Compare HELOC rates in North Dakota.

Introduction to HELOC Rates

If you’re wondering just what is a home equity line of credit (HELOC) in North Dakota, odds are that you’re making timely home loan payments and have been building up equity in your home. You can use this guide to see what rate and terms you might qualify for, and to understand the underlying factors that influence HELOC rates so you can choose the best offer for your financial needs.

We’ll take you step by step through the application process. And since a HELOC is just one way you can get equity out of your home, we’ll also explain alternatives to HELOCs. Ready to maximize your borrowing potential and achieve your financial objectives? Let’s start at the beginning.

What Is a HELOC?

A HELOC is a revolving line of credit with your home as collateral. The amount of your credit line will depend on your home’s value as well as your mortgage balance. Qualified borrowers may be able to borrow as much as 90% of their home equity with a HELOC. You can borrow, repay, and borrow again.

HELOCs have two phases: draw and repayment. It’s important to understand both.

The Draw Period

During a HELOC’s draw period, usually lasting 10 years, you can access funds up to your credit limit. Payments are typically interest-only, while paying down the principal is optional. If you do pay down your principal, you can borrow against the full credit line again. You can use a HELOC monthly payment calculator to help you with financial management during this phase.

The Repayment Period

A HELOC’s repayment period typically lasts 10 to 20 years. During this phase, borrowing ends and you repay the principal with interest. Rates are usually variable, which can make monthly repayment amounts somewhat unpredictable. A HELOC repayment calculator can show you what your payments would be each month depending on your interest rate.

Where Do HELOC Interest Rates Come From?

Interest rates on HELOCs are influenced by the prime rate — the rate banks charge customers deemed to be at lowest risk of default. Federal Reserve rates are just one factor lenders consider when setting their prime rates.

How Interest Rates Impact HELOC Affordability

Interest rates can have a significant impact on what a HELOC will cost you. When the time comes to repay a $60,000 HELOC with a 20-year term, a 6.00% rate would result in a monthly payment of $430, whereas a 7.00% rate would increase the payment to $465. More important, the customer with the 7.00% rate would pay $8,477 more in interest over the life of the loan. The greater the amount you borrow and the higher your interest rate, the larger these numbers grow.

HELOC Interest Rate Trends

Since HELOC rates are tied to prime interest rate set by lenders, understanding the history of the average prime rate can help you see where current HELOC rates in North Dakota fall. In recent years, the prime rate has ranged from a low of 3.25% in 2020 to a high of 8.50% in 2023. These fluctuations can have a direct impact on the practicality of a HELOC vs. a home equity loan, since HELOC rates are variable and home equity loan rates are usually fixed.

Historical Prime Interest Rate

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

A bunch of factors can influence HELOC rates in North Dakota. Here are some variables that are within your control and can play a role in what you’ll be offered.

Home Equity

If you have substantial equity in your home, you’ll appear less risky to lenders, and this can lead to them offering you a lower interest rate. As a borrower, you’ll typically need a minimum of 15% equity to qualify for a HELOC.

Credit Score

Maintaining a credit score of 680 or higher is needed to secure a HELOC, and 700 is even better. A higher credit score is a bonus, too, since lenders may offer you lower interest rates.

Stable Income

Lenders scrutinize your income to evaluate your ability to repay the HELOC. Stability is important.

Loan-to-Value Ratio

Many lenders stipulate that your combined loan-to-value ratio must be 90% or less, though some will allow you to borrow 100% of your home’s value. For example, if you hope to obtain a $100,000 HELOC and your mortgage balance is $300,000, while your home appraisal puts its value at $500,000, your LTV ratio would be 80%.

Variable vs Fixed Interest Rates

HELOCs generally have variable interest rates, meaning they will fluctuate during the loan term. Although they often start lower than the current fixed rates, they can adjust up or down depending on market conditions. Plugging a number of interest rates into a HELOC calculator will give you insight into the effects these fluctuations can have on your monthly payment.

Tools & Calculators

Online calculators can show you your monthly payment amount and the overall cost of your loan. Our favorites include a HELOC interest only calculator, which can help you determine the payments you’d have to make during the draw period. Whether you’re thinking about a HELOC or a home equity loan, check out these useful tools:

How to Qualify for a Competitive HELOC Rate

To obtain one of the more favorable HELOC rates in North Dakota, you’ll want to do a little financial housekeeping before submitting your application. Here’s a to-do list:

Care for Your Credit Score

If you maintain regular, timely payments while also reducing credit card balances, it can help you cultivate a credit score lenders will find attractive. Take a minute to check your report, too, and request that any inaccuracies be corrected.

Assess Your Home Equity

A strong home equity position can lead to better terms and a higher credit line when applying for a HELOC. You’ll want to have at least 15% equity in your home.

Calculate Your Debt-to-Income Ratio (DTI)

Your DTI ratio is how much you pay each month on your debt (student loans, car loans, personal loans, etc.), divided by your gross monthly income. Home equity lenders often look for a DTI below 36%. Some allow up to 50%. Calculating a DTI ratio can help you determine your eligibility for a HELOC.

Application Process for a HELOC in North Dakota

Your application process for a home equity line of credit will involve a detailed financial review and a formal appraisal of your home, among other steps. Understanding each task can help you navigate the journey.

Step 1. Run the Numbers

Confirm that your credit score is 680 or above, and that your DTI ratio is below 36%. Estimate your home equity to understand how much you can borrow. Some lenders offer online prequalification tools to streamline this process.

Step 2. Compare Lenders

When seeking North Dakota’s best HELOC rates, also compare qualification requirements, credit line limits, fees, and draw and repayment period durations from multiple lenders.

Step 3: Gather Your Documents

When you prepare your HELOC application, gather and organize necessary documents in advance. This will typically include proof of income (such as W2 forms and at least one tax return), as well as property documents like proof of insurance. If you are self-employed, you should count on lenders asking for a profit-and-loss statement and two years’ worth of tax returns.

Step 4: Submit Your Application

You should be able to submit your HELOC application online or in person, depending on the lender. Be sure to attach all of your necessary documents.

Step 5: Get an Appraisal

A home appraisal plays a pivotal role in determining your eligibility for a HELOC. If the appraised value of your home exceeds the outstanding balance of your mortgage, you may qualify. Ask the lender to guide you through the appraisal process if needed.

Step 6: Prepare for Closing

Before accessing funds via your home equity line of credit, you’ll have to sign documents and pay any required fees. Some lenders make funds available as fast as three business days after signing.

Tax Benefits and Considerations

You can deduct the interest you pay on your HELOC if you use the funds you borrow to buy, build, or significantly improve your primary residence. Your interest deduction is limited to the first $375,000 of the HELOC principal if you are an individual taxpayer ($750,000 if you and your spouse file jointly). Consult a tax advisor to help you navigate specific tax implications and confirm your eligibility for deductions related to HELOCs.

How Much Does a HELOC Cost?

A HELOC will cost you less than a typical home loan or mortgage refinance. With a HELOC, the appraisal fee is the biggest cost, at up to $500. Other charges may include application and administrative fees, and some lenders add annual maintenance, transaction, inactivity, or early termination fees. A lender offering a HELOC with no fees, or reduced fees, may increase the interest rate to compensate. Be sure to compare offers from multiple lenders.

Alternatives to HELOCs

Other ways exist to get equity out of your home, including different types of home equity loans and cash-out refinancing. Personal loans are an option, too, if you prefer an unsecured loan. Carefully consider the advantages and disadvantages of each option to determine what’s best for you.

Home Equity Loan

Unlike a HELOC, a home equity loan provides a lump sum amount, and is paid back at a fixed interest rate. Borrowers can usually access up to 85% of their home equity through this type of loan. A home equity loan calculator can help you estimate your borrowing capacity.

Here’s a quick comparison of the two:

Recommended: What Is a Home Equity Loan?

Cash-Out Refinance

If you’re debating between a cash-out refinance vs. a home equity line of credit maybe this will help: Cash-out refinancing lets you refinance your mortgage for more than what you owe, and receive the difference in cash. This option may suit you if you need a large sum of money and want just one monthly payment. Do the math to compare costs as you decide what suits your overall home loan strategy.

Personal Loan

A personal loan does not require collateral, making it a good option for those without significant home equity. A personal loan can provide a lump sum of $1,000 to $100,000, to be paid back in regular payments with interest over a 2- to 7-year term. It can be used for home improvements, debt consolidation, and other large expenses.

Credit Cards

Credit cards and HELOCs are both examples of revolving debt, in which you get access to a credit line that you tap as needed instead of receiving a chunk of money all at once. Credit cards tend to come with higher interest rates than HELOCs, though, which makes them much more expensive if you carry a large balance for months. Credit cards definitely offer flexibility for smaller purchases, but a HELOC can be more cost-effective for larger expenses like home improvements or debt consolidation.

The Takeaway

A home equity line of credit can be a valuable financial tool if you want to capitalize on your accumulated home equity. HELOCs offer competitive interest rates and flexible repayment options. A HELOC’s variable interest rate may increase unexpectedly depending on the market, making for higher monthly payment. But if you aren’t sure exactly how much you need for a big project, a HELOC is a good option to consider.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the monthly payment on a $50,000 HELOC?

A $50,000 home equity line of credit will require a monthly payment based on several factors, including how much of the credit line you draw, the interest rate, and the repayment terms. With an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. This is assuming you’ll make interest-only payments during the draw period.

Is a HELOC a good idea right now?

Determining whether a home equity line of credit is the right option for you now hinges on your individual financial circumstances, as well as the market. While a HELOC can be advantageous for home improvements, debt consolidation, and other substantial expenses, it’s important to consider the interest rate, repayment term, and potential risks involved.

What is the monthly payment on a $100,000 HELOC?

The payment a $100,000 home equity line of credit will require can easily be calculated with a HELOC monthly payment calculator. Factors like the interest rate, the duration of your repayment term, and other details will all influence the final monthly payment. But assuming you draw the full amount at a 7.00% interest rate, and choose a term of 20 years to repay, your monthly payment will be about $836.

What are the benefits of a HELOC?

HELOCs offer you flexible access to funds, a competitive rate, and potential tax advantages. Common uses of HELOCs include funding home improvement projects and educational expenses, and consolidating debt.

Do you need an appraisal for a HELOC?

Yes, an appraisal is generally required with a HELOC application, to help a lender ascertain the current market value of the property. The appraisal tells the lender how much equity you have, providing assistance at the setting of your borrowing limit.

What disqualifies you from getting a home equity loan?

A tarnished credit history, insufficient home equity, and a high debt-to-income ratio can all disqualify you from obtaining a home equity loan. Familiarize yourself with the requirements for various types of home equity loans to up your chances of meeting the criteria.

How difficult is it to get a HELOC?

How hard securing a HELOC can be is contingent on several factors, including your credit score, the home equity you have accumulated, and the stability of your income stream.

Does HELOC affect credit score?

Applying for one may temporarily cause a slight decrease in your credit score, since it will require the lender to make a hard inquiry. But making consistent, on-time payments on your HELOC should positively impact your credit score over time, too, as it demonstrates responsible borrowing behavior.

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