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A home equity line of credit, or HELOC, is a type of home equity loan that allows you to draw funds as you need them and repay the money at a variable interest rate. Because of this, HELOCs are generally best for people who need funds for ongoing home improvement projects or who need more time to pay down existing debt. HELOCs typically have lower interest rates than home equity loans and personal loans; to get the best rates, you'll have to have a high credit score, a low debt-to-income ratio and a lot of tappable equity in your home.
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Bankrate's ranking of the best HELOCs can help you start your search by evaluating interest rates, terms and fees across a variety of lenders. The resources below can also help you learn more about the process of tapping your home equity and deciding whether a HELOC is right for you.
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Home Equity Line of Credit (HELOC): A variable-rate line of credit based on your home value that you can continually borrow from and pay back over a set time frame.
Term: 10 Years | Fees: $75.00
Renovate your home, consolidate debt and more with a PNC Choice Home Equity Line of Credit
Presidential Bank, FSB
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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 July 13, 2022. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.
|LOAN TYPE||LOAN AMOUNT||LOAN TERM||APR RANGE||MIN. CRDIT SCORE|
|Third Federal Savings and Loan||$10,000–$200,000||10-year draw, 30-year repay||2.24%–18%||Not specified|
|Bethpage Federal Credit Union||Up to $500,000||10-year draw, 20-year repay||3.25%–18% (with autopay)||Not specified|
|Bank of America||$15,000–$1 million||10-year draw, 20-year repay||Varies by state||Not specified|
|Flagstar Bank||$10,000–$500,000||10-year draw, 20-year repay||Starting at 3.99% (with autopay)||Not specified|
|Figure||$15,000–$400,000||5–30 years||Starting at 3.24% (with autopay, partner credit union membership and origination fee)||620|
|Citizens||Starting at $5,000||10-year draw, 15-year repay||Starting at 3.25% (with autopay)||Not specified|
|BMO Harris Bank||$25,000–$150,000||10-year draw, 20-year repay||Starting at 3.59% (with autopay)||650|
|Lower||$15,000–$350,000||10-year draw, unspecified repay||Starting at 4.250%||Not specified|
|PenFed Credit Union||$25,000–$500,000||10-year draw, 20-year repay||3.75%–18%||660|
|PNC||$10,000–$1 million||Not specified||Not specified||Not specified|
|TD Bank||Starting at $25,000||Not specified||3.34%–18% (with TD Bank personal checking account)||Not specified|
With a HELOC, you’re given a line of credit that’s available for a set time frame (known as the draw period), usually up to 10 years. While most HELOCs have an interest-only draw period, you can make both interest and principal payments to pay off the line of credit 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.
Home equity line of credit rates are determined by your financial situation and your credit score. If you have good credit, your HELOC rate could be around 3 percent to 5 percent. If you have below-average credit, you'll likely fall within the 9 percent to 10 percent range.
The average HELOC rate, as of July 13, 2022, is 8.54 percent. Generally speaking, any rate below the average would be considered a good HELOC rate.
Because you have the ability to draw only what you need from a HELOC over 10 to 20 years, it’s best for people who need access to funds over a number of years — for a series of home improvement projects, for example — and who are comfortable using their homes as collateral.
In addition to estimating your home equity, lenders look at your credit history, credit score, income and other debts. Most lenders require a combined loan-to-value ratio of 85 percent or less, a credit score of 620 or higher and a debt-to-income ratio below 43 percent to approve you for a home equity line of credit.
As the economy recovers from the COVID 19 pandemic, the Federal Reserve is beginning to raise interest rates to combat inflation. HELOC rates are directly impacted by the decisions made by the Federal Reserve. In particular, HELOC rates are based on the prime rate set by the Fed. Mortgage rates have been on the rise since the Fed began raising rates in April. As mortgage rates rise, so do variable HELOC rates.
|LOAN TYPE||BORROWER||FIXED INTEREST RATE|
|Home equity loan||6.81%||3.25%–7.94%|
|10-year fixed home equity loan||6.88%||3.50%–7.94%|
|15-year fixed home equity loan||6.90%||3.75%–8.04%|
HELOCs have been hit hard by the COVID-19 pandemic. Interest rates plunged, and as a result, many banks became overwhelmed by new applications. Now may be a good time to get a HELOC or lock in a fixed rate if you have the option, but economic uncertainty and the influx of potential borrowers have also caused some banks to tighten eligibility requirements and even suspend HELOC applications altogether. If you've been thinking about getting a HELOC, it may be worthwhile to send in your application now as home equity lending picks back up.
If you have a HELOC and you're having trouble making payments due to the COVID-19 pandemic, contact your lender; many lenders have extended hardship relief options.
Some of the most popular ways homeowners use HELOC funds include:
HELOCs offer a combination of relatively low interest rates and the flexibility to borrow what you need when you need it. If you need money over a staggered period, a line of credit is ideal. However, there are always risks when you take out a loan, especially one that's secured by your home. Here are some of the key considerations for getting a HELOC.
Typically lower upfront costs than with home equity loans.
Lower interest rates than with credit cards.
Usually low or no closing costs.
Interest charged only on the amount of money you use.
Lenders may require minimum draws.
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 and put your home at risk.
While HELOCs and home equity loans are similar in some ways, they have a few distinct differences. These are some of the key factors you should consider when deciding between a HELOC and a home equity loan.
|HELOCS||HOME EQUITY LOANS|
|APRs||Slightly lower||Slightly higher|
|Funds disbursement||6.08%||Lump sum|
|Repayment terms||First 5-10 years: Interest-only payments Last 10-20 years: interest and principal||10-30 years of fixed payments|
|Best for||Ongoing home improvement projects, college tuition payments, medical expenses||Debt consolidation, large home improvement projects, major purchases|
A cash-out refinance replaces your current home mortgage with a larger home loan. The difference between the original mortgage and the new loan is disbursed to you in a lump sum. The main difference between a cash-out refinance and a HELOC is that a cash-out refinance requires you to replace your current mortgage, while a HELOC adds a loan to your current mortgage.
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 loan amount and estimated credit score.
To apply for a HELOC, start with these steps:
The best HELOC lenders offer 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:
Overview: Third Federal offers home equity loans and HELOCs featuring long repayment terms, potentially low interest rates and few fees.
Why Third Federal Savings and Loan is the best home equity line of credit with a long repayment term: Third Federal's HELOC offers one of the longest repayment terms of its competitors, which make payments more affordable for borrowers.
Perks: If you find a lower interest rate with another lender, you could qualify for an interest-rate match or a $1,000 check from Third Federal. Additionally, Third Federal has no closing costs or minimum draw requirements.
What to watch out for: Third Federal charges a $65 annual fee, which is waived for the first year. Additionally, there is a minimum monthly payment of $100.
Overview: Bethpage is a credit union that serves over 400,000 members. The credit union offers mortgage loans, refinance loans and HELOCs. Its HELOCs have zero fees.
Why Bethpage Federal Credit Union is the best home equity line of credit with a fixed-rate option: Bethpage offers the unique option to convert some or all of a variable-rate HELOC to a fixed-rate loan without a fee. With this option, you can choose between five-, 10- and 20- year repayment terms.
Perks: Unlike many competitors, Bethpage does not charge closing costs or annual fees, and its HELOCs have incredibly low introductory rates for the first year.
What to watch out for: In order to sign up for a Bethpage HELOC, you must become a member of the credit union by opening a minimum $5 share savings account. Additionally, Bethpage HELOCs are not available to borrowers who live in Texas.
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 0.75 percent off for making an initial withdrawal and up to 0.375 percent off for being a Preferred Rewards client.
Why Bank of America is the best home equity line of credit for low fees: There are no application fees, no annual fees and no closing costs on lines of up to $1 million.
Perks: If you qualify for the entire 1.375 percent discount on your interest rate, you’ll save a lot over the life of your loan. Rates vary depending on creditworthiness, loan amount and other factors, APR varies by state. 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.
Overview: Flagstar Bank offers HELOCs that 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.
Why Flagstar Bank is the best home equity line of credit for people with good credit: If you have strong credit, Flagstar may offer you some of the lowest rates in the business.
Perks: Flagstar has flexible loan amounts that range from as little as $10,000 to as much as $500,000.
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. Flagstar's loan offerings also vary by ZIP code; the details here are presented for the 49546 ZIP code.
Overview: Figure is an online lender that offers HELOCs in 41 states and Washington, D.C. Its rates are as low as 3.24 percent APR, which includes an origination fee of up to 4.99 percent and discounts for enrolling in autopay and joining one of its partner credit unions. 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.
Why Figure is the best home equity line of credit for fast funding: Figure promises an easy online application process with approval in five minutes and funding in as few as five business days. Figure could be a good option for borrowers who need fast cash.
Perks: There’s a fixed interest rate, which means the payments won’t change over the life of the loan unless you make additional draws.
What to watch out for: While some lenders offer a wide range of loan amounts, Figure caps its loans at $400,000 — though you may qualify for less, depending on your loan-to-value ratio and credit score. That might not be enough for some borrowers. There’s also an origination fee of as much as 4.99 percent.
Overview: Established in 1828, Citizens now has 1,000 branches spread across 11 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 is a solid choice.
Why Citizens is the best home equity line of credit for low loan amounts: Citizens’ lines of credit begin at $5,000 with its GoalBuilder HELOC and $17,500 with its standard HELOC.
Perks: With Citizens, you pay no setup or appraisal fees. Rates are also low, with APRs starting at 3.25 percent.
What to watch out for: For the standard HELOC, there’s a $350 prepayment penalty if you pay off your HELOC and close it within 36 months, along with a $50 annual fee during the draw period (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. Additionally, Citizens' offerings may vary by ZIP code; loan details presented here are based on the 10019 ZIP code, but your available terms and interest rates may vary.
Overview: 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.
Why BMO Harris Bank is the best home equity line of credit for different loan options: BMO Harris has a standard variable-rate HELOC, but you can also lock in all or part of your line at a fixed rate for a five- to 20-year term.
Perks: There are no application fees or closing costs, and you get a 0.5 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. Depending on the state in which you live, you may also have to pay mortgage taxes and an annual fee.
Overview: Lower, a fintech company that was founded in 2018, analyzes data to recommend the best loan for each borrower's financial situation. Lower offers mortgages, refinance loans, home equity loans and HELOCs.
Why Lower is the best home equity line of credit for quick approval: Lower gets its name from offering "lower" rates and promises a quick approval and closing process. The application process is completely online, and the application is streamlined and full of easy-to-understand language.
Perks: Lower lets you borrow up to 95 percent of your home's value, while most other lenders cap LTV at 80 or 85 percent. Additionally, Lower does not charge an annual fee.
What to watch out for: Lower charges a 1 percent origination fee on all HELOC transactions, so you may want to limit your spending. Lower also has a relatively low line of credit limit at $350,000.
Overview: Pentagon Federal Credit Union, or PenFed, serves 2 million members in all 50 states, Washington, D.C., and military bases in Guam, Puerto Rico and Okinawa. 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.
Why PenFed Credit Union is the best home equity line of credit for flexible membership requirements: While PenFed has a history of serving service members, you may also qualify for membership by being a member of other select organizations.
Perks: PenFed's interest rates start at 3.75 percent, which is low compared to the starting rates of some other lenders. 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 get 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 $99 in interest in the previous year), and you may have to pay taxes in certain states and appraisal fees if an appraisal is required.
Overview: PNC offers HELOCs, mortgage refinancing products and mortgage products. Its products and services vary by location, so you'll need to input your ZIP code on the website to see the rates and terms available to you.
Why PNC is the best home equity line of credit for flexible borrowing options: With PNC, you can switch back and forth between a fixed and variable rate for a portion of your HELOC throughout the draw period.
Perks: PNC's HELOC lets you borrow up to 84.9 percent of your home's value, and you can get a discount on your rate if you set up automatic payments from a PNC checking account.
What to watch out for: PNC's website is not upfront about information like interest rates and term lengths unless you input details about your home, which could make it harder to compare broadly across lenders. Additionally, the fixed-rate option requires a $100 fee each time you lock or unlock a rate.
Overview: TD Bank is a great option if you live along the East Coast and prefer to bank in person. With that said, you can also bank by phone, online or via mobile app.
Why TD Bank is the best home equity line of credit for in-person service: TD Bank customers can visit its more than 1,200 branches even on a few federal holidays and, in some locations, weekends.
Perks: TD Bank typically ranks high in customer satisfaction and offers low rates on its HELOCs (starting at 3.99 percent in some areas). Borrowers may also get a 0.25 percent rate discount for having a TD Bank checking account.
What to watch out for: TD Bank charges a few fees, though they’re mostly avoidable. The $50 annual fee applies to draws over $50,000, and if you pay off and close the account within 24 months, you may have to pay a 2 percent termination fee (max $450). There’s a $99 origination fee, and you may have to pay closing costs on certain accounts.
To select the top lenders that offer home equity lines of credit (HELOCs), Bankrate considered 15 factors that help consumers decide whether a lender is a good fit for them, such as minimum APR and minimum draw requirements. We sought lenders with low fees and a range of loan amounts for borrowers with varying budgets and credit profiles. We also looked for conveniences like online applications and fast funding.
Of the 34 lenders reviewed, 11 made Bankrate's list of best HELOCs. Each lender has a Bankrate rating, which consists of three categories. These categories include:
A HELOC can be a good idea if used for home improvement projects that increase the value of your home. Because a HELOC lets you take out what you need when you need it, it’s best for ongoing projects or expenses.
A HELOC is not a good idea if you don't have a steady income or a financial plan to pay off the loan. Since you use your home as collateral, if you fail to make the payments in full and on time, you risk losing your home.
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 for an additional fee.
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 a $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 tax law.
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's 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 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.
Due to the fact that HELOCs are revolving lines of credit, they can impact, and even hurt, your credit. When you apply, typically the lender will run a hard inquiry to assess your creditworthiness, and that can have a small impact on your credit score. While a hard inquiry may cause your credit score to drop a few points, you should be able to recover those points if you make timely payments on your HELOC balance.
That said, a HELOC will more significantly hurt your credit score if you fail to make on-time payments or if you miss payments altogether. You also run the risk of losing your home, since a HELOC uses it as collateral.
HELOC interest rates tend to be lower than interest rates for home equity loans and personal loans. However, HELOC rates also tend to be variable, meaning that rates could increase depending on decisions from the Federal Reserve.