Bankrate's guide to home equity loans

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When shopping for a home equity loan, look for a competitive interest rate, repayment terms that meet your needs and minimal fees. Loan details presented here are current as of the publish date. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APY, loan amounts, fees, credit requirements and broad availability.

Current home equity loan rates

As of Apr 2, 2020, the average Home Equity Loan Rate is 5.33%.

Current home equity rates

Lender
Line amount
Min APR
Max APR
Discover
$35,000-$200,000
3.99%
11.99%
BMO Harris Bank
$5,000 and up
4.74%
Unspecified
KeyBank
$10,000-$249,000
3.42%
Unspecified
Spring EQ
$25,000-$500,000
5.205%
Unspecified
Flagstar Bank
$10,000-$1,000,000
6.02%
Unspecified
U.S. Bank
$15,000-$750,000
4.05%
Unspecified
Navy Federal Credit Union
$10,000-$500,000
4.99%
Unspecified
Frost
Starts at $2,000
5.24%
6.14%
Connexus Credit Union
Starts at $5,000
4.482%
Unspecified
Regions Bank
$10,000-$250,000
3.25%
11.625%

Best home equity loans of 2020

A variety of lenders offer home equity loans that let you borrow against your home’s value. These come with fixed rates, which protect you against payment hikes because the interest rate and monthly payment remain the same over the life of the loan. However, some lenders offer better loan terms, lower rates or low fees that make them especially attractive. Current home equity loan interest rates range between 3.25 percent and 11.99 percent depending on the lender, loan amount and creditworthiness of the borrower. Our list of the best home equity loans for 2020 can help you decide which loan might work best for your needs.

Best home equity loan for low rates: Discover

Overview: Discover is a national bank that’s well known for its rewards credit cards — but it also offers a full lineup of banking services, such as checking and savings accounts, personal loans and student loans. We chose this bank as the best for low rates because of its national reach (Discover is available in 47 states and the District of Columbia) and low rates that start at 3.99 percent.

Perks: Discover’s home equity loans allow you to borrow up to $200,000 against your home equity with rates starting at just 3.99 percent. You can choose a loan term of 10, 15, 20 or 30 years. Plus, borrowers won’t pay origination fees, application fees, home valuation fees or cash at closing. It’s a solid option that’s available to most borrowers across the country.

What to watch out for: The best rates go to customers with excellent credit, so if your credit score needs work, you may want to look elsewhere. Also, borrowers who pay off their loans within 36 months may have to repay closing costs covered by Discover (max $500).

Lender Discover
Max LTV Ratio 95%
Max Debt-to-Income Ratio 43%
Min. Credit Score 620
Interest Rates Rates between 3.99% to 8.99% for first lien and 3.99% to 11.99% for second lien
Loan Amount $35,000 to $200,000
Term Lengths 10 to 30 years
Fees Borrowers pay no origination fees, application fees, home valuation fees or cash at closing
Additional Qualifications Plan to share your personal details, Social Security number, proof of income, employment information, tax returns and pay stubs when you apply

Best home equity loan for different loan options: BMO Harris Bank

Overview: BMO Harris Bank has more than 500 branches spread across Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida, but customers nationwide can access BMO’s online banking resources. Its home equity loans come with low loan minimums, low fees and a variety of term options. With so many ways to tailor your loan to your needs, a home equity loan from BMO Harris can be ideal for just about any financial need.

Perks: Borrowers have plenty of options when it comes to loan terms and amounts on BMO’s home equity loans. Plus, credit score and debt-to-income ratio requirements are loose, which increases your chances of approval. There are no application fees, no closing costs and a 0.25 percent discount when you set up autopay with a BMO Harris checking account.

What to watch out for: You can start your application online but must speak with a banker to get final approval.

Lender BMO Harris Bank
Max LTV Ratio Not specified
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates Variable rates start as low as 4.74% but vary based on state, loan amount, creditworthiness and LTV
Loan Amount $5,000 and up
Term Lengths 5 to 20 years
Fees There are no application fees, and BMO Harris may pay many of your closing costs.
Additional Qualifications Need a Social Security number, proof of income and government-issued ID to apply

Best home equity loan for homeowners with minimal equity: KeyBank

Overview: When you don’t have a lot of equity in your home, it can be difficult to find a lender willing to extend you credit. Fortunately, KeyBank lets consumers borrow up to 100 percent of their home’s value in a first and second mortgage if they qualify. Its terms are also flexible, making this bank a solid choice.

Perks: You can borrow up to 100 percent of your home’s value with rates as low at 3.42 percent and terms up to 30 years. Plus, borrowers can get a 0.25 percent rate discount with autopay.

What to watch out for: As a regional financial institution, KeyBank home equity loans are only available in 15 states. Plus, a $125 origination fee applies, and you may have to pay for title insurance, closing fees and mortgage taxes.

Lender KeyBank
Max LTV Ratio 100% combined LTV
Max Debt-to-Income Ratio None
Min. Credit Score None
Interest Rates Rates vary around by location but can be as low as 3.42% if you only want to borrow up to 85% of your home’s value; higher rates apply when you borrow up to 100% of the value of your home
Loan Amount $10,000 to $249,000
Term Lengths 5 to 30 years
Fees There’s a $125 origination fee, and you may also have to pay for title insurance, closing fees and mortgage taxes
Additional Qualifications Borrowers must be 18, provide proof of income and live in one of the states KeyBank serves

Best home equity loan for bad credit: Spring EQ

Overview: If you have a good credit score and you’ve built equity in your home, Spring EQ can help you tap into that equity. Borrowers need a minimum credit score of just 680 and can have a debt-to-income ratio as high as 50 percent. Spring EQ also offers competitive interest rates, with APRs starting at 5.205 percent and flexible loan terms to fit most borrower profiles.

Perks: You can borrow as much as 90 percent of your home equity at rates starting at 5.205 percent APR. Spring EQ’s minimum credit score is 680 and max DTI ratio is 50 percent, which is a draw for people with a tight financial situation. Plus, applicants typically aren’t required to provide proof of assets.

What to watch out for: Self-employed borrowers may need to provide more proof of income. Also, this lender’s high fees could put its home equity loans out of reach for some borrowers

Lender Spring EQ
Max LTV Ratio 90%
Max Debt-to-Income Ratio 50%
Min. Credit Score 680
Interest Rates Starting at 5.205%
Loan Amount $25,000 to $500,000
Term Lengths 5 to 30 years
Fees Spring EQ does not disclose its fees, but you may be on the hook for an administration fee, credit report and flood certification fees, document prep fees, title report fees, notary or title fees, recording fees and an appraisal fee
Additional Qualifications Plan to share your name, Social Security number, employment information and proof of income during the application process

Best home equity loan for flexible loan terms: Flagstar Bank

Overview: Established in 1987 and with 160 branches spread across Indiana, California, Michigan, Ohio and Wisconsin, Flagstar Bank consistently gets high marks for customer satisfaction and offers a full lineup of banking services.

Perks: Flagstar offers a lot of flexibility in its home equity loans. You can borrow up to 80 percent of your home equity with terms ranging from five to 20 years on loans from $10,000 to $1 million. APRs start at 6.02 percent.

What to watch out for: Flagstar’s home equity loans are available only in bank branches. It’s a good bet if you can meet qualifications and live near a branch; otherwise, you may need to look elsewhere.

Lender Flagstar Bank
Max LTV Ratio 80% combined LTV
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates Starting at 6.02%
Loan Amount $10,000 to $1,000,000
Term Lengths 5 to 20 years
Fees There’s no prepayment penalty and no bank-imposed closing costs. However, borrowers are responsible for prepaid interest, all state- and government-specific charges and taxes and lender’s title insurance on loan amounts over $500,000.
Additional Qualifications Property insurance is required, as is flood insurance in some cases. Borrowers must provide proof of income.

Best home equity loan for low fees at a national bank: U.S. Bank

Overview: With roots that trace back to 1863, U.S. Bank is now the fifth-largest bank by assets in the country with about 3,000 branch locations in 27 states. It’s a solid option for low fees at a nationwide lender.

Perks: U.S. Bank is offering rates starting at 4.05 percent on 10-year home equity loans and 4.19 percent for 15-year loans. There are no closing costs if you have a debt-to-income ratio of 43 percent or less, and you may qualify for a break on the annual fee or the interest rate if you have a U.S. Bank checking account.

What to watch out for: U.S. Bank tends to have stricter credit requirements, so the best interest rates go to people with credit scores around 730 or higher. If your credit needs work or the loan terms don’t fit your needs, you might want to try another lender.

Lender U.S. Bank
Max LTV Ratio Not specified
Max Debt-to-Income Ratio Not specified, but you may qualify for fewer fees with a DTI of 43% or less
Min. Credit Score Best interest rates go to people with credit scores of 730 or higher
Interest Rates Starting at 4.05%
Loan Amount $15,000 to $750,000 (up to $1 million for California properties)
Term Lengths Up to 30 years
Fees U.S. Bank covers all closing costs, but a $500 early termination fee applies if you pay off the loan within three years. This fee is waived for borrowers who either choose to pay a 1% origination fee at closing or have a debt-to-income ratio (DTI) above 43%.
Additional Qualifications Borrowers may need to talk with a U.S. Bank representative or visit a branch to fill out an application.

Overview: With nearly 9 million members, a presence on four continents and excellent customer service ratings, Navy Federal Credit Union is one of the very best choices for service members. You may borrow up to 100% of your home’s equity at a fixed rate for up to 20 years.

Perks: There’s no application or origination fee, and rates start at 4.99 percent. Plus, Navy Federal will cover some closing costs and members get a 0.25 percent rate discount by setting up autopay with a Navy Federal checking account.

What to watch out for: To apply for a home equity loan, you’ll have to join this credit union. Membership is limited to service members, veterans and their families. Borrowers may be on the hook for certain costs. For example, if you pay off your loan within three years, you’ll have to reimburse closing costs paid on your behalf.

Note: As of March 2020, Navy Federal Credit Union has temporarily suspended applications for new home equity loans.

Lender Navy Federal Credit Union
Max LTV Ratio 100%
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates As low as 4.99%
Loan Amount $10,000 to $500,000
Term Lengths 5 to 20 years
Fees Navy Federal will cover some closing costs, but borrowers may be on the hook for certain fees, taxes, appraisal fees, title insurance and any fees associated with condominium properties. If you pay off your loan within three years, you may have to reimburse closing costs paid on your behalf
Additional Qualifications You may have to show proof of income along with proof of homeowners insurance and trust documents (if applicable)

Best home equity loan for low fees at a regional bank: Frost

Overview: Established in 1868 and with 126 branches spread across Texas, Frost is a full-service bank that offers checking and saving accounts, personal loans, insurance and investment products and more. Home equity loans start as low as $2,000 and come with no fees. Frost’s customer service is also consistently highly rated, which is one reason this bank made our list.

Perks: Frost is a great option if you live in the Lone Star State. Aside from its solid customer service track record, borrowers won’t pay prepayment penalties, application fees, annual fees or closing costs on its home equity loans. It’s also a good fit for people who just need to borrow a small amount, as loans range from as little as $2,000 to $250,000 and above.

What to watch out for: This bank only has branches in Texas, so if you’re looking for in-person service and live elsewhere, you might need to look to a different lender.

Lender Frost
Max LTV Ratio 80%
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates 5.24% to 6.14%
Loan Amount Starting $2,000
Term Lengths 7 to 20 years
Fees There are no prepayment penalties, no application fees, no annual fees and no closing costs on loans from $2,000 to $250,000
Additional Qualifications You’ll need to show proof of homeowners insurance, bring your government-issued photo ID and provide your Social Security number

Best home equity loan for branch network: Connexus Credit Union

Overview: Established in 1935, Connexus offers auto loans, personal loans, student loans, credit cards, banking products and more. While some banks and credit unions are localized in one state or region, Connexus serves all 50 states through a co-op shared branch network of more than 5,600 locations throughout the U.S.

Perks: Borrowers can bank in person at a network of more than 5,600 branches, or apply for a home equity loan online or by phone. You’ll have to join the credit union, but membership options are flexible enough that just about anyone can find a way to join. Connexus’ home equity loan rates are also on par with other financial institutions on this list, starting as low as 4.482 percent.

What to watch out for: Borrowers won’t pay an annual fee, but they will be responsible for closing costs that can range from $175 to $2,000, depending on the property location and loan terms. And if you need fast cash, this credit union might be a no-go. Connexus says it could take 30 to 45 days to get your funds. Another potential deal breaker: You’ll have to join Connexus to apply for a home equity loan.

Lender Connexus Credit Union
Max LTV Ratio 90%
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates As low as 4.482%
Loan Amount Starts at $5,000
Term Lengths 5 to 20 years
Fees Borrowers won’t pay an annual fee, but they will be responsible for closing costs that can range from $175 to $2,000, depending on the property location and loan terms. The credit union also charges a returned loan payment fee of $15, a convenience fee of $9.95 for paying by debit or credit card online ($14.95 by phone), and a forced place insurance processing fee of $12.
Additional Qualifications You must join the credit union to apply for a home equity loan.

Best home equity loan for customer experience: Regions Bank

Overview: Established in 1971 and with a presence in 15 states, Regions Bank made our list because it consistently earns high marks from various consumer rating agencies. Regions offers a full lineup of personal banking services, including checking and savings accounts, credit cards, mortgages, student loans, personal loans, auto loans and home equity loans and lines of credit.

Perks: Home equity loans come with low interest rates, no annual fee, flexible repayment terms and no closing costs. Borrowers may qualify for a rate discount of 0.25 percent to 0.5 percent by setting up autopay from a Regions Bank checking account.

What to watch out for: The property securing your home equity loan will have to be located in a state where Regions has a branch, and you’ll need to close on the loan at a branch location. Additionally, borrowers are on the hook for a few fees, including late-payment fees of 5 percent (limits apply).

Lender Regions Bank
Max LTV Ratio 89%
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates 3.25% to 11.625%
Loan Amount $10,000 to $250,000
Term Lengths 7, 10 or 15 years
Fees Regions Bank will pay all closing costs, but borrowers may be responsible for over-limit fees of $29, late fee of 5% of the payment amount (limits apply) and a returned check fee of $15. There’s no annual fee
Additional Qualifications Regions Bank may ask for additional documentation or information, such as income verification and proof of property, wind or flood insurance if necessary

Recap of best home equity loans of 2020

Lender
Best lender for
Max LTV
Current home equity loan rates
Discover
Best home equity loans for low rates
95%
3.99% - 11.99%
BMO Harris Bank
Best home equity loans for different loan options
Not specified
As low as 4.74%
KeyBank
Best home equity loans for homeowners with minimal equity
100%
As low as 3.42%
Spring EQ
Best home equity loans for good credit
90%
As low as 5.205%
Flagstar Bank
Best home equity loans for flexible loan terms
80%
Starting at 6.02%
U.S. Bank
Best home equity loans for low fees at national bank
Not specified
Starts at 4.05%
Navy Federal Credit Union
Best home equity loans for service members
100%
As low as 4.99%
Frost
Best home equity loans for low fees at a regional bank
80%
5.24% - 6.14%
Connexus Credit Union
Best home equity loans for branch network
90%
As low as 4.482%
Regions Bank
Best home equity loans for customer experience
89%
3.25% - 11.625%

Reasons to use home equity loans

A home equity loan makes sense for a large, upfront expense because it’s paid in a lump sum. If you have smaller expenses that will be spread out over several years, such as multiple home projects or college tuition payments, a home equity line of credit, or HELOC, may save you money on interest. Top uses of home equity loans include:

How do home equity loans work?

A home equity loan lets you tap into the equity you’ve built in your home over time. These are available at many banks, credit unions and online lenders. You may use these funds for a range of purposes, including debt consolidation, home improvement projects or higher education costs. The amount you can borrow depends on how much equity you have, your financial situation and other factors.

After reviewing your application and checking your credit, the lender will tell you how much you can borrow, your interest rate, monthly payment, loan term and any fees involved. Make sure you understand these details before signing up for a home equity loan. Once you agree to the loan terms, the financial institution will disburse funds as one lump sum. Then, you pay back the loan over time in fixed monthly payments.

Evaluating your home’s equity

Check how much equity you own by dividing the amount you owe by the value of your home. For example, say you owe $200,000 on a home worth $400,000. That’s $200,000 / $400,000 = 0.50 or 50 percent “loan to value” (LTV). Compare that number to your lender’s maximum LTV ratio to see if you might qualify for a home equity loan.

Next, calculate how much you may borrow by multiplying your equity by the lender's maximum LTV and subtracting your mortgage balance. Say your lender allows you to borrow up to 85 percent of your available equity In this example, that would be $400,000 x 0.85 = $340,000. From there, you would subtract your mortgage balance: $340,000 - $200,000 = $140,000 as the maximum amount you may be eligible to borrow.

Costs of a home equity loan

Depending on the lender, borrowers may pay various fees either at closing or throughout the life of the loan. These add to your overall costs, so be sure you understand what you’ll pay before signing for a home equity loan. Some common costs include:

  • Origination fee to set up the loan.
  • Closing costs.
  • Late fees for a delayed monthly payment.
  • Prepayment penalty for paying off the loan before the term ends.

Additionally, you may have to pay for title insurance, property insurance, flood insurance or certain taxes, depending on the lender, the home’s location, your state laws or other factors.

Pros and cons of home equity loans

Home equity loans are best suited for people who know how much they need, as they’re distributed in one lump sum. Additionally, they’re a good option for folks who want to use the funds for home improvements. The reason for this is that the interest you’ll pay is tax deductible if the money is used for renovation.

Conversely, if you use home equity loan funds for any reason aside from substantial home improvements, such as paying off student debt or consolidating credit card bills, the mortgage interest is no longer deductible under the new tax law.

Another benefit of home equity loans are the competitive interest rates, which are usually much lower than those of personal loans and cash-out refinances. Be sure to compare lenders’ rates for the best deal available.

Pros:

  • Lower interest rates than unsecured debt such as credit cards or personal loans.
  • Fixed monthly payments.
  • Mortgage interest may be tax deductible.

Cons:

  • Closing costs can be expensive.
  • Risk of losing your home if you are unable to make the payments, or ending up underwater on your mortgage if home values drop.
  • The ease of tapping home equity makes overspending a risk.

Alternatives to home equity loans

Before taking out a home equity loan, ask yourself whether there are other options for financing that might be appropriate for your situation. For example, if you don’t need the money all at once in a lump sum, a HELOC could save you on interest costs. A cash-out refinance is another option, especially if your original mortgage has a higher interest rate than what’s available in the current market.

How to apply for a home equity loan

Prepare for a home equity loan application by checking your credit, calculating your home equity and taking stock of how much other debt you already have. Many lenders let you start the application process online by entering your personal and financial information. During the approval process you’ll be asked to provide supporting documentation such as your government-issued identification and pay stubs. You may need to pay fees for a loan application, credit check and home appraisal.

Home equity loan FAQs

If you have more questions or are still unsure about home equity loans, here’s a list of questions and answers to help you better understand the product.

What is home equity?

Your home equity is calculated by subtracting how much you still owe on your mortgage from the appraised value of your home. Home equity is one way to measure your personal wealth.

What is a home equity loan?

A home equity loan is based on the equity of the borrower's home. Unlike a HELOC, you receive all of the money upfront and then make equal monthly payments of principal and interest for the life of the loan (similar to a mortgage).

How do you calculate your home equity?

Over time, you build up equity in your home as you make payments on your mortgage. You’ll need a substantial amount of equity in your home to qualify for a home equity loan.

Home equity is defined as the value of your home minus any amount you still owe on your mortgage. The amount you’re eligible to borrow for a home equity loan is based on your loan-to-value, or LTV, ratio. A home equity calculator can help you figure out how much you can borrow.

Where can I get a home equity loan?

A variety of banks and lenders offer home equity loans. It’s always a good idea to shop around with a few lenders to compare rates, fees and loan terms.

When is a good time to use a home equity loan?

If you’ve been considering a home equity loan, now is the time to lock in your rate. Rates have been slowly moving higher, but they’re still lower than historical benchmarks. If you get a fixed-rate loan, which most home equity loans are, you will end up saving money in the long run if rates continue to climb.

What are the minimum requirements?

In addition to having enough equity, lenders will also factor in your credit score, LTV ratio and income when determining whether to approve you for a home equity loan.

Minimum requirements generally include a credit score of 620 or higher, a maximum loan-to-value ratio of 80 percent and a documented source of income.

Home equity lenders reviewed by Bankrate

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Home equity tips

A home equity line of credit, or HELOC, has an adjustable rate of interest attached to paying it off, which means that your payments can fluctuate based on the federal funds rate. Think about a home loan if the idea of an adjustable rate unnerves you.

Know your loan-to-value, or LTV, ratio. This is how much you owe versus how much the home is worth. Many people are in trouble now because their homes dropped in value. You don't want to be stuck owing more than your house is worth.

Figure out what the loan is for and how long you'll need the money to help decide which kind of loan you need. Home equity loans are better for single lump sum expenses while home equity lines of credit, or HELOCs, are best for prolonged expenses, like college tuition.