What is home equity and how do you calculate it?

Home equity is the stake you have in your property. Over time, you build up equity in your home as you make payments on your mortgage or your home’s value rises. If you have built a substantial amount of equity in your home, you can take out a home equity loan. Home equity loans are installment loans that allow you to borrow a percentage of your home equity, typically up to 85 percent. Unlike with 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). To calculate your home equity, subtract your current mortgage balance from the appraised value of your home. Check out Bankrate’s home equity calculator to estimate how much you can borrow.

Where can I get a home equity loan?

Banks, credit unions and other types of lenders offer home equity loans. Here’s an overview: Banks: A bank can offer a competitive rate for a home equity loan, provided you meet requirements for the lowest possible APR and set up automatic payments. Credit unions: Credit unions can also offer competitive home equity loan rates, but all of their products, including home equity loans, are only available to members. Many credit unions have very flexible membership requirements, however, so it might be easier to join one than you think. Non-bank lenders: Non-bank lenders are typically online-only operations with streamlined processes that translate to fast funding. They might offer higher or lower rates than a bank, so compare options. If you have an existing relationship with a bank, it may be best to start your search there, but it’s always a good idea to shop around with a few lenders to compare rates, fees and loan terms. A good way to do this is by taking advantage of prequalification forms, which let you see your potential rates and eligibility with a lender without impacting your credit score. Be sure to confirm this with your lender, however; some prequalifications do in fact involve a hard credit pull, which affects your score slightly.

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

A home equity loan may be a good option if you've been planning a large home renovation or if you need to consolidate debt and you spot a good rate. If you’ve been considering a home equity loan, now might be a good time to lock in your rate before they rise further.

What are the minimum requirements?

Many lenders have fixed LTV ratio requirements for their home equity loans, meaning you'll need to have a certain amount of equity in your home to qualify. Lenders will also factor in your credit score and income when determining your rate and eligibility. Minimum requirements generally include a credit score of 620 or higher, a maximum loan-to-value ratio of 80 percent or 85 percent and a documented source of income.

Are home equity loan rates higher than mortgage rates?

Home equity loan rates are typically higher than first mortgage rates because home equity loans are considered second mortgages. In the event of a foreclosure, the lender of a second mortgage will be paid only after the lender of the first mortgage has been paid in full. To make up for this risk, lenders offering second mortgages will charge higher interest rates. Since home equity loan rates are higher than first mortgage rates as a baseline, as of early October 2022, you can expect to find home equity loan rates starting around 7 percent.

What is the three-day cancellation rule?

Unlike other loans, such as personal loans, home equity loans must go through a closing period. During this period, all home equity loans are legally subject to a three-day cancellation rule, which states that you have the right to cancel your home equity loan until midnight of the third business day after you sign your contract. Changes to the contract, as well as funds disbursement, cannot occur during this time.

What is the difference between a home equity loan and a cash-out refinance?

Home equity loans and cash-out mortgage refinances are both potential ways to get money for home renovations or unexpected expenses. That said, both options have their pros and cons. While a home equity loan is a "second mortgage" that allows you to borrow additional funds for nearly any purpose, a cash-out refinance replaces your existing mortgage. With a cash-out refinance, you'll take out a new mortgage for more than your outstanding loan balance, and then withdraw the difference in cash. Because of this, a home equity loan is typically best if you already have a good rate and terms on your current mortgage. A cash-out refinance only makes sense if you can qualify for a better interest rate on your mortgage and you don't mind resetting your repayment term.

How fast can I get a home equity loan?

Because home equity loans typically require appraisals, it can take longer to get a home equity loan than a personal loan. From application to funds disbursement, the process typically takes two to four weeks — although some new online lenders are trying to shorten that process.

How much equity can I borrow from my home?

The exact amount you can borrow varies depending on the lender, but you can generally borrow up to 80 or 85 percent of your home’s appraised value.

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Best home equity loan lenders for April 2024

Q: What is a home equity loan?

A home equity loan is an installment loan based on the equity of the borrower's home. Most home equity lenders allow you to borrow a certain percentage of your home equity, typically up to 85 percent. Unlike with 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).

Written by

Andrew Dehan

Edited by

Troy Segal

Edited by

Troy Segal

Updated April 27, 2024

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Best home equity loan lenders in April 2024

If you’re interested in leveraging your home equity, a home equity loan — also known as a HELoan — may be right for you. Here we’ve put together a list of the top home equity loan lenders to help you narrow down your search.

Lender	Bankrate Score	Minimum Credit Score	Loan Amount	Term Lengths
Third Federal Savings and Loan	4.5/5	Undisclosed	$10,000-$200,000	5-30 years
BMO Harris Bank	4.5/5	700	$25,000-$150,000	5-20 years
Discover	4.4/5	620 (700 or higher for $150,000 or more)	$35,000-$300,000	10-30 years
U.S. Bank	4.2/5	Undisclosed	$15,000-$750,000 (or $1 million in California)	Up to 30 years
TD Bank	4.1/5	660	Minimum of $10,000 for home equity loan	5-30 years
Regions Bank	3.8/5	Undisclosed	$10,000-$250,000 for home equity loans	10-20 years
Rockland Trust Bank	3.6/5	Undisclosed	$25,000-$400,000 for home equity loan	5-20 years
Connexus Credit Union	3.5/5	640	Starting at $5,000	5-15 years

Third Federal Savings and Loan: Best home equity loan lender for customer service

4.5

Bankrate Score

Overview

Based out of Cleveland, Third Federal has been in operation since 1938. It offers a variety of financial products and services, like certificates of deposit (CDs), savings accounts, mortgages and home equity loans. It only services 25 states, plus Washington, D.C. However, if you’re located in a state where it operates, you can access a bank that offers competitive rates and receives high marks for customer experience.

Of all the home equity lenders we surveyed, Third Federal Savings and Loan is the only one that offers a personalized rate tool with an instant quote without you having to submit your contact information. The bank also ranks high for customer satisfaction, offering multiple contact options.
Those seeking competitive rates, superlative customer service, and the option of either an online experience or in-person interaction.
- You could qualify for either a rate match or a $1,000 check if you find a lower rate from a competitor
- If you’re getting a home equity loan, you can choose between fixed-rate or adjustable-rate terms
- The bank’s home equity loans are only available in eight states

BMO Harris Bank: Best home equity loan lender for affordability

4.5

Bankrate Score

Overview

BMO Harris has roots that go back as far as 1847. They’re currently the eighth largest U.S. bank by assets, and are headquartered in Chicago. A sizable financial services institution, operating in personal banking, business lending and capital markets, they recently grew even larger with their acquisition of Bank of the West.

BMO Harris scored a 10 out of 10 for affordability due to its below-average rates and introductory rate offers. The bank also doesn’t charge application fees and covers borrowers’ closing costs.
Those with strong credit scores, who hate fees and love low rates.
- No application fees and no closing costs
- Many in-person branches
- Requires a 700 minimum credit score

Discover: Best home equity loan lender for competitive rates

4.4

Bankrate Score

Overview

Discover was founded by Sears as a credit card company in 1985, and has since grown into a full-fledged financial services company. Along with the cash-back credit cards it’s known for, it offers home equity loans, mortgage refinancing, online banking and student loans.

Discover offers introductory APRs as low as 6.24 percent for borrowers with high credit scores — as much as 2 to 3 percentage points below national averages.
Those who want the lowest rate, who need a sizable amount of equity, and who don’t mind a largely digital lender.
- Doesn’t charge application, appraisal or origination fees
- Allows a combined-loan-to-value (CLTV) of up to 90 percent
- Not ideal if you want an in-person experience
- The minimum loan amount is $35,000 — too high for some borrowers

U.S. Bank: Best home equity loan lender for nationwide availability

4.2

Bankrate Score

Overview

U.S. Bank (also known as U.S. Bancorp) is one of the largest banking institutions in the United States. Founded in 1863 as the United State National Bank of Portland, it’s now headquartered in Minneapolis, MN. Along with home equity loans, it offers a wide array of personal financial products, as well as business banking and wealth management services.

U.S. Bank offers home equity loans throughout the entire country — our top-scoring lender to do so.
Those who live in areas not widely serviced by home equity loan lenders; those who hate upfront fees and closing costs.
- Available in all 50 states
- Covers all closing costs for borrowers
- Offers discounts for setting up automatic payments and to its banking customers
- Only has branches in 26 states
- Mixed customer satisfaction

TD Bank: Best home equity loan lender for East Coast borrowers

4.1

Bankrate Score

Overview

TD — which stands for “Toronto Dominion” — is a successor to the Bank of Toronto, which was founded in 1855. Since then, there have been several mergers and acquisitions. TD Bank is currently headquartered in Cherry Hill, NJ, advertising itself as “America’s most convenient bank.”

TD Bank has over 1,100 branches located up and down the Eastern seaboard of the U.S. Many branches offer extended hours and are open on weekends. On top of that, TD Bank receives high marks for customer satisfaction, making it a bank that’s held in high regard by its customers.
Those with strong credit scores, those on the East Coast and those who like in-person service.
- Customers who set up autopay from a TD Bank checking or savings account receive a 0.25% rate discount
- Numerous in-person branches
- Home equity products are only available in select states
- Charges a $99 origination fee

Regions Bank: Best home equity loan lender for the South/Midwest

3.8

Bankrate Score

Overview

Regions Bank was founded in 1971 as First Alabama Bankshares. It provides a range of consumer, commercial, mortgage and wealth management products.

Regions Bank has over 1,300 branches in the South and Midwest. At the time of our survey, it offered an APR as low as 6.25 percent — 3 percentage points below the national average.
Those who live in the South or Midwest; those with high credit scores seeking low rates and fees.
- No closing costs for home equity loans
- Many in-person branches
- Highly competitive rates
- Doesn’t list credit score requirements or loan rates on its site
- Only available in 15 states

Rockland Trust Bank: Best home equity loan lender for Massachusetts-area borrowers

3.6

Bankrate Score

Overview

Rockland Trust was founded in Rockland, Massachusetts — near Boston — in 1907 with the purpose of promoting business activity in the area. Now the bank remains headquartered in Rockland, with in-person branches and online banking for businesses and individuals.

Rockland Trust has several branches in the Massachusetts-area that offer a wide variety of commercial and retail banking access. Along with their business practices, Rockland Trust stays connected to the community through a variety of community support programs.
Bay State borrowers who seek a sizable home equity loan.
- Offers personalized service at its branches and online
- No closing costs or annual fees
- Only available in the Massachusetts area
- Home equity products start at $25,000 — high compared to some other home equity lenders

Connexus Credit Union: Best home equity loan lender for small or short-term loans

3.5

Bankrate Score

Overview

Connexus Credit Union was founded in 1935 and is headquartered in Wausau, Wisconsin. Its membership is contingent on where you live, work or if you’re a member of other community groups. You can also become a member by making a donation to the Connexus Association — a nonprofit organization that provides resources to promote financial literacy and education.

Connexus only offers home equity loans with five, 10 or 15-year terms. Each of these loan terms comes with competitively low APRs — ranging between 7.20 – 9.15% (as of Jan. 18, 2024). Along with that, the credit union allows you to borrow up to 90% of your equity, compared to the conventional 80 – 85%.
Those who want a small loan, or one they can repay quickly; those with fair credit.
- You can borrow up to 90 percent of your home’s equity
- You can apply entirely online or with a representative over the phone
- You can borrow as little as $5,000
- You have to be a credit union member
- Only available in 14 states, with branches restricted to Illinois, Minnesota and Wisconsin
- Charges closing costs

Methodology

The eight lenders featured here rank as “the best” because, among financial institutions offering HE loans, they had the highest Bankrate Scores.

To determine a home equity lender's Bankrate Score, Bankrate rates lenders on a scale of one (1) to five (5) stars — with five (5) the highest rating — based on a variety of factors relating to the lender's products and services. To assign our ratings, we assessed each mortgage lender across three core areas:

Affordability: Annual percentage rate (APR) - 80%; introductory APR - 20%
Availability: Licensing - 50%; credit score - 20%; loan minimum - 10%; draw requirement - 10%; loan products - 10%
Borrower experience: Rate transparency - 45%; convenience - 35%; customer service - 10%; fixed-rate options - 10%

Learn more about our methodology.

How does a home equity loan work?

Also known as a second mortgage or second lien, a home equity loan works by letting you borrow against the equity you have in your home. Typically, they are loans with fixed interest rates and terms range from five to 30 years. You’re given the funds in a lump sum once you close on the loan and you’ll begin repaying the loan right away. Like your mortgage, they’re secured by your home, so failure to pay can result in foreclosure and the loss of your home.

Explore more: What is a home equity loan?

What to consider when choosing a home equity loan lender

When shopping for a home equity loan, there are several factors to consider:

Availability: Research not only what lenders are in your area, but what specific products they offer. Many lenders may have a presence in your state, but not offer home equity loans there.
Financial requirements: Home equity loans aren’t as standardized as mortgages. For example, some lenders may require you to maintain 25 percent equity, whereas others only require 10 percent. Some may require a credit score of 620 while others require 700.
Fees: Fees can vary significantly between lenders. Research what fees a lender charges, like an appraisal fee or origination fees.
Rates: Interest rates and APRs can also vary between lenders. Shop multiple lenders to compare the overall costs of the loan.
Contact options: Is it important your lender has in-person branch offices nearby? Do they have weekend customer service hours? How is their online banking? It’s good to know how you can contact a lender with an issue before getting a loan from them.
Customer reviews: Check out what customers have said about the lender before borrowing from them. Organizations and sites like the Better Business Bureau and TrustPilot may help inform your decision.

How much equity do I typically need to have in my home before I can get a home equity loan?

Usually, you’ll need more than 20 percent equity to get a home equity loan. How much more depends on how much you want to borrow. Most lenders require a combined-loan-to-volume (CLTV) of 80 percent or less, though some lenders may go as high as 90 percent. At 80 percent CLTV, you must maintain at least 20 percent equity in the home.

For example, say you have a home valued at $400,000. Twenty percent equity in this home is $80,000. If you have $100,000 in equity, subtract $80,000 from it to get how much you can borrow — $20,000.

Home equity lenders reviewed by Bankrate

Why trust Bankrate?

At Bankrate, our mission is to empower you to make smarter financial decisions. We’ve been comparing and surveying financial institutions for more than 40 years to help you find the right products for your situation. Our award-winning editorial team follows strict guidelines to ensure our content is not influenced by advertisers. Additionally, our content is thoroughly reported and vigorously edited to ensure accuracy.

Bankrate analyzes loans to compare interest rates, fees, accessibility, online tools, repayment terms and funding speed to help readers feel confident in their financial decisions. Our meticulous research done by loan experts identifies both advantages and disadvantages to the best lenders.

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 publication date. Check the lenders’ websites to see if there is more recent information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.

Best home equity loan lenders for April 2024

Best home equity loan lenders in April 2024

Third Federal Savings and Loan: Best home equity loan lender for customer service

Overview

Why we say it's the best for customer service

Who should get this loan?

Pros

Cons

BMO Harris Bank: Best home equity loan lender for affordability

Overview

Why we say it's the best for affordability

Who should get this loan?

Pros

Cons

Discover: Best home equity loan lender for competitive rates

Overview

Why we say it's the best for competitive rates

Who should get this loan?

Pros

Cons

U.S. Bank: Best home equity loan lender for nationwide availability

Overview

Why we say it's the best for nationwide availability

Who should get this loan?

Pros

Cons

TD Bank: Best home equity loan lender for East Coast borrowers

Overview

Why we say it’s the best for East Coast borrowers

Who should get this loan?

Pros

Cons

Regions Bank: Best home equity loan lender for the South/Midwest

Overview

Why we say it’s the best for the South and Midwest

Who should get this loan?

Pros

Cons

Rockland Trust Bank: Best home equity loan lender for Massachusetts-area borrowers

Overview

Why we say it’s the best for Massachusetts area borrowers

Who should get this loan?

Pros

Cons

Connexus Credit Union: Best home equity loan lender for small or short-term loans

Overview

Why we say it’s the best for short-term loans

Who should get this loan?

Pros

Cons

Methodology

How does a home equity loan work?

What to consider when choosing a home equity loan lender

How much equity do I typically need to have in my home before I can get a home equity loan?

Home equity lenders reviewed by Bankrate

Why trust Bankrate?