Bankrate's guide to home equity lines of credit

Current HELOC rates

Loan Type Rate
Home Equity Line of Credit 6.35%
Last update: 1/27/2020 12:00am

Home equity line of credit, or HELOC, rate: As of Jan 27, 2020, the average HELOC rate is 6.35%.

Best HELOC lenders of 2020

The best HELOC lenders offer lines of credit with competitive interest rates, low fees and an easy online application process. Current HELOC rates range between 3.49% and 21.00% depending on creditworthiness. 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:

Best introductory APR: Fifth Third Bank

Fifth Third Bank is popular for its banking products that include checking accounts, savings accounts, personal loans and home loans. The bank’s HELOC product, which they call the Fifth Third Equity Flexline, is also favored by homeowners thanks to its low fees and low introductory APR. If you’re looking for a HELOC that won’t break the bank, consider Fifth Third.

Pros: Qualify for an introductory APR of 3.49 percent for 12 months on lines of credit of at least $25,000 and six months on lines below that threshold; earn Real Life Reward points when you use your loan funds for purchases and get a 0.25 percent discount for autopay with a Fifth Third deposit account

Cons: Variable APRs range from 5.15 percent to 12.20 percent after the introductory offer ends depending on your creditworthiness

Lender Fifth Third Bank
Interest Rates Pay just 3.49 percent for 12 months on lines of credit of at least $25,000 and six months on lines less than that, followed by a variable APR of 5.15 percent to 12.20 percent
Qualifications Borrow up to 85 percent of your home’s value in a first and second mortgage; regional availability
Available Term Lengths 30 years with a 10-year draw period
Line of Credit Amount Borrow between $10,000 and $500,000
Fees No closing costs, but a $65 annual fee applies; additional fees can apply to condominiums and investment properties

Best for low fees: Bank of America

Bank of America’s HELOC is geared to consumers who want to avoid costly fees. The application process can be completed online, making it easy to get the money you need without having to go to a branch.

Pros: There are no application fees, annual fees or closing costs; you also get a 0.25 percent discount for setting up your loan for autopay with a Bank of America account. You can also get an interest rate discount if you’re a Preferred Rewards customer

Cons: You have to close your loan in a Bank of America financial center

Lender Bank of America
Interest Rates Pay a variable rate of 3.74 percent APR for 12 months, followed by a variable APR of 5.65 percent
Qualifications Borrow up to 85 percent of your home’s value in a first and second mortgage; available nationwide
Available Term Lengths 30 years with a 10-year draw period
Line of Credit Amount Borrow up to $1 million for a primary residence and up to $500,000 on a second home; minimum HELOC amount is $25,000
Fees No application fees, closing costs or annual fees

Best for good credit: Flagstar Bank

Flagstar Bank offers HELOCs that are geared to consumers with good or excellent credit. 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 them out.

Pros: Low introductory APR and flexible loan amounts

Cons: Annual fee applies

Lender Flagstar Bank
Interest Rates 3.49 percent APR for six billing cycles followed by variable APR of 5.49 percent to 21.00 percent APR
Qualifications Borrow up to 80 percent of your home’s value; not valid in Texas
Available Term Lengths 30 years with a 10-year draw period
Line of Credit Amount $10,000 to $1 million
Fees Annual fee is $75; waived the first year

Best for fast funding: Figure

Figure is an online lender that offers home equity loan products, including HELOCs, with rates as low as 4.99 percent. They offer an easy online application process and fast funding, which is why they made our list.

Pros: Get approved online in five minutes and access your funds in as little as five days; comes with a fixed interest rate and a minimum credit score of 600 applies

Cons: Lower loan limits than other options

Lender Figure
Interest Rates Average APRs range from 4.99 percent to 13.74 percent
Qualifications Borrow up to 95 percent of your home’s value; available nationwide
Available Term Lengths Loans terms offered in five, 10, 15 and 30 years
Line of Credit Amount Borrow up to $150,000
Fees Pay an origination fee of up to 4.99 percent of your loan amount

Best for debt consolidation: Citizens Bank

While any HELOC is a good option to consolidate debt if you can qualify for a lower interest rate, HELOCs offered by Citizens Bank can be ideal for home repairs since they come with low fees and a 25-year term that will get you out of debt faster.

Pros: No set up or appraisal fees; discount of 0.25 percent offered for automatic monthly payments

Cons: Prepayment penalty if you pay off your HELOC before 36 months

Lender Citizens Bank
Interest Rates Variable rate of 4.25 percent to 21 percent
Qualifications Borrow up to 80 percent of your home’s value in a first and second mortgage; Citizens Bank operates branches in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont
Available Term Lengths 25 years with 10-year draw period
Line of Credit Amount Depends home equity and other factors, but lines over $100,000 are available and have the lowest rates
Fees $50 annual fee that is waived the first year; $350 prepayment fee if you close your HELOC within 36 months

Best for home repairs: Spring EQ

Spring EQ is an innovative online lender that offers home equity products perfect for home repairs, home remodeling projects and more. Their loans, which actually come with a fixed interest rate, grant you high loan limits that can make major remodeling projects a feasible idea. Plus, interest rates are competitive with other national lenders and you can borrow up to 100 percent of your home’s value.

Pros: Borrow up to $500,000 of your home’s equity with simple, fast funding

Cons: Some lenders offer lower introductory APRs; high fees

Lender Spring EQ
Interest Rates Interest rates start at 4.99% for the first six months
Qualifications Borrow up to 100 percent of your home’s value; available nationwide
Available Term Lengths Qualify for a loan with terms up to 30 years
Line of Credit Amount Borrow up to $500,000
Fees You’ll need to pay a $799 administration fee along with a credit report and flood certification fee, document prep fee, title report fee, notary or title fee, recording fee and appraisal fee

Recap of best HELOCs of 2020

Lender
Best lender for
Max LTV
Current HELOC rates
National/Regional
Fifth Third Bank
Best introductory APR
85%
3.49% - 12.20%
Regional
Bank of America
Best for low fees
85%
3.74% - 5.65%
National
Flagstar Bank
Best for good credit
80%
3.49% - 21.00%
National (excludes Texas)
Figure
Best for fast funding
95%
4.99% - 13.74%
National
Citizens Bank
Best for debt consolidation
80%
4.25% - 21.00%
Regional
Spring EQ
Best for home repairs
100%
As low as 4.99%
National

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.

Reasons to use a HELOC

HELOCs are often used for home improvement projects like kitchen remodels or additions. Some homeowners use a HELOC for debt consolidation, paying off high-interest credit card bills. Tapping the equity on 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. Homeowners use HELOCs to fund all sorts of needs. Popular ways homeowners use HELOC funds include:

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 on your home. Here’s a table with some of the key considerations of getting a HELOC.

Pros of HELOCs

Cons of HELOCs

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.

How to apply for a HELOC

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

During the approval process, you’ll be asked to provide supporting documentation and may need to schedule an appraisal of your home.

HELOC FAQs

What is a HELOC?

HELOC stands for home equity line of credit. It is a loan based on the equity of the borrower’s home. Similar to how a credit card works, it allows you to take out money and pay it back down at your own pace up to a certain amount during the draw period.

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.

Why should I take out a HELOC?

A HELOC can be a good idea for a number of reasons. Maybe you need to fund a home improvement project or finance your education. It is also flexible, especially if you don’t need all the money upfront. However, a HELOC is not a good idea when you aren’t in a position to pay it back or deal with the interest.

How do you calculate your 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 less the amounts you owe on your mortgage or mortgages.

Lenders calculate the size of a HELOC they’ll approve based 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.

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.

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.