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Published: Oct 29, 2024 33 min read
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Company Highlight
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  • Unlock cash from within your home
  • Online loan application process
  • Save time on documents & paperwork
  • Pay down debt, buy an investment property, or renovate your home

Trust Pilot Rating4.7 out of 5
TrustPilot Reviews34,231
Originations133,403
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  • Home Equity Loans

  • Loans ranging from $35,000 to $300,000

  • Competitive fixed rates

  • $0 costs at closing | $0 appraisal fees | $0 application fees | $0 origination fees


Trust Pilot Rating2.7 out of 5
TrustPilot Reviews13
Originations17,224
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  • Flexible terms, redraw up to 100%, borrow up to $400K
  • Approval in 5 minutes. Funding in as few as 5 days
  • Use to consolidate debt or finance your next project
  • 100% digital app & online appraisal for good/excellent credit

Trust Pilot Rating4.5 out of 5
TrustPilot Reviews2,602
Originations8,385
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  • No monthly payments or interest rates 
  • No need to refinance
  • Minimum FICO score required:  500 
  • 20% of home equity required

Trust Pilot Rating4.7 out of 5
TrustPilot Reviews949
Originations0

*Rates and APRs are subject to change. All information provided here is accurate as of October 29, 2024.

Home Equity Loans Main Takeaways

  • Home equity loans and lines of credit are viable options for property owners to access cash to consolidate higher-interest debt, make home improvements or weather a financial setback.
  • Home equity loans are more popular than ever; in 2024, home equity lending reached its highest level since 2008. Lenders originated over 333,000 new home equity loans during the first half of the year.
  • The home equity held by homeowners with mortgages totaled $17.6 trillion net during the second quarter of 2024, according to data from analytics firm CoreLogic. That represents a year-over-year increase of 8%.
  • Money’s editorial team researched and evaluated over 35 home equity providers, comparing their interest rates, fees and qualification requirements.
  • Citizens Bank, Discover and U.S. Bank are among our choices for the best home equity loans and lines of credit.

Why Trust Us?

Our editors and writers evaluate home equity loan and HELOC providers independently, ensuring our content is precise and guided by editorial integrity. Read the full methodology to learn more.

  • Reviewed 38 providers
  • 1,000+ hours of research
  • Based on 14 data points, including APRs, loan limits and approval time

Best Home Equity Loans Reviews

The companies listed below are in alphabetical order.

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HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
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Best Home Equity Loan Lenders Reviews


Pros
  • No appraisal fees or closing costs
  • 0.25% off with AutoPay if using a Citizens Checking account
  • Choose full or interest-only payments during 10-year draw period
Cons
  • Only for properties in certain states
  • $50 annual fee after the first year on standard HELOCs
HIGHLIGHTS
Annual Percentage Rate (APR)
8.00% to 21.00%
Loan Amounts
$5,000 - $25,000
Terms
10 years
Max. Loan-to-Value (LTV)
Not disclosed

Why we chose this company:

Citizens Bank (NMLS #433960) has consistently garnered good customer reviews and high marks in independent, third-party customer satisfaction surveys. That acclaim makes it our choice to provide the best customer experience.

The bank offers two home equity lines of credit (HELOC) products: the standard line of credit, which provides credit lines starting at a minimum of $17,500, and the Citizens GoalBuilder, which has a minimum borrowing limit of $5,000 and a maximum limit of $25,000.

Citizen says its Fastline application allows you to obtain a personalized rate and line amount within a few minutes without impacting your credit score. Once you review and accept the bank’s offer, you could close in as little as seven days and receive your credit line as soon as two weeks after accepting the offer. Signing up for autopay from any Citizens Bank checking account qualifies you for a 0.25% rate discount.

Eligibility requirements

  • Property type - Owner-occupied 1- to 4-family properties or condominiums
  • Credit score - Not disclosed
  • Amount of equity available - Not disclosed
  • Regional availability - Offered in Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Vermont, Virginia and Washington DC.

See rates on Citizens Bank's Secure Website >>


Pros
  • Loan amounts from $5,000
  • No annual fee
  • 15-year draw period available
Cons
  • A credit union membership is required
  • Closing costs can range from $175 to $2,000
  • Home equity loans not available in Maryland, Texas, Hawaii and Alaska
HIGHLIGHTS
Annual Percentage Rate (APR)
6.89% - 9.41%
Loan Amount
From $5,000
Terms
5 to 15 years
Max. Loan-to-Value (LTV)
90%

Why we chose this company:

Connexus Credit Union (NMLS #649316) offers home equity loans with flexible repayment terms, ranging between five and 15 years, in addition to an interest-only home equity line of credit.

You'll make interest-only payments on the line of credit during the loan's draw period rather than having to pay off the loan’s principal as well. It’s a convenient option if you prefer or need to start with lower payments and are confident you’ll be able to afford the higher costs in the future when repayment of the principal will kick in.

Connexus offers attractive locked rates – at writing, the rate for their interest-only HELOC was 5.99%, valid until October 1, 2025. The lender also offers a standard line of credit – one in which you pay both interest and principal during the draw period for the loan. The monthly payment on that option is 1.5% of the amount borrowed.

Connexus is currently offering qualified borrowers a fixed introductory rate lock on both HELOC options until April 2025, after which the interest will become variable.

Eligibility requirements

  • Property type - Primary home and second homes (single-family homes, 2-4-unit condominiums, owner-occupied duplexes, or townhouses)
  • Credit score - Not disclosed
  • Amount of equity available - Minimum 10%
  • Regional availability - Home equity loans not available in Maryland, Texas, Hawaii or Alaska.

Read Connexus Credit Union Home Equity Loan Review

See rates on Connexus's Secure Website >>


Pros
  • No origination, appraisal or application fees or mortgage taxes due at closing
  • No prepayment penalty
  • Full online application process
Cons
  • No information regarding discounts
HIGHLIGHTS
Annual Percentage Rate (APR)
Check Website for Details
Loan amounts
$35,000 - $300,000
Terms
10 to 30 years
Max. Loan-to-Value (LTV)
90%

Why we chose this company:

If you want a lender that doesn't charge a lot of fees, Discover (NMLS #684042) is a great option to consider.

Discover home equity loans don’t involve origination, application, loan processing or appraisal fees. You also won’t pay any upfront closing costs. The online lender offers competitive, fixed interest rates and repayment terms of between 10 and 30 years.

You can borrow up to 90% of your available home equity, and the loan can be either a first or second lien. Loan amounts range from a minimum of $35,000 to a maximum of $300,000. The application process is entirely online, and Discover’s eClosing allows you to sign and submit all closing documents digitally.

Eligibility requirements

  • Property type - Primary residence (single-family residences, condos and townhomes)
  • Credit score - Minimum of 680
  • Amount of equity available - Usually between 10% to 20%
  • Regional availability - Available nationwide.

Read Discover Home Equity Loans Review

See rates on Discover's Secure Website >>


HIGHLIGHTS
Annual Percentage Rate (APR) Range
6.55% - 15.95 (Conditions apply)
Loan Amount
$15,000 - $400,000
Terms
5, 10, 15 and 30 years
Max. Loan-to-Value (LTV)
Not disclosed

Why we chose this company: Figure (NMLS #1717824) offers competitive rates, an entirely online application process, quick approval times and funding in as little as five days.

The fintech company stands out for its streamlined application, which lets customers check their rate, apply and receive an approval decision within minutes. The process includes an eNotary who confirms customers’ identities and reviews mortgage applications and documents electronically. In addition, loans can be funded within five days after approval.

Figure’s loan amounts for HELOCs range from $15,000 to $400,000. Interest rates are fixed for the initial draw amount but change for subsequent draws, and the available loan terms are five, 10, 15 and 30 years. Figure doesn’t charge fees to open or maintain accounts, and there are no penalties for prepayment. However, it charges a one-time origination fee of up to 4.99% of the initial draw.

The lender recently launched its Piggyback HELOC, a second loan available through Figure's partner network. Homebuyers can use the piggyback loan on top of the primary mortgage to lower down payment costs, while homeowners with low equity can use it for cash-out refinances.

Eligibility requirements

  • Property type - Single-family residences, townhouses, urban developments and condos
  • Credit score - Minimums of 640 for primary residences and 680 for non-owner occupied or investment properties
  • Amount of equity available - Not disclosed
  • Regional availability - Not available in Delaware, Hawaii, Kentucky, New York, or West Virginia.

See rates on Figure's Secure Website >>


Pros
  • Line amounts of up to $1 million
  • 0.25% rate discount with AutoPay
  • 1 to 4-unit properties and modular homes are eligible
Cons
  • $75 annual fee after first year
  • Not available in Texas, Puerto Rico or the U.S. Virgin Islands
  • HELOANs are only available in states with a branch office
HIGHLIGHTS
Annual Percentage Rate (APR)
8.99% - 21.00%
Loan Amount
$10,000 - $1,000,000
Terms
10-year draw period, 20-year repayment
Max. Loan-to-Value (LTV)
85%

Why we chose this company:

Flagstar (NMLS #417490) offers lines of credit of up to $1 million, which makes it the best HELOC option for large loans.

Flagstar’s home equity line of credit has variable interest rates. It’s available for between $10,000 and $1 million, which means it offers one of the highest loan limits on the market. Borrowers who take out a credit line of $50,000 or more and make an initial draw of at least 50% of the available credit qualify for a 7.99% interest rate for the first six billing cycles.

Customers who set up AutoPay from a Flagstar deposit account can receive a 0.25% discount on their interest rate. The company also offers a 10-year draw period and a 20-year repayment term.

Flagstar doesn’t charge closing costs (which typically include appraisal, title, notary and recording fees) as long as you leave the HELOC open for at least 36 months. However, customers are responsible for paying government taxes and fees at closing and a $75 annual fee after the first year.

Eligibility requirements

  • Property type - Primary residences, including 1-to-4-unit residential homes and secondary homes (1-unit residential homes)
  • Credit score - Not disclosed
  • Amount of equity available - Not disclosed
  • Regional availability - Not available in Texas, Puerto Rico or the U.S. Virgin Islands.

Read Flagstar Home Equity Loans Review

See rates on Flagstar's Secure Website >>


Pros
  • No application, origination, annual or inactivity fees
  • Borrows up to 100% of your home equity for HELOANS and up to 95% for HELOCs
  • Longer 20-year draw period for HELOCs
Cons
  • Membership limited to the military and their families
HIGHLIGHTS
Annual Percentage Rate (APR)
From 7.340% (HELOAN), 8.250% - 18.00% (HELOC). Terms apply.
Loan Amount
$10,000 - $500,000
Terms
5 to 20 years
Max. Loan-to-Value (LTV)
100%

Why we chose this company: Navy Federal Credit Union (NMLS #399807) offers the best home equity loans for military service members and veterans. Their products include loans without application or origination fees and HELOCs with longer draw periods than most competitors.

Navy Federal offers fixed-rate equity loans and home equity lines of credit for loan amounts between $10,000 and $500,000. In the case of equity loans, Navy Federal lets you borrow up to 100% of your home’s equity, with repayment terms of five, 10, 15 and 20 years.

However, with a HELOC, you can borrow up to 95% of your home’s equity at a variable rate. Navy Federal offers a longer-than-average 20-year drawing period than the 10-year term most competitors offer. The company also covers closing costs, ranging from $300 to $2,000 for loans of up to $250,000.

Eligibility requirements

  • Credit union membership - must be an active duty, retired or veteran of the armed forces, or an immediate family member
  • Property type - primary residence, single-family home
  • Credit score - Not disclosed
  • Amount of equity available - Not disclosed
  • Regional availability - HELOCS not available in Texas.

See rates on Navy Federal Credit Union's Secure Website >>


Pros
  • Rates starting at 6.75% APR
  • HELOC can be converted into a fixed-rate loan
  • No closing costs
Cons
  • Property tied to the loan must be in a state with a Regions retail branch
  • Branches only in AL, AK, FL, GA, IL, IN, IA, KY, LA, MS, MO, NC, SC, TN, and TX
HIGHLIGHTS
Annual Percentage Rate (APR)
6.75% to 14.125%
Loan Amounts
$10,000 – $250,000
Terms
10, 15 or 20 years
Max. Loan-to-Value (LTV)
up to 89%

Why we chose this company: Regions Bank (NMLS #174490) made our cut as the lender with the most flexible repayment terms. It offers term lengths of between seven and 20 years.

Regions Bank offers fixed-rate home equity loans with no closing costs. Loan amounts range from $10,000 to $250,000.

In addition to home equity loans, Regions Bank offers home equity lines of credit (HELOCs). These start at $10,000 and go up to $500,000, with a 10-year draw and a 20-year repayment period.

Regions Bank covers the closing costs due on credit lines of up to $250,000. If your line of credit exceeds $250,000, Regions Bank will contribute up to $500.

Eligibility requirements

  • Property type - Primary or secondary residence
  • Credit score - Not disclosed
  • Amount of equity available - At least $10,000
  • Regional availability - Available in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee and Texas.

See rates on Regions Bank's Secure Website >>


Pros
  • Multiple fixed-rate repayment options may be available
  • Covers appraisal fee
  • HELOC with no annual fee in most states
Cons
  • Only offers HELOC
  • Prepayment penalty for terminating a line of credit within 36 months
  • $15 service fee
HIGHLIGHTS
Annual Percentage Rate (APR)
8.00% – 16.00% (or state maximum)
Loan Amounts
From $5,000
Terms
5, 10, 15, and 20 years
Max. Loan-to-Value (LTV)
Not disclosed

Why we chose this company: Truist (NMLS #399803) is our choice for the best fixed-rate HELOC because borrowers can choose fixed rates and repayment terms of between five and 20 years.

Truist offers home equity lines of credit with three repayment options: interest-only, fixed and variable-rate repayments, all with zero-cost closing options. The minimum amount you can request for HELOCs is $5,000. Fixed-rate HELOCs may be subject to a $15 set-up fee. On the other hand, Truist’s variable-rate lines of credit have a 10-year draw period and a 20-year repayment period.

Borrowers in some states can choose to have Truist pay the closing costs on lines of up to $500,000. However, rates will vary with this option. Prepayment penalties on lines of credit may also apply should the account be closed within three years of opening. If this is the case, you’ll have to pay back any origination or closing costs paid by Truist, which could cost you as much as $10,000.

Eligibility requirements

  • Property type - Single-family, primary residence, second home or condominium occupied by the owner
  • Credit score - Not disclosed
  • Amount of equity available - Not disclosed
  • Regional availability - Available in Alabama, Arkansas, California, Florida, Georgia, Tennessee, South Carolina, Virginia, Maryland, Mississippi, Washington DC, West Virginia, Indiana, Kentucky, New Jersey, Ohio, Pennsylvania, North Carolina and Texas.

Read Truist Home Equity Review

See rates on Truist's Secure Website >>


Pros
  • No closing costs, although initial escrow-related costs may apply
  • Interest rate will never exceed 18% APR, subject to applicable state law
  • 0.50% interest rate discount with automatic payments deducted from a U.S. Bank account
Cons
  • $75 annual fee may apply after the first year
  • Early closure fee of 1% or up to $500 applicable during the first 30 months
  • Home equity loans not available in Hawaii, Louisiana, New York, Oklahoma and Rhode Island if property is held in a trust
HIGHLIGHTS
Annual Percentage Rate (APR)
From 7.65% (HELOAN); 8.45% - 12.10% (HELOC)
Loan amounts
$25,000 - $750,000
Terms
10 to 30 years
Max. Loan-to-Value (LTV)
60%

Why we chose this company: U.S. Bank (NMLS #402761) has the best home equity loan for borrowers with good credit. It offers highly competitive interest rates for customers with scores of 730 or more.

To get the lowest rates, however, you’ll need a U.S. Bank checking or savings account with automatic payments set up.

The company’s home equity loans and HELOCs do not have closing costs. Home equity loans have repayment terms of up to 30 years. Loan amounts start at $5,000 and go up to 60% of your home equity to a maximum of $750,000 ($1 million in California).

While the HELOCs feature variable rates, you can convert a portion of (or the total) amount of your balance to a fixed rate for up to 20 years. In addition to having this fixed-rate payment option, any balance you don’t convert to a fixed-rate arrangement will continue to have a minimum payment and variable rate.

Eligibility requirements

  • Property type - Primary residence, single-family home
  • Credit score - Minimum 660
  • Amount of equity available - Not disclosed
  • Regional availability - Not available in Hawaii, Louisiana, New York, Oklahoma or Rhode Island if property is held in a trust.

Read U.S. Bank Home Equity review

See rates on U.S. Bank's Secure Website >>


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Other home equity loan companies we considered

While solid contenders, the following home equity loan lenders didn’t make it to the top of our list. Nevertheless, they might have features and products suited to your particular circumstances.

Bank of America

Pros
  • No fees for converting a variable rate loan to a fixed rate
  • 0.25% rate discount if you enroll in AutoPay using a BofA checking or savings account
  • Up to 1.50% rate discount for initial withdrawals of $150k or more (0.10% for every $10,000)
Cons
  • Only offers HELOCs
  • Can't open more than three fixed-rate loans at the same time
  • Maximum APR is not disclosed

Bank of America (NMLS #399802) is another lender that offers home equity lines of credit. In addition, it features introductory rates and multiple rate discounts, such as one of 0.625% if you enroll in autopay and up to 0.750% for customers with a Preferred Rewards account. However, Bank of America doesn’t offer home equity loans nor readily disclose the maximum APR customers might pay.

Read Bank of America Home Equity Review

See rates on Bank of America's Secure Website >>

BMO Harris Bank

Pros
  • 0.50% AutoPay rate discount
  • Fixed-rate options for HELOCs
Cons
  • $75 fee each time you convert HELOC from a variable to a fixed rate
  • Not all transactions are eligible for remote closing
  • $75 annual fee each year during the draw period

BMO Harris Bank (NMLS #401052) offers home equity loans and HELOCs, which are available for customers with a minimum FICO score of 700 or between 650 and 680, respectively. While BMO Harris’s home equity line of credit rates are competitive, the lender mainly operates in only eight states: Arizona, Illinois, Florida, Kansas, Indiana, Minnesota, Missouri and Wisconsin.

Read BMO Harris Bank Home Equity Review

See rates on BMO Harris Bank's Secure Website >>

Frost

Pros
  • No application or annual fee charges
  • 0.25% rate discount with automatic payment
  • APR rates for HELOANs starting at 6.93%
  • No prepayment penalty for HELOC
Cons
  • Only available in Texas

Frost Bank (NMLS #431208) features competitive home equity loans and HELOC products with terms of up to 20 years. Home equity loans and HELOCs are available starting from $2,000 and $8,000, respectively. Frost's main drawback is that it’s only available in Texas. It may be an option worth considering if you live in this state.

See rates on Frost's Secure Website >>

KeyBank

Pros
  • 0.25% rate discount for having a KeyBank checking or savings account
  • Borrow up to 80% of your home's value
  • Flexible payment options including principal and interest, interest-only or fixed
Cons
  • Doesn't openly disclose APRs for their home equity loans
  • Only services 15 states

KeyBank (NMLS #399797) offers home equity loans and lines of credit of up to 80% of your home’s value. Home equity loans are available from $25,000 to $500,000, whereas the minimum amount for HELOCs is $10,000. Like most banks, KeyBank offers a 0.25% rate discount when you enroll in autopay. However, its products are only available in Alaska, Colorado, Connecticut, Idaho, Indiana, Massachusetts, Maine, Michigan, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont and Washington.

See rates on KeyBank's Secure Website >>

PenFed

Pros
  • Loan amounts from $25,000 up to $500,000
  • Covers most closing costs
Cons
  • Only offers HELOCs
  • Does not offer lines of credit for certain types of properties
  • Properties must be fully livable and have no safety issues to be eligible

Credit union PenFed (NMLS #401822) only offers home equity lines of credit with a 10-year draw period and a 20-year repayment period. Loan amounts range from $25,000 to $500,000 max. However, to apply, you must become a credit union member and have a minimum credit score of 680. It also charges an annual fee during the draw period.

See rates on PenFed's Secure Website >>

PNC Bank

Pros
  • Offers fixed and variable rate options on HELOCs
  • Minimum draw amount in Texas is $4,000
  • Potential home renovation tax benefits when renovating for medical purposes or installing energy efficient equipment
Cons
  • $100 transfer fee each time borrowers opt for a fixed rate
  • In Texas, only applicants with primary residences and LTVs under 80% are eligible

PNC (NMLS #446303) offers fixed-rate home equity lines of credit for balances of $5,000 or more and a 0.25% rate discount when you enroll in autopay. However, interest rates aren’t readily displayed on its website, and it charges an annual fee of $50. In addition, its home equity products are unavailable in Alaska, Hawaii, Louisiana, Mississippi, Nevada or South Dakota.

Read PNC Home Equity Review

See rates on PNC Bank's Secure Website >>

Spring EQ

Pros
  • 640 minimum score for home equity loans
  • Offers access to up to 90% of your home value
  • Relatively fast funding, between 14 to 21 days
Cons
  • Doesn't disclose information about fees and rates

Spring EQ (NMLS #1464945) specializes in home equity products. You can access up to 90% of the equity in your home and borrow up to $500,000 with this lender.

Loan terms range from five to 30 years. The loan application process is entirely online, providing instant qualification in most cases and funding between 14 to 21 days. However, it didn’t make our top picks as current fees and rates are not openly available on their website.

Read Spring EQ Home Equity Review

See rates on Spring EQ's Secure Website >>

Unison

Pros
  • Lets you convert up to 15% of your home equity into cash
  • Single-family homes, townhouses and condominiums are eligible
  • Doesn't impact creditworthiness nor charges interest rates
  • No payments for 30 years or until you sell your home
Cons
  • Five-year restriction period, where Unison won't share in the losses of your home's value, if you sell
  • May affect your eligibility for refinancing your mortgage
  • Must pay back the co-investment plus four times the percentage invested after 30 years

Unison is a home equity loan alternative that offers home co-investing. The company lets you borrow up to 15% of your home value in cash in return for a share of your home’s future value. Although you don’t have to pay Unison back for up to 30 years or until you sell your house, this alternative has several potential drawbacks. For one, you may be unable to refinance your home during this period. And if you don’t sell your home, you must pay back the original co-investment plus a percentage of your home’s increased value.

See rates on Unison's Secure Website >>

Home Equity Loans Guide

Long-time and even recent homeowners are in an enviable position when it comes to the value of their homes. Since the second quarter of 2023, property owners with existing mortgages have gained $1.3 trillion in home equity; that represents a year-over-year increase of 8%, according to a report by analytics firm CoreLogic. Overall, mortgage holders had an aggregate of $17.6 trillion in equity they can access if needed.

That accumulation has been a lifeline for some property owners. “The substantial accumulation of home equity for existing homeowners has served as a financial buffer in times of uncertainty,” wrote Selma Hepp, CoreLogic’s chief economist, in the report. “Some homeowners are facing higher costs of homeowners’ insurance and taxes and have had to tap into their equity to prevent falling behind on their mortgages.”

Home equity loans and lines of credit are options property owners can consider if they need cash to pay off debt that’s high in interest debt or to cover unexpected bills like medical costs or home repairs. They can also use the money to make home improvements, which provides another advantage – since the interest paid on the loan is tax deductible. Check your credit report and review your personal finances to see whether tapping into your home equity can help you meet your financial goals.

To learn more about whether a home equity loan is the right option for you and how to find a suitable lender, read on for our complete guide.

What is a home equity loan?

A home equity loan (HEL or HELOAN) is a fixed-term loan product that uses the equity you’ve accumulated in your home as collateral. Often called a second mortgage, a home equity loan provides the borrower with a lump-sum payment they can use for major home renovations, consolidating debts or paying off student loans. The borrower can repay the loan in equal installments.

Home equity loans often have lower interest rates than credit cards or personal loans, provided you have a good credit score. Yet they also put you at risk of losing your home if you cannot make payments. Note, too, that the first mortgage remains the primary loan on a property if it still carries a balance – meaning it will be paid first if the borrower defaults on their obligations.

How does a home equity loan work?

Home equity loans work like a second mortgage, allowing you to take out a loan against your property's value. As with your primary mortgage, your home is at risk of foreclosure if you can't make payments.

The maximum amount you can borrow with a home equity loan depends on several factors, including your debt-to-income ratio (DTI), standard loan-to-value (LTV) ratio and combined loan-to-value ratio (CLTV). Home equity loans typically can't exceed 80% to 90% of the property’s appraised value. Loan terms include a fixed interest rate and monthly loan payments for up to 30 years.

Current home equity loan interest rates

Home equity loan rates are typically on par with mortgage loan rates. HELOC rates, on the other hand, are variable and can be somewhat higher depending on the bank and the prime rate.

When comparing rates, look at the annual percentage rates (APRs) to get a more complete idea of what you’ll pay in interest and help you determine which lender offers the best rate.

How to calculate home equity

Home equity refers to the difference between your mortgage balance (what you owe) and the current market value of your home.

Your equity can increase over time as you pay down the principal and if the value of your property goes up. It can also decrease if your home value drops.

To calculate your equity, you need to:

  • Determine the current market value of your home. (In most cases, a certified real estate appraiser can help you obtain an official valuation.)
  • Deduct your remaining mortgage balance (if you have one) from your home's current market value.

For instance, if your home is worth $300,000 and you owe $175,000 of your mortgage, your home equity is $125,000. Your home's equity is full value if you’ve already paid your mortgage.

Home equity loan requirements

When determining if you qualify for a home equity loan, lenders will typically check if you meet the following requirements:

  • At least an 80% loan-to-value ratio, or the equivalent of 20% equity
  • A low debt-to-income ratio, preferably under 43%
  • A minimum credit score of 620 or higher
  • Own a qualifying home, such as a single-family home, townhouse or condo
  • Be employed, self-employed or retired and have a steady income
  • Supporting documentation, such as pay stubs, tax returns and W2s

Naturally, the higher your home equity, the more you’ll be able to borrow. If you’re a recent homebuyer, focus on building equity before considering this type of loan. One way to do this is by making additional mortgage payments to your principal. Check our guide on how to build equity in a home for more actionable steps.

Pros and cons of home equity loans

Here are some advantages and disadvantages to consider when deciding whether a home equity loan is the best option for your financial situation.

Pros
  • You get a fixed interest rate
  • Predictable payments for the life of the loan
  • Money can be used for any purpose (debt consolidation, paying for tuition, etc.)
  • Interest may be tax-deductible, if the loan is used for home improvement
Cons
  • Must use your home as collateral
  • You'll have a second mortgage if you're still paying the primary mortgage
  • You may have to pay closing costs, depending on the lender
  • You need significant equity on your home, typically between 15% and 20%

How to choose a home equity loan

When looking for a home equity loan, consider the following steps.

1. Understand your options

There are two types of home equity loans: traditional home equity loans and home equity lines of credit. Traditional home equity loans give you a lump sum, whereas HELOCs work like credit cards. Read the section on differences between home equity loans and HELOCs for more information.

2. Compare loan terms and repayment options

Regardless of which option you choose, ensure you understand all the costs associated with the loan or line of credit. A fixed-rate loan means your rate and loan payments won’t change for the life of the loan.

Your monthly payments will fluctuate with interest rates if it’s a variable or adjustable-rate loan. While mortgage rates remain low, your payments will be low. However, those interest rates may start to go up at some point, which means your monthly payments will also increase.

3. Calculate how much you can borrow with a home equity loan

To determine how much equity you can borrow, you must calculate your loan-to-value ratio (LTV). To do this, divide your mortgage’s outstanding balance by your home’s current market value and convert that into a percentage. For example, your current mortgage loan balance is $175,000, and your home is appraised at $250,000. This means you have a loan-to-value ratio of 70% and 30% equity.

Because most lenders require you to keep at least 20% equity in the home, you would only be able to borrow against 10% of your equity — in this case, $25,000 (10% of the home's current value gives you the amount you’ll be eligible to borrow).

An easier way to calculate how much you can borrow is to multiply your home’s current value by 80% and subtract what you still owe from the total.

4. Check closing costs for home equity loans

Home equity lenders may charge closing costs, just like primary mortgage lenders. These costs can range from 2% to 5% of your loan total. Lenders may also charge an application fee and other costs for services such as loan origination, appraisals, title search and attorneys. There are, however, no appraisal home equity loan lenders as well.

However, many lenders don’t charge some of these fees and may even be willing to waive closing costs altogether on the condition that you won’t pay off the loan before a certain period of time (typically three years). If you close the loan before then, you must pay back all the costs the lender covered.

Some lenders may offer higher interest rates in exchange for reducing or covering closing costs or fees.

How to get a home equity loan

Once you’ve chosen your home equity lender, you will typically need to get an appraisal, gather your financial information and apply for the loan. Check out our guide on how to get a home equity loan for more information.

Alternatives to home equity loans

Aside from home equity loans, there are several ways to tap into your home’s equity: home equity lines of credit (HELOC), cash-out refinance loans and personal loans.

Most of these loan options require equity in your home, but they all have different characteristics and qualification requirements.

Home equity loan vs HELOC

When deciding between a home equity loan and a home equity line of credit, keep in mind these key differences:

Home Equity Loan

HELOC

Most have a fixed interest rate.

HELOCs typically have a variable interest rate, which can increase or decrease over time. (Some banks may let you convert your variable rate into a fixed rate later on)

Access to funds is through a single upfront lump sum.

Allows you to withdraw funds as needed up to a preset credit limit for an established period of time (draw period).

Available with terms from five up to 30 years

Typically has a 10-year draw period and a 20-year repayment period.

You pay interest plus principal for the determined repayment period.

Options to pay interest only during the draw period are typically available.

Home equity loan vs. cash-out refinance

Home equity loans and cash-out-refinances are ways to get cash for home improvement projects or debt consolidation using some of your home equity. However, some property owners prefer refinancing their existing mortgage into a cash-out refinance rather than taking on a new loan. These are the differences to consider:

Home Equity Loan

Cash-out refinance

Gives you a lump sum in exchange of your home equity, creates a second mortgage on the property.

Pays you part of your home equity in cash, and replaces your existing mortgage with a new one.

The terms of the original mortgage won't change. Instead, you'll have two loans.

You may refinance at a lower interest rate, if available.

Interest rates are typically somewhat higher than mortgage rates.

Interest rates are typically lower because they're based on current mortgage rates.

Tax deductible if the funds are used to improve your home.

Interests on the principal are tax deductible as any other mortgage. You may also deduct the cash-out portion if used for home improvements.

Home equity loan vs. personal loan

For some, a personal loan can be a viable alternative to a home equity loan. When choosing between the two, keep these key differences in mind.

Home Equity Loan

Personal Loan

Home serves as collateral, so rates are lower

Typically unsecured, as a result rates tend to be higher

Borrowing limits are generally higher, and are determined by the amount of equity in the borrower's home.

Borrowing limits are lower, and based on the borrower's creditworthiness, income, and other factors.

Interest paid can be tax deductible if the funds are used to improve your home.

Generally not tax-deductible, regardless of how the funds are used.

Carries the risk of losing your home if you default

Lenders cannot seize assets if the borrower defaults, but can still damage the borrower's credit score

Home equity loan vs. promotional credit card offers

If you have a smaller expense, such as wanting new furniture for your living room or replacing a broken refrigerator, a credit card with a promotional APR can be a good alternative to a home equity loan. With good credit, you can apply online and get approved quickly.

You can begin using the card immediately and get over a year at 0% APR, giving you time to pay the balance without interest charges. For example:

  • Blue Cash Everyday from American Express: This card offers 0% APR for 15 months on purchases. At the end of the promotional period, the variable APR will be 18.74% to 29.74%.
  • Chase Freedom Unlimited: The Chase Freedom Unlimited card gives new card members 15 months at 0% APR. Once the promotional period expires, the variable APR will be between 19.99% and 28.74%.
  • U.S. Bank Visa Platinum Card: With this card, you can qualify for 0% APR on purchases for 21 billing cycles, giving you nearly two years without worrying about interest charges. After the promotional period ends, the variable APR will be between 18.24% and 29.24%.

A credit card may not be practical for large projects, such as a pool installation, since you may be unable to pay off the balance in full by the end of the card's promotional period. Credit card rates are generally in the double digits, causing significant amounts of interest to build over time. For five-figure expenses, a home equity loan could make more sense.

Repaying home equity loans

To save money over the life of your home equity loan or HELOC, consider making additional payments or paying off the loan early. While making extra payments or an early repayment can help you become debt-free sooner, there is a drawback: some lenders charge prepayment penalties.

The penalty can be a percentage of your balance or a flat amount. For example, if you pay off your loan within three years of origination, the bank may charge you a penalty of $1,000 or 2% of the original credit limit. Review the loan agreement or disclosure before taking out a loan or line of credit, and look for details on early repayment.

Best Home Equity Loans FAQs

Can you get a home equity loan with bad credit?

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There are some home equity and HELOC lenders who are willing to consider applicants with credit scores in the 600s. However, expect to pay higher interest rates and be required to have at least 20% equity in your home.

Going with your current mortgage lender could be a good move. If you have a track record of on-time payments and a stable income, they might approve your application even with a less-than-perfect credit score.

How long does it take to get a home equity loan?

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Timing can vary greatly depending on the home equity lender. In most cases, it can take between two and four weeks to close the loan, whereas funding may take a few days after closing.

How can you use a home equity loan

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You can use a home equity loan to add value to your property by way of home improvements. You can also use it to consolidate debts, invest in a new business venture, create an emergency fund, pay education bills, or cover unexpected expenses.

How We Chose The Best Home Equity Loans

The methodology we used to narrow down our list of the top home equity loan providers includes researching and vetting each lender and evaluating them on the following criteria:

    • Price transparency: We evaluated the loan types offered, minimum and maximum loan amounts, interest rates, loan terms and credit score requirements for each lender.
  • Price transparency: We evaluated the loan types offered, minimum and maximum loan amounts, interest rates, loan terms and credit score requirements for each lender.
  • Application process: We checked eligibility requirements and approval times. In addition, we compared application and evaluation fees and whether application services were available online, by phone or in person.
  • Reputation and customer satisfaction: We looked into two main data sources: J.D. Power's 2024 U.S. Mortgage Servicer Satisfaction Study and complaint data as reported by the Consumer Financial Protection Bureau (CFPB).

Summary of Money’s Best Home Equity Loans of November 2024

According to our analysis, the companies below offer the best home equity loans. They appear listed in alphabetical order.