Bankrate's guide to home equity lines of credit (HELOC)

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When shopping for a HELOC, 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.

Best home equity line of credit (HELOC) rates

As of Jun 5, 2020, the average HELOC rate is 5.32%.

Lender
Loan amount
Loan term
APR Range
Fifth Third Bank
$10,000-$500,000
10-year draw, 20-year repay
3.15%-10.20%
Chase Bank
$50,000-$500,000
10-year draw, 20-year repay
3.75%-6.26%
Bank of America
$25,000-$1,000,000
10-year draw, 20-year repay
3.77%-Unspecified
Flagstar Bank
$10,000-$1,000,000
10-year draw, 20-year repay
4.99%-21.00%
Figure
$15,000-$150,000
5, 10, 15, or 30 year
4.99%-12.50%
Citizens Bank
Starts at $17,500
10-year draw, 15-year repay
2.75%-21.00%
BMO Harris Bank
$25,000-$150,000
10-year draw, 5 to 20-year repay
2.49%-18.00%
Navy Federal Credit Union
$10,000-$500,000
20-year draw, 20-year repay
5.00%-18.00%
PenFed Credit Union
$25,000-$500,000
10-year draw, 20-year repay
3.7%-18.00%
Citibank
$10,000-$1,000,000
Unspecified draw, 20-year repay
4.09%-6.99%
TD Bank
Starts at $25,000
Unspecified
3.74%-18.00%

Summary: What you need to know about HELOCs in 2020

What is a home equity line of credit, or HELOC?

A HELOC is a variable-rate home equity loan that works something like a credit card. It’s different from a home equity loan.

With a home equity loan, you get a lump sum all at once. With a HELOC, you’re given a line of credit that’s available for a set time frame, usually up to 10 years. This is called the draw period — during this time, you can withdraw money as you need it.

You can typically choose between a HELOC with an interest-only draw period and one that allows you to pay both interest and principal, helping you pay the line of credit off faster.

When the line of credit’s draw period expires, you enter the repayment period, which can last up to 20 years. You’ll pay back the outstanding balance that you borrowed, as well as any interest owed. A lender may allow you to renew the credit line.

HELOC rates are variable and are tied to a benchmark interest rate. As the prime rate moves up or down, so does your HELOC rate. Payments vary depending on the interest rate and how much money you have used. However, some lenders will allow you to convert an adjustable rate into a fixed rate.

How does the coronavirus affect HELOCs?

HELOCs have been hit hard by COVID-19. Interest rates have plunged, but as a result many banks have become overwhelmed by new applications. It's true that now may be a good time to get a HELOC or lock in a fixed rate if you have the option, but the influx of potential borrowers has also caused several banks to tighten eligibility requirements and even suspend HELOC applications all together. If you've been thinking about getting a HELOC, it may be worthwhile to send in your application now before more banks close their offerings.

Reasons to apply for a HELOC

HELOCs are often used for home improvement projects like kitchen remodels or additions, though some homeowners use a HELOC for debt consolidation or paying off high-interest credit card bills. Tapping the equity in your house to pay off debt does come with the risk of potentially losing your home if you find yourself unable to make the payments.

Some of the most popular ways homeowners use HELOC funds include:

  • Home improvements. Using your home equity to pay for home improvement projects is a smart move, especially if the home improvement projects will increase the value of your home.
  • Medical expenses. A HELOC may be a good option if you have large or ongoing medical expenses and want to take advantage of lower interest rates.
  • Large purchases. Because HELOCs have longer repayment periods than many loans, they may be an attractive choice for making large purchases. Just make sure you have a plan in place to make consistent payments during the repayment period.
  • Tuition or education costs. If you have ongoing education costs, it may make more sense to take out a HELOC than a loan, as some HELOCs have lower interest rates than student loans.
  • Debt consolidation. A HELOC's similarity to a credit card, and its lower interest rates, may make it a good choice for consolidating credit card debt. However, be careful not to rack up even more debt during the HELOC's draw period.

What are the pros and cons of HELOCs?

HELOCs offer a combination of relatively low interest rates and a lot of flexibility. If you need money over a staggered period — for example, at the beginning of each semester for the next four years to pay for a child’s college tuition or for a remodeling project that will take three years to finish — a line of credit is ideal. It gives you the flexibility to borrow only the amount you need, when you need it. And if you borrow relatively small amounts and pay back the principal quickly, a line of credit can cost less than a home equity loan.

However, there are always risks when you take out a loan, especially one that is secured by your home. Here are some of the key considerations of getting a HELOC.

Pros:

  • Typically lower upfront costs than home equity loans.
  • Interest rates generally lower than credit cards.
  • Usually low or no closing costs.
  • Interest charged only on the amount of money you use.

Cons:

  • Lenders may require minimum drawdowns.
  • Interest rates can adjust upward or downward.
  • Lenders may charge a variety of fees, including annual fees, application fees, cancellation fees or early closure fees.
  • Late or missed payments can damage your credit.

How to calculate home equity

To get a HELOC, you must have a substantial amount of equity in your home. Equity is the market value of your home minus the amounts you owe on your mortgage or mortgages.

Lenders calculate the size of a HELOC they’ll approve based on your loan-to-value ratio, along with other factors, like credit history. Use the Bankrate HELOC calculator to estimate the amount of money you might qualify to borrow.

How to apply for a HELOC

With most HELOC lenders, you can generally get the application process started in just a few minutes online. You’ll simply enter some personal and financial information such as your name, address, salary, desired amount and estimated credit score.

To apply for a HELOC, start with these steps:

  1. Check your credit score. The lower your credit score, the better your rates and the more likely you are to be approved. If you have a credit score in the mid-600s or below, work to pay off existing debt and make timely payments on your credit cards to raise your score.
  2. Shop around. It's rarely wise to choose the first HELOC lender you see. To make sure you're getting the best rate and terms possible, research a few different lenders and take advantage of any prequalification offers available.
  3. Gather your application materials. Many lenders will ask for your Social Security number, salary, employment information and estimated home value. Now is also a good time to collect details about your home's outstanding mortgage balance. After applying, lenders should reach out within a few days, although some online lenders offer same-day approval.
  4. Complete the verification process. Once you've accepted a loan offer, you'll have to provide verification documents, which may include pay stubs, W-2s or tax returns. You may also have to get an appraisal on your home. At this time, lenders will perform a hard credit check, which will temporarily ding your credit score.
  5. Receive funds. The time between offer acceptance and funds disbursement varies by lender, but some lenders may make HELOC funds available in as little as one week. From there, you can use your funds as needed and begin making payments.

Details: The best HELOC lenders of 2020

If you’ve built home equity and need to fund an upcoming expense, a home equity line of credit can be a good way to access money using your home as collateral. Homeowners can use these funds for a range of expenses, including home improvement projects and debt consolidation.

The best HELOC lenders offer lines of credit with competitive interest rates, low fees and an easy online application process. We analyzed HELOC offers from a wide range of banks, credit unions and online lenders to come up with this list of top lenders in this space:

Fifth Third Bank: Best home equity line of credit with fixed-rate option

Overview: Fifth Third Bank offers checking and savings accounts, personal loans, home loans and more. The bank’s HELOC product, the Fifth Third Equity Flexline, has low fees and a low minimum APR.

Perks: For a $95 fee, you can lock in your balance with a fixed rate over a fixed term, which is a great feature if you have a low rate and want to guarantee it over a set number of years. You can also earn Real Life Reward points when you use your loan funds for purchases using a credit card tied to your line of credit and get a 0.25 percent discount for autopay with a Fifth Third deposit account.

What to watch out for: Fifth Third offers HELOCs in only 10 states.

Lender Fifth Third Bank
Interest Rates 3.15% to 10.20% APR (max 25%)
Qualifications Not specified
Available Term Lengths 10-year draw period with a 20-year repayment period
Line of Credit Amount $10,000 to $500,000
Fees There are no closing costs, but a $65 annual fee applies (waived in the first year). Additional fees can apply to condominiums and investment properties.

Chase Bank: Best home equity line of credit for customer discounts

Overview: Chase is a national bank with branches and ATMs in 47 states and Washington, D.C. For its HELOCs, Chase customers may qualify for a rate discount up to 0.62 percent, and the lender waives certain fees for its customers. Other banks also offer relationship discounts, but Chase’s are more easily attainable.

Perks: You can get 0.25 percent off your interest rate just for owning a qualified Chase account; another 0.12 percent off when you set up automatic payments from a Chase checking account; and an extra 0.25 percent off when you’re planning a $30,000 home improvement project or you withdraw $30,000 from your home equity line at closing. Plus, Chase pays for closing costs in most cases, and you can convert some or all of your balance to a fixed-rate loan during the life of the account.

What to watch out for: There’s a $50 origination fee and $50 annual fee, though these are waived for qualified existing Chase home equity customers. Chase also has stricter credit requirements than some; its minimum credit score is 680. And although Chase has hundreds of locations across the country, HELOCs aren't available in Alaska, Hawaii and South Carolina.

Note: Due to impacts of COVID-19, Chase is currently suspending applications for its HELOCs.

Lender Chase Bank
Interest Rates 3.75% to 6.26% APR (max 21%)
Qualifications Not specified
Available Term Lengths 10-year draw period with a 20-year repayment period
Line of Credit Amount $50,000 to $500,000
Fees There’s a $50 origination fee (waived for existing customers) and a $50 annual fee after the first year. Some borrowers may have to pay property insurance, flood insurance and a mortgage recording tax.

Bank of America: Best home equity line of credit for low fees

Overview: Bank of America offers HELOCs in all 50 states and Washington, D.C., and nixes a lot of fees that other banks charge. You can also shave 0.25 percent off your rate when you set up automatic payments from a Bank of America checking or savings account, up to 1.5 percent off for withdrawing $150,000 or more and up to 0.375 percent off for being a Preferred Rewards client.

Perks: If you qualify for the entire 2.125 percent discount on your interest rate, you’ll save a lot over the life of your loan. There are no application fees, no closing costs and no annual fees for qualified accounts. Rates vary depending on creditworthiness, loan amount and other factors, but they may go as low as 3.77 percent in some states. As with some other lenders, you can convert some or all of your balance to a fixed-rate loan.

What to watch out for: The best rate discounts are reserved for Preferred Rewards members and those who make large draws from their HELOCs. Additionally, there’s a high bar to qualify for the application fee discount.

Lender Bank of America
Interest Rates As low as 3.77% APR in some states
Qualifications Not specified
Available Term Lengths 10-year draw period with a 20-year repayment period
Line of Credit Amount $25,000 to $1 million
Fees There are no application fees, no closing costs and no annual fees for qualified accounts.

Flagstar Bank: Best home equity line of credit for good credit

Overview: Flagstar Bank offers HELOCs that are geared to consumers with credit scores around 660 and above. These lines of credit feature flexible withdrawal methods and affordable rates for those who can qualify. If you’re looking for a HELOC that offers attractive terms and you have a solid credit rating, you should check it out.

Perks: Flagstar has flexible loan amounts that range from as little as $10,000 to up to $1 million. If you have strong credit, you could qualify for the best rates.

What to watch out for: There’s an annual fee of $75, though it’s waived in the first year. And while most banks let you convert some or all of your balance to a fixed-rate loan, Flagstar’s APR remains variable for the life of the loan. That means you may pay more in interest. Borrowers may also have to pay back closing fees if the account is closed within 36 months, and some loans require title insurance, government taxes and other fees.

Lender Flagstar Bank
Interest Rates 4.99% to 21.00% APR
Qualifications Borrow up to 80% of your home’s value; not valid in Texas
Available Term Lengths 10-year draw period with a 20-year repayment period
Line of Credit Amount $10,000 to $1 million
Fees The annual fee is $75 (waived the first year), and borrowers may have to pay back closing fees if the account is closed within 36 months. Some loans require title insurance, government taxes and fees at closing.

Figure: Best home equity line of credit for fast funding

Overview: Figure is an online lender that currently offers HELOCs in 39 states with rates as low as 4.75 percent. It promises an easy online application process and fast funding, which is why it made our list. Its HELOC works a bit like a home equity loan in the beginning: You get the full loan amount (minus the origination fee) with a fixed rate. As you pay off the line of credit, you can borrow funds again up to the limit. These draws will get a different interest rate.

Perks: This could be a good option for borrowers who need fast cash. You could get approved online in five minutes and access your funds in as little as five days. There’s also a fixed interest rate, which means this cost won’t change over the life of the loan. Additionally, the minimum credit score of 620 is low compared to some others on this list.

What to watch out for: While some lenders offer a wide range of loan amounts, Figure caps its loans at $150,000. That could be a good option if you don’t need to borrow much, but it might not be enough for some borrowers. There’s also an origination fee of as much as 4.99 percent.

Note: Due to impacts of COVID-19, Figure is currently suspending applications for its HELOCs.

Lender Figure
Interest Rates 4.75% to 13.75% APR
Qualifications Borrow up to 95% of your home’s value
Available Term Lengths Loans terms offered in 5-, 10-, 15- and 30-year increments
Line of Credit Amount $15,000 to $150,000
Fees Pay an origination fee of up to 4.99% of your initial draw.

Citizens Bank: Best home equity line of credit for low loan amounts

Overview: Established in 1828, Citizens Bank now has 1,100 branches spread across 12 states in the New England, Mid-Atlantic and Midwest regions. If you’re looking to borrow a small amount and you prefer banking in person, Citizens Bank is a solid choice. Lines of credit begin at $17,500 and there are ways to save on fees and your monthly rate.

Perks: With Citizens Bank, you can borrow as little as $17,500 and pay no setup or appraisal fees.

What to watch out for: There’s a $350 prepayment penalty if you pay off your HELOC within 36 months, along with a $50 annual fee (waived in the first year). It also may take up to 45 days to get your funding, which could be a deal breaker for some.

Lender Citizens Bank
Interest Rates 2.75% to 21.00% APR
Qualifications Not specified
Available Term Lengths 10-year draw period with 15-year repayment period
Line of Credit Amount Minimum $17,500, but lines over $100,000 are available and have the lowest rates
Fees There’s a $50 annual fee (waived in the first year) and a $350 prepayment fee if you close your HELOC within 36 months.

BMO Harris Bank: Best home equity line of credit for different loan options

Overview: Founded in 1847 and chartered under its current name in 2011, BMO Harris Bank has more than 500 branches spread across eight states. However, customers nationwide can bank with BMO online. Its HELOCs start at $25,000, come with flexible repayment terms and have no setup fees.

Perks: With the fixed-rate HELOC, borrowers can borrow from their line of credit for 10 years and then choose from four repayment periods, during which they can lock a fixed interest rate. Loan amounts start at $25,000 and 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: Borrowers may have to repay setup costs if the line of credit is closed within 36 months. And depending on the state in which you live, you may also have to pay mortgage taxes.

Lender BMO Harris Bank
Interest Rates Variable APR start as low as 2.49% for the first six months and increase to a minimum of 3.20% after that. However, rates vary based on state, loan amount, creditworthiness and LTV
Qualifications Borrow up to 85% of your home's value. Typically the minimum credit score for borrowers is 680.
Available Term Lengths 10-year draw period with a repayment period from 5 to 20 years
Line of Credit Amount $25,000 to $150,000
Fees BMO Harris covers the setup costs, but the borrower may have to repay those costs if the line of credit is closed within 36 months. Depending on the state, borrowers may also have to pay mortgage taxes.

Overview: Established in 1933 and now with nearly 9 million members, Navy Federal Credit Union is a popular credit union for service members, veterans and their families. It has a presence on four continents, earns top ratings for customer service and offers solid pricing on its financial products, including checking accounts, mortgages, auto loans and credit cards.

Perks: You may borrow up to 95 percent of your home's equity with an APR starting at 5 percent, with loans ranging from $10,000 to $500,000. There are no application, origination, annual or inactivity fees. If you set up recurring payments from a Navy Federal checking account, you can qualify for a 0.25 percent rate discount. Plus, Navy Federal will cover most of your closing costs.

What to watch out for: To apply for a HELOC, you must join the credit union, which limits membership to service members, veterans and their families. You may be responsible for certain fees and taxes, though Navy Federal doesn’t specify which ones. And if you pay off your loan within three years of closing, you'll have to reimburse Navy Federal for any closing costs it paid.

Note: Due to impacts of COVID-19, Navy Federal Credit Union is currently suspending applications for its HELOCs.

Lender Navy Federal Credit Union
Interest Rates 5.00% to 18.00% APR
Qualifications Borrow up to 95% of your home’s value
Available Term Lengths 20-year draw period with a 20-year repayment period
Line of Credit Amount $10,000 to $500,000
Fees There are no application, origination, annual or inactivity fees. If you close the account within 36 months, you will have to repay closing costs. You'll need to pay certain government fees and recording charges, credit report fees, taxes and, when required, appraisal fees, title insurance and any fees associated with condominium properties

PenFed Credit Union: Best home equity line of credit with flexible membership requirements

Overview: Pentagon Federal Credit Union, or PenFed, serves more than 1.75 million members in all 50 states, the District of Columbia, and military bases in Guam, Puerto Rico and Okinawa. While PenFed has a history of serving service members, you may also qualify for membership through other select organizations. This credit union offers competitive rates on its HELOCs along with other financial services, including credit cards, checking accounts, savings accounts, mortgages and auto loans.

Perks: PenFed's interest rates start at 3.75 percent and cap at 18 percent. It’s a low rate cap compared to some of the other institutions on this list. You’ll also get a break on certain fees, as PenFed pays most of the closing costs associated with its HELOCs.

What to watch out for: While this credit union has flexible membership requirements, you still have to join to apply for a HELOC. This adds a step to the process and could be a deal breaker for some. Additionally, if you close your account within 36 months, you’ll be on the hook for the closing costs PenFed paid on your behalf. There’s also a $99 annual fee (waived if you paid more than $99 in interest in the previous year), and you also may have to pay taxes in certain states and appraisal fees if an appraisal is required.

Lender PenFed Credit Union
Interest Rates 3.75% to 18.00% APR
Qualifications Borrow up to 90% of your home’s value for owner-occupied properties and 80% for non-owner-occupied properties
Available Term Lengths 10-year draw period with a 20-year repayment period
Line of Credit Amount $25,000 to $500,000
Fees $99 annual fee, waived if $99 in interest was paid during the preceding 12-month period.

Citibank: Best home equity line of credit for flexible loan amounts

Overview: Citibank is one of the largest financial institutions in the world and offers HELOCs in every state in the U.S. except Alaska. Its loan amounts are some of the most flexible we’ve seen, starting at $10,000 and going as high as $1 million. With a presence in nearly every state, just about any borrower can find a loan amount they need. The HELOCs also come with few to no fees.

Perks: You can borrow as little as $10,000 and as much as $1 million, giving you flexible options. There are no application fees, and Citi pays for most third-party closing costs. Customers who set up autopay may get a rate discount, although Citi doesn’t specify how much.

What to watch out for: While you can start a HELOC application online, you may need to visit a branch at closing.

Lender Citibank
Interest Rates 4.09% to 6.99% APR (max 18%)
Qualifications Not specified
Available Term Lengths There’s no specified draw period, but these HELOCs come with a 20-year repayment period.
Line of Credit Amount $10,000 to $1 million
Fees There’s a $50 annual fee during the draw period for most customers, and you can choose to either pay closing costs or receive a rate discount. If you close the account within 36 months, you may have to repay closing costs that were paid on your behalf. Borrowers may also have to pay for property insurance and any fees to release an existing mortgage.

TD Bank: Best home equity line of credit for flexible loan amounts

Overview: TD Bank customers can visit its nearly 1,300 branches, spread along the East Coast, seven days a week and even during a few federal holidays. Its long hours and weekend policy is one reason this bank made our list. It’s a great option if you prefer to bank in person and have a question on a Sunday morning, for example. Of course, you can also bank by phone, online or via mobile app.

Perks: Aside from its ultra-flexible hours, TD Bank also excels in other ways. It typically ranks high in customer satisfaction and offers low rates on its HELOCs (starting at 3.74 percent). Borrowers may also get a 0.25 percent rate discount by setting up payments from a TD Bank checking account.

What to watch out for: Though TD Bank does charge fees, they’re mostly avoidable. The $50 annual fee applies to draws over $50,000, and if you close the account within 24 months, you may have to pay a 2 percent prepayment penalty (max $450). There’s a $99 origination fee, and you may have to pay closing costs on certain accounts.

Lender TD Bank
Interest Rates 3.74% to 18.00 APR%
Qualifications Not specified
Available Term Lengths Not specified
Line of Credit Amount Line of credit start at $25,000
Fees There’s a $50 annual fee on loans over $50,000 and a $99 origination fee. The 2% prepayment penalty (max $450) applies if you pay off the loan within 24 months.

Alternatives to a HELOC

There are other options for using the value of your home equity besides a HELOC. These include home equity loans and cash-out refinancing. You could also turn to personal loans or decide to delay spending until you can save up the cash. Consider all options carefully before making your decision.

HELOC FAQs

Where can I get a HELOC?

A variety of banks and lenders offer HELOCs. Our storefront can help you target the best opportunities and rates in your area. It’s always a good idea to shop around with a few lenders to compare rates, fees and loan terms.

What are the minimum requirements?

In addition to estimating your home equity, lenders look at credit history, credit score, income and other debts. Most lenders require a total loan-to-value ratio of 85 percent or less, a credit score of 620 or higher and an adequate debt-to-income ratio to approve you for a home equity line of credit.

What is a HELOC draw period expiration?

The draw period expiration of a HELOC refers to a time when you can no longer draw any remaining loan amounts. This draw period expiration will vary based on the lender and the payment period you have signed on for. Some can last as long as 20 years. At the end of the draw period, the facility converts to a fixed repayment schedule, like a mortgage, where you make equal monthly payments.

Is the interest paid on a HELOC tax-deductible?

Interest paid on a HELOC is tax-deductible as long as it’s used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. Interest is capped at $750,000 on home loans (combined mortgage and HELOC or home equity loan). So if you had a $600,000 mortgage and $300,000 HELOC for home improvements on a house worth $1.2 million, you could only deduct the interest on the first $750,000 of the $900,000 you borrowed.

If you are using a HELOC for any purpose other than home improvement (such as starting a business or consolidating high-interest debt), you cannot deduct interest under the new tax law.

Are HELOC rates fixed?

Like credit cards, HELOCs typically have variable interest rates — meaning the rate you initially receive may rise or fall during your draw and repayment periods. However, some lenders have begun offering options to convert all or part of your variable-rate HELOC into a fixed-rate HELOC, sometimes with an additional fee.

Which is better: a HELOC or a home equity loan?

Choosing between a HELOC and a home equity loan comes down to your financial situation, needs and priorities.

A HELOC usually has a longer repayment period and allows you to take only the money you need, when you need it, so it may be best for people who have ongoing expenses or those who prefer to pay back debt at their own pace.

A home equity loan, on the other hand, offers slightly more predictability in terms of monthly payments, since you'll receive a large sum of money upfront and pay it back in monthly installments with a fixed interest rate. Home equity loans are usually best for people who need a lump sum right away and want a predictable monthly payment.

How do HELOC payments work?

A HELOC has two stages: the draw period and the repayment period. The draw period, which typically lasts up to 10 years, is the time in which you can use your funds as needed. During the draw period, you have the option to pay back your principal and replenish funds, but you're usually only required to pay your interest each month.

Following the draw period is the repayment period, which can last up to 20 years. During this time, you can no longer access funds; you'll instead make monthly payments on both your principal and your interest as you would with a home equity loan. As such, your monthly payments will be much higher.

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.