Second mortgages could come with lower upfront fees in North Carolina

For North Carolina families tapping home equity, SB 675 could make a second mortgage cheaper to close by limiting the upfront fees lenders can charge. The bill would not change the interest rate, but it would curb closing costs and bring state law closer to federal standards for those loans.

That matters because these loans often come into play when homeowners tap equity or use other subordinate financing. The change is about fees and discounts, not the loan’s interest rate, so the price pressure shows up at closing rather than in the monthly payment.

The fee that shows up at closing

Under the rewrite, the second- or junior-lien fee section would sit alongside the existing limits in state law, and it would continue to govern loans secured by a second or junior lien on real property. The text says those fees or discounts are fully earned when the loan is made, and it also points lenders back to the federal points-and-fees test for certain loans.

In plain English, that means the state is looking at the same part of the transaction federal mortgage rules already watch closely: the front-end cost of borrowing. For a homeowner trying to refinance debt, fund repairs or cover another expense with a subordinate loan, a tighter fee cap can change whether the deal is worth doing.

Why subordinate debt gets special treatment

The people most likely to notice the change are borrowers using home equity or other layered financing, especially when a second lien is stacked on top of an existing mortgage. Those loans are often smaller and more expensive to structure, which makes the up-front fee limit especially important.

If the bill becomes law, the practical question for borrowers and lenders will be whether the closing costs still leave enough room for the loan to make sense. For families trying to turn home equity into usable cash, that difference can decide whether a loan is affordable enough to sign.