Disclaimer: The prime rate directly influences the rates on HELOCs and home equity loans.
Key Points
• Home equity loans allow homeowners to borrow against the equity in their home.
• Home equity loan rates in North Carolina vary based on credit score, loan-to-value ratio, and lender policies, among other factors.
• Home equity loan interest rates are influenced by the prime rate and prevailing economic conditions, and can fluctuate over time.
• Home equity loans are typically used for large expenses such as renovations, education, or debt consolidation.
• Alternatives to home equity loans include a HELOC, HECM, or cash-out refinance; each has its own unique characteristics.
A home equity loan can help you tap into the funds you need to achieve your dreams in the Tar Heel State. This guide will tell you what you need to know to go about it. We’ll cover the factors that can influence the rates you’re offered — especially those you may be able to control. Armed with this information, you’ll be better equipped to make a choice that fits your needs.
A home equity loan is like a second mortgage, with your home as the collateral (assuming you are still paying off your first mortgage). You receive the funds you borrow in one lump sum and repay the loan with equal monthly payments over a term of five to 30 years. A home equity loan is not the same thing as a home equity line of credit (HELOC) — more on that below.
Home equity loans usually have fixed interest rates, which can be lower than the rates on unsecured personal loans. To qualify for a home equity loan, you’ll usually need at least 20% equity in your home. Home equity loans can be used for a variety of purposes, from home improvements to education expenses to medical bills to debt consolidation.
Economic factors, such as the rate set by banks for their most creditworthy customers and policy decisions made by the Federal Reserve, significantly influence home equity loan interest rates. Keeping up with the news on how the Federal Reserve is adjusting its rates and being aware of the current home equity rates in North Carolina can help you determine whether the time is right to apply for a home equity loan.
Understanding the impact of interest rates on loan affordability is key. Over a standard 20-year loan, a 1% variance in interest rate can translate to a noticeably higher monthly payment and a significantly greater amount of interest paid.
Let’s take a look at how that plays out if you borrow $30,000 with a 20-year term:
• At 8.00% interest the monthly payment would be $251 and the total interest paid would be $30,224.
• At 7.00% interest the monthly payment would be $233 and the total interest paid would be $25,822.
• At 6.00% interest the monthly payment would be $215 and the total interest paid would be $21,583.
Of course the more you borrow, the more noticeable the difference in monthly payment and total interest would be.
The prime interest rate is a key factor in the direction of rates for North Carolina’s different types of home equity loans. Take a look at the history of the prime rate to get a sense of how high or low it may go.
| Date | Prime Rate |
|---|---|
| 9/19/2024 | 8.00% |
| 7/27/2023 | 8.50% |
| 5/4/2023 | 8.25% |
| 3/23/2023 | 8.00% |
| 2/2/2023 | 7.75% |
| 12/15/2022 | 7.50% |
| 11/3/2022 | 7.00% |
| 9/22/2022 | 6.25% |
| 7/28/2022 | 5.50% |
| 6/16/2022 | 4.75% |
| 5/5/2022 | 4.00% |
| 3/17/2022 | 3.50% |
| 3/16/2020 | 3.25% |
| 3/4/2020 | 4.25% |
| 10/31/2019 | 4.75% |
| 9/19/2019 | 5.00% |
| 8/1/2019 | 5.25% |
| 12/20/2018 | 5.50% |
| 9/27/2018 | 5.25% |
In North Carolina, a number of elements, such as credit score, loan-to-value ratio, home value, property location, and lender policies all play a part in determining what home equity loan rate a borrower might be offered. Lenders carefully consider these factors, and by understanding them, you can increase your chances of securing the best rate.
If you’ve been building your credit history with care, making payments on time, and keeping your credit card balances low, you’re likely to qualify for a sweet interest rate. In general, lenders prefer a credit score of 680 or higher, and many have a preference for scores of 700 or more.
Lenders establish your home equity and the amount you can borrow by evaluating your home’s value through an independent appraisal. Don’t be surprised if the lender sends an appraiser to your home to take photos and write a report — time to tidy up!
The loan-to-value (LTV) ratio is a key number in mortgage lending. It’s calculated by dividing the loan amount by the appraised value of the property. Most lenders require a maximum LTV of 85%.
The ebb and flow of home values directly impacts the equity you can leverage. In times of rising values, lenders are more inclined to greenlight larger loans, as the reduced risk of default is tied to your home’s increased worth. On the flip side, when values dip, lenders proceed with caution. This can pose a challenge for those seeking loans or looking to refinance. Here’s where understanding the homebuying environment in North Carolina — and in your specific town or neighborhood — may come in handy.
Living in an area prone to extreme weather conditions such as hurricanes or flooding can mean higher interest rates due to the perceived risk of lending. (Whether this will impact parts of Western North Carolina now more than in the past due to recent extraordinary flooding remains to be seen.)
Lender policies can have a big impact on North Carolina home equity loan rates, so it’s a good idea to shop around with multiple lenders. By comparing interest rates, fees and closing costs, you can find a deal that works for your financial situation.
To qualify for the most favorable interest rates available, homeowners should take proactive steps to establish a strong credit score, manage their debt-to-income ratio effectively, obtain adequate property insurance coverage, and maintain a sufficient level of home equity. By implementing these measures, homeowners can position themselves to secure the most advantageous mortgage terms and potentially save a substantial amount of money over the life of their loan. Utilizing a home equity loan calculator can also help homeowners understand their financial options and make informed decisions.
A higher credit score can lead to better rates on home equity loans, such as those offered by SoFi. Maintaining a strong credit history and making timely payments is crucial to securing the most favorable terms. By establishing and maintaining a strong credit score, you can access more advantageous home equity loan options, potentially saving thousands of dollars in interest over the life of the loan.
Your debt-to-income (DTI) ratio is a key number that lenders use when deciding whether to approve your application for a home equity loan. It’s calculated by dividing your monthly debt payments by your monthly income. Most lenders want your DTI to be 36% or less, but the maximum DTI allowed can vary depending on the lender, the loan type, and other factors. A lower DTI can help you get a lower interest rate.
In many cases, you’ll need to have property insurance in place to get a home equity loan. If you live in a flood-prone area, you may need to purchase flood insurance, too. It’s important to have the right amount of insurance to protect against financial loss and give you peace of mind.
In North Carolina, as in other parts of the U.S., lenders typically require you to have at least 20% equity in your home to get a home equity loan.
With a typical home mortgage loan, you choose between a fixed and a variable interest rate. But with a home equity loan, your interest rate will be fixed. That means you’ll have a consistent, predictable monthly payment for the life of the loan. While fixed rates offer stability, they may be higher initially than variable rates, which can start out lower, but can increase or decrease over time.
A variety of financial tools and calculators are available to help homeowners determine their eligibility and estimate their borrowing power for home equity loans. Check them out below:
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.
In North Carolina, you can expect to see closing costs that range from 2-5% of the home equity loan amount. Common fees include the appraisal fee ($300 – $600) and charges for credit reports, document preparation, and title insurance.
Here’s the deal: The interest on your home equity loan is tax-deductible if you use it to significantly improve your home. You can deduct the interest you paid on the first $750,000 of your mortgage ($375,000 for couples filing separately), and you’ll need to itemize your
In addition to traditional home equity loans, there are other ways to get equity out of your home, each with its own benefits and drawbacks. You’ll want to compare the home equity loan rates in North Carolina if you’re looking at any of these options:
A HELOC is like a credit card but typically comes with a lower interest rate. The lender will approve you for a specific amount, based on criteria similar to those used for a home equity loan. You can then borrow as much as you need up to that approved limit.
The interest rate on a HELOC is usually a variable rate, which means your payments will go up if interest rates do. This can make budgeting more difficult. But when considering a HELOC vs. a home equity loan, one advantage of a HELOC is that if you aren’t sure how much cash you need on hand for a project, such as a kitchen remodel, with a HELOC you only borrow and pay interest on what you need at any given time.
A HECM is a government-backed reverse mortgage for homeowners 62 or older that allows the homeowner to receive payments based on the value of the home. Payments can be received as a lump sum, regular installments, or as a line of credit. No payments are required until the homeowner leaves the home. HECMs have higher closing costs and longer processing times than other options, such as a traditional North Carolina home equity loan.
A standard mortgage refinance involves swapping out your current loan for a new one. But with a cash-out refinance, you take out a new mortgage that’s larger than your existing one. You then pay off your original mortgage and keep the remaining cash to use as you wish. (If you’re comparing cash-out refinance vs a home equity line of credit the big difference is that the cash-out refinance, like a home equity loan, delivers the funds you’re borrowing to you in one lump sum.
Most lenders will let you borrow up to 80-85% of your home’s value. This is a popular option because the interest rate on your mortgage is likely to be lower than the interest on, say, a personal loan. But if you enjoy a very low interest rate on your current mortgage, this approach may not work in your favor. Some borrowers like the cash-out refinance option because it leaves them with one monthly payment instead of making two separate payments to a first mortgage and a home equity loan or HELOC.
Understanding the ins and outs of home equity loans and home equity loan rates in North Carolina is key to making the best financial decisions. By comparing lenders, working to keep your credit score high, and maintaining a good amount of home equity, you can improve your chances of getting the best loan terms for your financial goals.
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.When it comes to a $50,000 home equity loan, the interest rate and loan term you choose will play a big role in the size of your monthly payment. Borrowing $50,000 at a 7.50% interest rate with a 10-year term would equal a monthly payment of $594.
When you’re thinking about a $100,000 HELOC, keep in mind that your monthly payment will fluctuate based on the current interest rate and how much of your credit line you’ve utilized. If you used the full $100,000 and your interest rate was 8.00%, you’d pay $836 per month if you repaid the funds over 20 years.
When you’re looking at a $25,000 home equity loan, you need to think about how the interest rate and the loan term will affect your monthly payments. Assuming a 10-year term, an interest rate of 6.00% would mean a $278 monthly payment. An interest rate of 8.00% would mean $303.
The monthly payment on a $30,000 home equity loan would be $287, assuming an interest rate of 8.00% and a 15-year term. Changing the rate or term will result in a change in the payment amount as well.
A history of bad credit, a lack of equity in your home, or too much debt might disqualify you from getting a home loan. Inadequate home insurance is another warning sign for lenders.
The big benefit of a HELOC is its flexibility. You’re approved to borrow a certain amount, but you take out only what you need — so you only pay interest on what you have actually borrowed. You can also borrow and repay repeatedly up until it’s time to start repaying what you have borrowed in full.
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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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
