates:
Application Process for a HELOC in Omaha
Many lenders offer the convenience of prequalification for a HELOC online. This can be a great way to get a sense of the rates and credit limits you might be eligible for. The prequalification process is quite simple, just requiring some basic financial information. If you decide to move forward and apply for a HELOC, follow these steps:
Step 1: Run the Numbers
First things first, check your equity level (as we’ve seen, you need 15% equity, at minimum). Also look at your credit score (it should be at least 640) and DTI ratio (it should be 50% or lower). If you pass with flying colors on all three, move on.
Step 2: Compare Lenders
As you explore lenders’ offers, don’t just look at interest rates. Compare qualification requirements, credit line maximums, fees, and the length of the draw and repayment periods a lender offers, among other factors. Look for lenders with competitive HELOC rates in Omaha and terms that suit your needs.
Step 3: Submit Your Application
Now, it’s time to get your ducks in a row. Have your identification, income verification, and property details ready to go. Recent pay stubs, W-2 forms, and tax returns are usually needed. If you’re self-employed, a lender might ask for a profit-and-loss statement and a couple of years of tax returns. Submitting your application is a breeze — you can do it online, over the phone, or in person. Just make sure everything’s accurate to avoid any hiccups.
Step 4: Get an Appraisal
An appraisal is a thorough and professional evaluation of your home’s value. It’s a key factor in determining the maximum amount you can borrow and the terms of the loan.
Step 5: Prepare for Closing
Before you can access your HELOC funds, you’ll need to sign documents and pay any fees. Some lenders make the funds available to you within three days after the closing of the HELOC. Review all the documents, correct any errors, and make sure you understand the terms and conditions of the agreement.
Closing Costs and Fees
HELOC closing costs are generally lower than those for a home purchase or refinance. The appraisal fee, which can range from $300 to $600, is often the most significant expense. A title search, if required, can add another $100 to $450 to the bill. You might also encounter application, origination, and administrative fees, along with annual maintenance fees that could reach $250.
Tax Benefits and Considerations
HELOC interest costs can be tax-deductible, but only if the funds were used to significantly improve your primary residence. These tax guidelines are good through 2025. To make sure you’re getting the most out of your HELOC, it’s a good idea to consult with a qualified tax advisor to confirm your eligibility for any deductions and to help you stay on track with HELOCs and taxes in 2026 and beyond.
There are other ways besides a HELOC to get equity out of your home, including home equity loans and cash-out refinancing. You could also consider a personal loan. Understand your options before making a firm decision:
Home Equity Loan
A home equity loan provides you with a lump sum at a fixed interest rate, and you’ll begin making principal-plus-interest payments at once. You can typically borrow up to 85% of your equity. Lenders look for a credit score of 680 or more, with many favoring 700 and above. This option is great if you have a specific need for a defined amount of money and prefer the predictability of fixed payments. A home equity loan calculator can help you see what you might qualify for.
Cash-Out Refinance
With a cash-out mortgage refinance, you refinance for more than you currently owe and take the difference in cash. It’s a good option, so long as the interest costs of a new mortgage are better than what you’d have at your current rate. Things to think about with a cash-out refinance vs. a home equity line of credit: With a refi you’d need a credit score of 620 or higher and a debt-to-income ratio under 43%. You can choose between fixed or variable interest rates.
Personal Loan
A personal loan is a versatile, typically unsecured loan that you repay in regular, fixed installments over a period of two to seven years. The key benefit here is that your home is not at risk of foreclosure should you encounter financial challenges. Most lenders look for a credit score of 610 or higher. While these loans are relatively quick to secure, the interest rates may be higher compared to HELOCs or home equity loans.
The Takeaway
When considering a HELOC, it’s important to weigh the benefits and risks. HELOCs offer flexible access to funds and potentially lower interest rates compared to other loans, but they also come with the risk of losing your home if you default. HELOC rates in Omaha and other locations can vary, so it’s crucial to shop around and compare offers from different lenders. Ensure you have a solid repayment plan in place and that you understand the terms before applying.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
A HELOC is a versatile financial tool. You can use it for home improvements, education costs, consolidating your higher interest debt, or any other purpose. It works much like a credit card, allowing you to draw funds as you need them and repay over time. The interest on a HELOC may be tax-deductible if the loan funds are used to improve your home, but you should check with a tax advisor to be sure.
Is a HELOC the right move?
If you’re looking for a flexible way to access funds for significant expenses and are comfortable with variable interest rates, a HELOC could be a smart move. But if you prefer the stability of a fixed payment amount, you might want to explore a home equity loan. If current mortgage interest rates are lower than what you are currently paying, you might also want to look into a cash-out refinance.
Do you need an appraisal for a HELOC?
An appraisal is usually required to qualify for a HELOC. The appraisal helps determine the home’s current market value, which is a key factor in calculating the amount of credit you can access (and if you can qualify for a HELOC at all). This helps protect both the lender and the borrower by ensuring the loan amount is appropriate for the home’s value.
What could disqualify you from getting a home equity loan?
A few key factors could stand in the way of securing a home equity loan, such as a lower credit score (below 680), a high debt-to-income (DTI) ratio (over 50%), or less than 15% equity built up in your home.
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.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
• A home equity line of credit (HELOC) is a revolving line of credit that is secured by your home equity and drawn on as you need it.
• HELOCs are useful for managing large ongoing expenses, like a home remodel, or for paying off higher-interest debt.
• The rates for a HELOC are tied to the prime rate and to individual borrowers’ creditworthiness.
• HELOCs have variable rates, which means monthly payments can fluctuate over the life of the loan.
• It’s important to know the risks: If you default on a HELOC, it can lead to foreclosure.
Introduction to HELOC Rates
This is your comprehensive guide to home equity line of credit interest rates in Cincinnati, Ohio. Whether you are thinking about borrowing funds for a home renovation or paying for another significant expense, this article will give you information to help you make well-informed financial decisions about how to get equity out of your home. It will cover the factors that influence HELOC interest rates, along with the benefits and risks of opening a HELOC. By the end, we’ll equip you with the knowledge you need to understand current market conditions and qualify for the best available rates.
What Is a HELOC?
Before you make decisions about borrowing, it’s helpful to understand exactly what a home equity line of credit is. A HELOC is a line of credit that a homeowner can borrow against as needed, up to a limit that their lender sets based on their home equity. If you get a HELOC, your home is the collateral that secures the loan. This, of course, means that if you don’t repay what you borrow, you may face foreclosure.
Your home equity is the difference between your home’s value and your mortgage balance. To qualify for a HELOC, you typically need 15% equity, and you can borrow up to 90% of the equity you have accrued. HELOC interest rates are often lower than rates on unsecured loans. A HELOC has two main phases:
The Draw Period
During the HELOC’s initial draw period (usually 10 years) you can access funds in increments, as you need to. During this time, you’ll pay interest on what you borrow. Most lenders will not require you to pay down the principal — although you can do that if you wish to draw on the credit line again. A HELOC interest-only calculator is useful during the draw period.
The Repayment Period
After the draw period ends, the 10- to 20-year repayment period begins. Monthly payments will increase as you begin to repay the principal plus the interest. HELOC interest rates tend to be variable, which means the amount you pay monthly may go up or down as rates change. A HELOC monthly payment calculator can help you compute what you might owe.
Where Do HELOC Interest Rates Come From?
Lenders peg interest rates for HELOCs and different types of home equity loans to the prime rate — a figure that moves up or down with the Federal Reserve’s economic maneuvers. Each lender also tacks on a margin, which is why rates vary in the marketplace. The national average interest rate for a HELOC is 8.27%, but rates can range from 6.63% to 15.65%.
You’ll want to get rate quotes from multiple lenders if you apply for a HELOC. Your personal financial profile, including credit score, debts, and the amount of equity you’ve built in your home, affects the interest rate you’ll be offered. A higher credit score and more equity can tip the scales in your favor.
How Interest Rates Impact HELOC Affordability
You’ll have to invest time and energy shopping around to get the best HELOC interest rate, but that rate makes a big difference in what you’ll end up paying. Even a small shift in the rate can mean you’ll pay a lot more interest over the life of the HELOC. For example, if you used $50,000 from a HELOC during your 10-year draw period, the difference in the monthly interest payment based on an 8.50% versus a 9.50% rate is $42 per month (monthly payments would be $354 and $396, respectively).
If you happened to be repaying principal plus interest on the same $50,000 during a 20-year repayment period, monthly payments at the lower interest rate would be $620, and at the higher rate $647. That may not seem like such a large difference, but over the full repayment term, the lower interest rate could save you more than $3,000. Of course, since HELOCs have variable interest rates, real-world numbers may end up crunching somewhat differently.
Check out this chart, which compares HELOC loans at different loan amounts, terms and interest rates.
Repayment Amount
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
It’s hardly a crystal ball, but the prime interest rate can be a helpful gauge for HELOC rates. Since 2018, the prime rate has risen and fallen regularly, reaching a low of 3.25% in 2020 and then a high of 8.50% in 2023. This history can offer you some perspective on the current rates you’re about to start seeing in Cincinnati.
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
Adjustable vs Fixed Interest Rates
HELOCs often come with adjustable interest rates. While these rates usually start lower than fixed rates, they can go up or down as they respond to market conditions. If you decide to move forward with a HELOC, you should examine each lender’s offer. You should be able to see the specifics of how often rates could change and where the lender might cap the rate. But if you are someone who can handle some financial ebb and flow, this might be a good choice for you.
Helpful Tools & Calculators
When you apply for a HELOC, you can use online tools to estimate the amount of money you’ll need to make your monthly payments, and what your interest costs might be. These tools will help you understand how a HELOC and its rates could sway your budget and plan accordingly.
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
For you to land a top rate on a HELOC, the status of your credit score, DTI ratio, and home equity level are critical. Lenders look for potential borrowers to have at least 15% equity in their homes, generally — and more is even better. Here are a few ways to ensure your finances are in a good place before you apply.
Improve Your Credit Score
A top-notch credit score of 700 or higher is key to unlocking the very best HELOC rates. Good news is you can nudge your number up by paying every bill on time and steadily chipping away at any credit card balances you are carrying. Also, regularly review your credit report for inaccuracies and dispute errors. Your score will truly reflect your financial responsibility.
Calculate Your Debt-to-Income (DTI) Ratio
You can easily calculate your DTI ratio: Add up your total monthly debt payments and divide the sum by your gross monthly income. Most HELOC lenders are looking for DTIs under 50% from their borrowers. For the best HELOC interest rates on offer in Cincinnati, get yours down even further, below 36%. Paying off debt (or increasing earnings) will enhance your financial profile.
Current HELOC rates by state.
Compare current HELOC interest rates by state and find a HELOC rate that suits your financial goals.
Select a state to view current rates:
Application Process for a HELOC in Columbus
The application process for a HELOC in Cincinnati is straightforward, especially if you prequalify online. That early step lets you view the rate you might qualify for. If you decide to move forward with the full application, it’s a matter of gathering the necessary paperwork and submitting via the web. Here’s a step-by-step of the process:
Step 1: Run the Numbers
Before you take the plunge, check your credit score and calculate your debt-to-income ratio. You’ll also want to assess your home equity — you need at least 15% to qualify. You can easily calculate your level of equity by subtracting your current mortgage balance from your home’s estimated value, then dividing the answer by that same home value to get a percentage. Paying your mortgage payments on time every month is a no-fail way to build equity.
Step 2: Compare Lenders
Researching different lenders will help you to find the best HELOC interest rates in Cincinnati. Look at not only their advertised rates, but also their qualification criteria, credit line minimums and maximums, the fees they charge, and how long their draw and repayment periods run. Lenders may have unique terms and conditions — be sure to read the fine print.
Step 3: Submit Your Application
Gather your paperwork first. What you’ll need includes your recent pay stubs, W-2 forms, and tax returns. If you are self-employed, your potential lender may ask for a profit-and-loss statement, as well as two years’ worth of tax returns. You should have a copy of your homeowners insurance policy handy, too. Got everything together? You can apply online, over the phone, or in person. Double-check all information you provide for accuracy.
Step 4: Get an Appraisal
A lender will require an objective professional analysis of your home’s value. Once you’ve identified the most appealing HELOC offer, you’ll need to plan on paying between around $300 to $600 for an appraisal. This step will confirm the amount of equity you have in your home. It’s an important part of the HELOC application process.
Step 5: Prepare for Closing
Before you’ll get access to your funds, you’ll need to pay the required fees and sign your HELOC agreement. You will be able to find lenders who’ll have your funds ready within a few days of closing. Take the time to look over all of your documents carefully. Don’t be afraid to ask every question you have and make sure you thoroughly understand the terms of your HELOC.
Closing Costs and Fees
HELOCs will often come with closing costs that are lower than what you would pay in this phase for a home mortgage loan or a cash-out refi. An appraisal fee is usually the most significant expense among them. Other costs you could encounter may be for a title search, and application, origination, and administrative fees. Some lenders also charge an annual maintenance fee of up to $250. Keep in mind: If a lender offers to reduce or waive closing costs, you could end up with a higher interest rate.
At this point, homeowners can deduct interest they pay on a HELOC if they use the borrowed funds to make significant improvements to their primary residence. Remember to itemize your costs and be aware that this policy may change in the future. Consult with a tax advisor about your specific circumstances.
Alternatives to HELOCs
Other ways to get equity out of your home exist besides a HELOC. Some examples include home equity loans and cash-out refinancing, as well as personal loans. It’s worth considering all the options before you commit to a HELOC.
Home Equity Loan
What is a home equity loan? This option offers you a one-time lump-sum loan instead of a line of credit. It usually has a fixed interest rate and can often be for up to around 85% of your home equity. (A home equity loan calculator can help you figure out how much you might be eligible to borrow.) Lenders will look for you to have a 680 or higher credit score to qualify. If you know you prefer the predictability of a fixed interest rate and set payment schedule, this could be a fit for you. One difference between HELOCs and home equity loans is that with the home equity loan, you get the money all at once and you must begin repaying principal plus interest right away.
Cash-Out Refinance
A cash-out mortgage refinance allows you to refinance for more than you owe on your mortgage right now and take the difference in a lump sum of cash. This is an option to consider as long as the costs of the new mortgage are better than those on your current home loan. Things to consider with a cash-out refinance vs. a home equity line of credit: A refinance will require you to have a credit score of 620 or higher and a DTI ratio under 43%. A refi is slightly easier to get and also lets you choose a fixed or variable interest rate. It also leaves you with one monthly payment instead of two.
Personal Loan
This is an unsecured loan that you’ll repay in regular, fixed installments over two to seven years. A key benefit of this type of loan is that if you encounter financial challenges, your home is not at risk of foreclosure if you are unable to make your payments. Most lenders look for a credit score of 610 or higher for this type of borrowing. These loans are relatively quick to secure, but the interest rates tend to be higher compared to home equity loans or HELOCs.
The Takeaway
If you’re considering a HELOC, you should weigh both the benefits and the potential risks. HELOCs are a flexible venue for borrowing funds. It’s great to pay interest only on the portion of the credit line you use. They also come with the inherent risk of variable interest rates, and potential for foreclosure if payments become too difficult to make. In Cincinnati, it pays to explore current HELOC rates and terms with multiple lenders before you decide.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
Your payment on a $50,000 HELOC will depend on your interest rate and repayment terms. During the draw period, if you used all $50,000 but made interest payments only, your monthly bill at 8.00% interest would be $333. Once you enter the repayment term of 20 years, the monthly cost would rise to $607. Since HELOCs have variable interest rates, these are just estimates.
Is a HELOC a smart move?
Whether a HELOC is a good idea right now or not depends on your financial concerns and the current HELOC rates in Cincinnati. If you need a flexible line of credit to help you with significant expenses, and you can manage your monthly payments changing, a HELOC might be a smart choice.
What could prevent you from getting a home equity loan?
A few things could stand in the way of your qualifying for a home equity loan or a home equity line of credit. You’ll need to have at least 15% equity in your home, for one thing, or 20% equity, depending on the loan and the lender. You’ll need to meet a lender’s credit-score requirements and have a healthy debt-to-income ratio, too.
How does a HELOC affect your credit score?
Upon opening a HELOC, you may see a slight dip in your credit score because of the lender’s hard inquiry. But by using your HELOC responsibly and making timely payments, you can actually improve your score, since you’ll show that you’re a reliable borrower. Then again, maxing out your line of credit or missing payments may have a negative impact on your score. This is why you need to manage your HELOC wisely.
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.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
• Home Equity Line of Credit (HELOC) rates in Charleston are influenced by the prime rate and aspects of the borrower’s financial profile.
• HELOCs offer flexible access to funds, with interest accruing only on the funds you use.
• Variable interest rates on HELOCs can lead to unpredictability with future monthly payments.
• Home equity is the difference between your home’s value and the outstanding mortgage balance.
• To qualify for a HELOC, you’ll generally need to have at least 15% equity in your home and a credit score of 640 or better.
Introduction to HELOC Rates
We put this overview together to offer you, as a homeowner, tools to increase your understanding of how to get equity out of your home in Charleston, SC.
What is a home equity line of credit, or HELOC? If you’ve been paying down your home loan month by month and have built up a fair amount of home equity, you may be wondering if a HELOC can help you modernize your living space, invest in education, or consolidate higher-interest debt. This article will give you the tools to make well-informed choices as we look into the factors that influence HELOC rates, the advantages and potential pitfalls of these financial tools, and the keys to finding the most favorable lenders and terms. Is a HELOC the right choice for you? This guide should help you know for sure.
What Is a HELOC?
A HELOC is a revolving credit line that allows you to tap into equity you’ve built in your home. Because it’s a credit line, you can borrow the money you need in increments, as you need it, up to whatever maximum amount your lender sets for you. You’ll typically need to have at least 15% equity to qualify, and you can borrow up to 90% of that equity. It’s important that you have a plan for repaying a HELOC, because missing payments will put you at risk for foreclosure.
A HELOC has two phases:
The Draw Period
In the HELOC’s initial draw period (usually 10 years) you can access funds in increments, as needed. During this time, you’ll need to pay interest on what you borrow, but most lenders won’t require you to pay down the principal. You’ll only need to do so if you max out the credit line and want to draw on it again. A HELOC interest-only calculator can help you compute what you’ll owe during this phase.
The Repayment Period
Once the draw period ends, a repayment period of 10 to 20 years will begin. Your monthly payments will increase because now you’ll be paying off both the principal and interest. HELOC interest rates are generally variable, so the amount of your monthly payment may go up or down if your rate changes. A HELOC monthly payment calculator is useful during this phase. It can help you predict fluctuations.
How Are HELOC Interest Rates Determined?
HELOC interest rates, along with those for different types of home equity loans, are typically set based on the prime rate, which is greatly influenced by Federal Reserve policies. Lenders usually add a margin to the prime rate to determine the interest rate they’ll offer, but they also consider your credit score, debt-to-income (DTI) ratio, income, and the amount of equity you have in your home. That’s why rates vary from lender to lender, and also why getting quotes from multiple lenders before settling on an offer and signing a HELOC agreement is important.
How Interest Rates Impact HELOC Affordability
What looks like a small difference between two HELOC rates can actually make a noticeable difference in the cost of a HELOC over the long haul. For example, on a $50,000 HELOC with a 20-year term, a one-percentage-point rate change from 7.00% to 8.00% would bump your monthly payment up by $30, and increase the total interest you’d pay over the life of the HELOC by almost $7,000. The more you borrow with a HELOC, the greater the effect of even a slight increase or decrease in interest rate, so keep an eye on what comes after the decimal point.
HELOC Interest Rate Trends
Be watchful of the prime interest rate, too. It can clue you in on the direction HELOC rates might be heading. Since 2018, the prime rate has experienced ups and downs, hitting a low of 3.25% in 2020 and a high of 8.50% in 2023. An understanding of historical patterns can give you perspective on rates you see in the marketplace. Some borrowers try to time their HELOC applications to coincide with a dip in rates. But it’s difficult to win at that game. There are other, possibly more effective ways to increase your chances of getting the best available 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
Adjustable vs. Fixed Interest Rates
HELOCs are likely to come with adjustable interest rates, which generally start off lower than those on fixed-rate loans, but can go up or down in response to market conditions. If you decide to move forward with a HELOC, you’ll want to examine lender offers not only for starting rates, but for the specifics on how often a rate can change, and what the cap is. If you can handle a bit of financial ebb and flow, a HELOC might be the right choice for you.
Helpful Tools & Calculators
Before applying for a HELOC, try out some online tools, which can help you get an estimate of what your monthly payments and interest costs might be. These useful calculators can assist you in understanding the impact of HELOC rates on your budget, so you can plan accordingly.
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 land a top rate on a HELOC, your credit score, DTI ratio, and home equity level are critically important. Lenders generally look for you to have at least 15% equity in your home — and more is better. Here are some ways to ensure your finances are up to snuff before you apply.
Improve Your Credit Score
A stellar credit score of 700 or higher is key to unlocking the best HELOC rates. The good news is, you can nudge your number up by paying your bills on time and steadfastly chipping away at those credit card balances. Also, regularly review your credit report for inaccuracies. Dispute any errors you see, and your score will truly reflect your financial responsibility.
Calculate Your Debt-to-Income Ratio (DTI)
Your DTI ratio is simple to calculate: Divide your total monthly debt payments by your gross monthly income. Most HELOC lenders are looking for a DTI under 50%, and for the best HELOC interest rates in Charleston, you’ll want to get yours down even further, below 36%. Paying down debt (or increasing earnings) will enhance your financial profile.
Current HELOC rates by state.
Compare current HELOC interest rates by state and find a HELOC rate that suits your financial goals.
Select a state to view current rates:
Application Process for a HELOC in Charleston
The application process for a HELOC in Charleston is fairly straightforward, especially if you take the time to prequalify online. This preliminary step lets you view the rate you might qualify for. If you decide to move forward and complete a full application, it’s a matter of gathering the necessary paperwork and submitting via the web. Here’s the full process:
Step 1. Run the Numbers
Before taking the plunge, run a check on your credit score and calculate your debt-to-income ratio. Then assess your home equity — you need at least 15% to proceed. To calculate your equity percentage, subtract your current mortgage balance from your home’s estimated value, then divide the answer by that same home value. There you have it. Making your regular mortgage payments is a surefire way to build equity, and home renovations also help it grow.
Step 2. Compare Lenders
Research different lenders to find the best HELOC interest rates in Charleston. Look at not only their rates, but also qualification requirements, credit line minimums and maximums, fees, and the length of their draw and repayment periods. Each lender may have unique terms and conditions. It’s important to read the fine print.
Step 3: Submit Your Application
Now it’s time to gather your paperwork. You will need recent pay stubs, W-2 forms, and tax returns. If you’re self-employed, you may be asked for a profit-and-loss statement and two years’ worth of tax returns. Have your homeowners insurance policy handy, too. Once you’ve got everything together, you can apply online, over the phone, or in person. Double-checking the information you provide for accuracy will keep the process moving smoothly.
Step 4: Get an Appraisal
A lender will require an objective professional analysis of your home’s value, so once you’ve identified the HELOC offer that’s most appealing to you, you should expect to pay between $300 and $600 for an appraisal. This step confirms the amount of equity you have in your home and is an important part of the HELOC application process.
Step 5: Prepare for Closing
Before you’ll be able to tap into your funds, you’ll need to sign your HELOC agreement and pay the required fees. You can find many lenders who’ll have your funds ready within a few days of closing. Be sure to take time to review all of your documents carefully, and ask any questions you have to make sure you’re clear on the terms of your HELOC.
Closing Costs and Fees
HELOCs typically come with lower closing costs than you’d pay with a home mortgage loan or a cash-out refinance. The appraisal fee is usually the most significant expense. Other costs you may encounter are title search, application, origination, and administrative fees. Some lenders also charge an annual maintenance fee, which could be up to $250 per year. Keep in mind that if a lender offers to reduce or waive closing costs, it could mean a higher interest rate for you.
Right now, homeowners can deduct HELOC interest if they use the borrowed funds to make significant improvements to their primary residence, and itemize costs. Policy may change in the future. Consult with a tax advisor about your specific circumstances.
Alternatives to HELOCs
Other ways to get equity out of your home besides a HELOC include home equity loans and cash-out refinancing, as well as personal loans. Before you commit to a HELOC, it’s worth considering all the options.
Home Equity Loan
What is a home equity loan? It offers you a one-time lump-sum loan instead of a line of credit. This loan usually has a fixed interest rate and can often be for up to 85% of your home equity. (A home equity loan calculator can help you see how much you might be eligible to borrow.) Lenders look for you to have a credit score of 680 or higher to qualify. If you prefer the predictability of a fixed interest rate and a set payment schedule, this could be a good fit for you. One difference between a HELOC and a home equity loan is that you get the money all at once and begin repaying principal plus interest right away with the home equity loan.
Cash-Out Refinance
A cash-out mortgage refinance allows you to refinance for more than you owe on your mortgage right now and take the difference in cash. It’s a good option as long as the costs on a new mortgage are preferable to what you’d continue to have with your current home loan. Things to think about with a cash-out refinance vs. a home equity line of credit: With a refinance you’d need a credit score of 620 or higher and a DTI ratio that is under 43%. A slightly easier to get refi also lets you choose between fixed or variable interest rates, and leaves you with one monthly payment instead of two.
Personal Loan
A personal loan is an unsecured loan that you repay in regular, fixed installments over a period of two to seven years. The key benefit to one of these loans is that your home is not at risk of foreclosure should you encounter financial challenges and be unable to make your payments. Most lenders look for a credit score of 610 or higher for this type of borrowing. While these loans are relatively quick to secure, the interest rates tend to be higher compared to HELOCs or home equity loans.
The Takeaway
When considering a HELOC in Charleston, it’s important to weigh both the potential benefits and the possible risks you are taking on. HELOCs offer financial flexibility and may come with more attractive interest rates compared to other borrowing options, and that makes them well-suited for managing large and ongoing expenses. However, they also come with a risk of losing your home should you fall into default. Always take the time to assess your overall financial situation before taking out a loan — you’ll likely need a credit score of at least 640 to qualify. If you think a HELOC is right for you, look at multiple lenders’ rates.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.
If you need flexibility to access funds in increments for big expenses and feel comfortable with variable interest rates, a HELOC could be a smart move. That said, if you prefer the stability of fixed payments, a home equity loan might suit you better.
What would the monthly payment on a $100,000 HELOC be?
Payments on a $100,000 HELOC fluctuate based on the interest rate, the terms of repayment, and how much of the credit line you are actually using. If you borrow the full $100,000 and have an 8.00% rate, for example, you might only pay around $667 per month in interest during the draw period. Once the repayment phase arrives, you’d start paying down the principal and your monthly payment would rise to more than $1,200. HELOCs have variable interest rates, so your exact results may vary and your rate could go up in time.
Do you need an appraisal for a HELOC?
Yes, you’ll need a home appraisal to obtain a home equity line of credit. Your best bet is to await your potential lender’s instructions so you know exactly how your home should be appraised. An appraisal will help lenders determine your home’s current market value and the amount you can borrow. It also plays a role in how lenders set the interest rate you’ll be offered.
Will a HELOC impact your credit score?
Opening a HELOC involves a hard inquiry on your credit report, which can cause a slight, temporary drop in your score. However, if you manage a HELOC responsibly, it can have a positive impact on your credit score. (Missing payments, on the other hand, will hurt your credit score.)
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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