The Bankrate guide to home equity loans

By Rashawn Mitchner Reviewed by Mark Hamrick, Bankrate senior economic analyst

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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 APR, loan amounts, fees, credit requirements and broad availability.

What are today's average interest rates for home equity loans?

As of May 12, 2021, the average Home Equity Loan Rate is 6.80%.


Loan Type
Average Rate
Average Rate Range
Home equity loan
10-year fixed home equity loan
15-year fixed home equity loan

To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. The rates shown above are calculated using a loan or line amount of $30,000, with a FICO score of 700 and a combined loan-to-value ratio of 80 percent.

Best home equity loan rates in May 2021

The best home equity loan lenders offer a variety of repayment terms, low interest rates and few fees. It's best to shop around with a few lenders before accepting an offer, as each lender will evaluate your eligibility differently. Your rate will depend on your credit score, income, home equity and more, with the lowest rates going to the most creditworthy borrowers.

Loan amount
Loan term
APR Range
Best for
10 to 30 years
Low rates
BMO Harris Bank
5 to 20 years
Starting at 4.24% (with autopay)
Different loan options
Starting at $25,000
5 to 30 years
Starting at 2.52% (with autopay)
Homeowners with limited equity
Spring EQ
Up to $500,000
Not specified
Starting at 5.205%
Fast funding
Flagstar Bank
10 to 20 years
Starting at 5.43% (with autopay)
Flexible loan terms
U.S. Bank
Up to 30 years
Starting at 3.8% (with autopay)
Low fees at a national bank
Navy Federal Credit Union*
5 to 20 years
Starting at 5%
Service members
Starting at $2,000
7 to 20 years
Starting at 4.49%
Low fees at a regional bank
Connexus Credit Union
Starting at $5,000
5 to 20 years
Starting at 4.26%
Branch network
Regions Bank
7 to 20 years
Starting at 3% (with autopay)
Customer experience

* Navy Federal Credit Union has suspended applications for new home equity loans.

Summary: Home equity loans in 2021

What is a home equity loan and how does it work?

A home equity loan is a lump sum that you borrow against the equity you’ve built in your home. Most lenders will let you borrow up to 80 percent or 85 percent of your home’s equity, that is, the value of your home minus the amount you still owe on the mortgage. These loans have fixed interest rates and typical repayment periods between five and 30 years. Because your home serves as the collateral for a home equity loan, a lender can foreclose on it if you fail to make the payments.

Home equity loans 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, your monthly payment, your loan term and any fees involved. 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

You can calculate how much equity you may be able to borrow 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). This means that you have 50 percent equity in your home. 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 home's value by the lender's maximum LTV and subtracting your mortgage balance.

Say your lender allows you to borrow up to 85 percent of your home's value. 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.

Fixed-rate vs. variable-rate home equity loans

Most home equity loans have fixed rates, meaning the rate that you're given when you receive the funds is guaranteed for the duration of your loan term. This makes home equity loans particularly attractive for people on a tight budget or those who are risk-averse, since a fixed rate means a fixed monthly payment.

A variable interest rate, on the other hand, means that your interest rate can rise or fall each month based on market conditions. It's rare to find a home equity loan with a variable interest rate; if you'd prefer this variable rate, a home equity line of credit (HELOC) is a better option.

How does the coronavirus affect home equity loans?

Due to the current state of the economy, home equity loans may be an attractive option to access emergency cash. However, while interest rates plummeted last year, it became harder to qualify for one of these loans. Bankrate Chief Financial Analyst Greg McBride says that uncertainty around the job and housing markets early on in the pandemic led some banks to suspend home equity loan applications or restrict approvals to existing customers or those with high credit scores.

But in 2021, McBride says, rising home prices are making lenders more comfortable with increasing the volume of their home equity lending.

“Not only did home prices not go down, but they've actually gone up and homeowners have more equity, and so I expect that, from a loan performance standpoint, things are going to end up looking a lot better than had been initially assumed,” he says.

If you're looking to apply for a home equity loan, take advantage of prequalification offers, especially if your credit score is below average. And if you have an existing loan and are experiencing financial hardship, contact your lender to ask about loan relief options during this time.

“The reality of it is there is going to be an ongoing need for payment relief because of ongoing financial distress and long-term unemployment, and I expect that you will see lenders working to accommodate that,” McBride says.

Pros and cons of home equity loans

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

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.


  • Lower interest rates than those of unsecured debt such as credit cards or personal loans.
  • High borrowing limits.
  • Fixed monthly payments.
  • Interest may be tax deductible.


  • Potentially expensive closing costs.
  • Risk of losing your home if you are unable to make the payments or ending up underwater on your mortgage if home values drop.
  • Longer funding timeline than that of personal loans.

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.

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.

Home equity practices to avoid

When searching for a home equity lender, watch out for any unscrupulous or even unlawful business practices. Some harmful home equity practices include:

  • Bait and switch: A lender should always be upfront about its loan terms and fees, and it shouldn't change those terms when it comes time to sign off on your loan.
  • Loan flipping: While refinancing a home equity loan can be a good option for some people, a lender should never pressure you to repeatedly refinance — it could be a ploy to get you to pay more in fees and closing costs.
  • Insurance packing: Title insurance and hazard insurance are common for home equity loans. Something like credit insurance is not. Be on the lookout for lenders that try to hide an insurance clause in your contract.
  • Equity stripping: A reputable lender should evaluate your credit and your ability to repay the loan when considering you for a home equity product. A lender that extends a loan solely on the amount of equity you have could be predatory.

Overall, it's best to keep an eye out for lenders that fail to disclose fees, offer products that seem too good to be true or pressure you to sign a loan contract quickly.

Details: Best home equity loan rates in 2021

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, since 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 fewer fees. Current home equity loan interest rates range between 3 percent and 12 percent, depending on the lender, loan amount and creditworthiness of the borrower. Our list of the best home equity loans for 2021 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 all 50 states and Washington, D.C.) and rates that start at 3.99 percent APR.

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 APR. 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 90%
Max Debt-to-Income Ratio 43%
Min. Credit Score 620
Interest Rates 3.99% to 7.99% APR for first lien and 3.99% to 11.99% APR for second lien
Loan Amount $35,000 to $200,000
Term Lengths 10 to 30 years
Fees None
Additional Qualifications Plan to share your personal details, Social Security number, proof of income, employment information, tax returns and pay stubs when you apply

Read Bankrate’s expert Discover review

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

Overview: BMO Harris Bank has more than 600 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, few 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, there are no application fees and you get a 0.5 percent discount when you set up autopay with a BMO Harris checking or savings account.

What to watch out for: You can start your application online, but you may have to 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 700
Interest Rates Starting at 4.24% (with autopay)
Loan Amount $25,000–$150,000
Term Lengths 5 to 20 years
Fees None
Additional Qualifications Need a Social Security number, proof of income and information about debts and other financial obligations

Read Bankrate’s expert BMO Harris Bank review

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 90 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 90 percent of your home’s value with rates as low as 2.52 percent APR in some states and terms up to 30 years. Plus, borrowers can get a 0.25 percent rate discount if they have a KeyBank checking and KeyBank savings account.

What to watch out for: As a regional financial institution, KeyBank home equity loans are only available in 15 states. Plus, a $295 origination fee applies, and you may have to pay for title insurance, closing fees and mortgage taxes.

Lender KeyBank
Max LTV Ratio 90% combined LTV
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates Starting at 2.52% APR in some locations
Loan Amount Starting at $25,000
Term Lengths 1 to 30 years
Fees There’s a $295 origination fee, and you may have to pay costs of appraisal, title, flood insurance and mortgage tax if you repay and terminate the loan within 36 months.
Additional Qualifications Borrowers must be 18, provide proof of income and live in one of the states KeyBank serves

Best home equity loan for fast funding: Spring EQ

Overview: If you have an average 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 its maximum 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. Additionally, the option to borrow 90 percent of your home's value requires you to have a credit score of at least 740.

Lender Spring EQ
Max LTV Ratio 90%
Max Debt-to-Income Ratio 50%
Min. Credit Score 680
Interest Rates Starting at 5.205% APR
Loan Amount $25,000 to $500,000
Term Lengths Not specified
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, verification of credit profile and debt-to-income ratio and the home’s current value.

Read Bankrate’s expert Spring EQ review

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. Terms range from five to 20 years on loans from $10,000 to $500,000. APRs start at 5.88 percent in some states.

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. Additionally, loan details vary by location — loan details presented here are based on the 49546 ZIP code.

Lender Flagstar Bank
Max LTV Ratio Not specified
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates Starting at 5.88% APR (with autopay)
Loan Amount $10,000 to $500,000
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.
Additional Qualifications Property insurance is required, as is flood insurance in some cases. Borrowers must provide proof of income.

Read Bankrate’s expert Flagstar Bank review

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 offers rates starting at 3.8 percent APR on 10- and 15-year home equity loans. These low rates include a 0.5% discount for those who make automatic payments from a U.S. Bank checking or savings 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
Min. Credit Score Not specified
Interest Rates Starting at 3.8% APR (with autopay)
Loan Amount $15,000 to $750,000 (up to $1 million for California properties)
Term Lengths Up to 30 years
Fees None
Additional Qualifications Loan approvals are subject to credit approval.

Read Bankrate’s expert U.S. Bank review

Note: Due to the impacts of the coronavirus pandemic, Navy Federal Credit Union has temporarily suspended applications for new home equity loans. The information presented below reflects Navy Federal Credit Union‘s previous offerings.

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 percent 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 5 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 Navy Federal paid on your behalf.

Lender Navy Federal Credit Union
Max LTV Ratio 100%
Max Debt-to-Income Ratio Not specified
Min. Credit Score Not specified
Interest Rates Starting at 4.99% APR
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 Navy Federal 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 130 branches spread across Texas, Frost is a full-service bank that offers checking and saving accounts, personal loans, insurance, investment products and more. Home equity loans start as low as $2,000 and come with no application fee and no annual fee. 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 $500,000 or more. Frost offers a 0.25% discount for those who set up automatic payment from a Frost checking or savings account.

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'll 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 4.49% to 5.64% APR
Loan Amount Starting at $2,000
Term Lengths 7 to 20 years
Fees There are no prepayment penalties, no application fees and no annual fees. There are also no closing costs on loans from $2,000 to $500,000.
Additional Qualifications You’ll need to show proof of homeowners insurance, bring your government-issued photo ID and provide your Social Security number

Read Bankrate’s expert Frost review

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 6,000 locations throughout the U.S.

Perks: Borrowers can bank in person at a network of more than 6,000 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 those of other financial institutions on this list, starting as low as 4.26 percent APR.

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. 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 Starting at 4.26% APR
Loan Amount Starting 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

Read Bankrate’s expert Connexus Credit Union review

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 also qualify for a rate discount 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. You’ll need at least $10,000 in equity. Additionally, borrowers are on the hook for a few fees, including late fees of 5 percent (with a minimum of $29 and a maximum of $100 in most states). There’s also a returned check fee of $15 for all states.

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% APR (with autopay)
Loan Amount $10,000 to $250,000
Term Lengths 7 to 20 years
Fees Regions Bank will pay all closing costs, but borrowers may be responsible for over-limit fees of $29, a 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

Read Bankrate’s expert Regions Bank review

Getting a home equity loan with bad credit

If you have poor credit, you may have a harder time getting approved for a loan, but it is still possible. If you're interested in applying for a bad-credit home equity loan, the first step you should take is to shop around with a few different lenders. Since each lender has its own individual requirements, it's possible that one lender will be more accepting of poor credit scores and offer better rates than a similar lender.

Generally, you'll have to meet the following criteria to qualify for a home equity loan:

  • At least 15 percent to 20 percent equity in your home.
  • A minimum credit score of 620.
  • A maximum debt-to-income ratio of 43 percent.
  • On-time bill payment history.
  • Stable employment or income history.

If you don't meet the requirements, you may want to consider getting a co-signer to increase your chances of approval.

Home equity loan vs. HELOC

Home equity loans and home equity lines of credit (HELOCs) are both loans backed by the equity in your home. However, while a home equity loan has a fixed interest rate and disburses funds in a lump sum, a HELOC lets you make draws with variable interest rates, like a credit card.

Generally speaking, if you're planning on making multiple home improvement projects over an extended period of time, a HELOC may be the better option for you. If you're thinking about consolidating high-interest credit card debt or doing a larger home improvement project that would require all of the funds upfront, a home equity loan may be the best option.

Home equity loan vs. HELOC for bad credit

Because home equity loans and HELOCs both use your home as collateral, they are both viable options if you have poor credit — it will likely be easier to qualify for a home equity product than, say, an unsecured personal loan.

However, it's still important to consider which option is right for your financial situation, especially if your poor credit is a result of missed payments. If you know that you would benefit from a structured monthly budget, a home equity loan is the right option. If you would rather focus on keeping your debt low, a HELOC will allow you to take out only as much as you need and pay it back on a more flexible timeline.

If you've shopped around at different lenders, have considered getting a co-signer and still aren't sure if you'll get approved due to your credit score, you still have options. Consider why you're interested in taking out a loan. Do you need the funds immediately? Will this help you or hurt you in the long run by racking up more debt?

If you're having trouble getting approved, take some time to improve your credit score. It's also important to decide how a loan could impact your credit score in the future, since you'll be taking on more debt with both a home equity loan and a HELOC.

Home equity loan FAQ

What is home equity and how do you calculate it?

Home equity is the stake you have in your property, as opposed to the lender's stake. To calculate your home equity, subtract your current mortgage balance from the appraised value of your home. Over time, you build up equity in your home as you make payments on your mortgage. Home equity is one way to measure your personal wealth, since you can borrow from your home equity in the form of loans or lines of credit.

You’ll need a substantial amount of equity in your home to qualify for a home equity loan. A home equity calculator can help you figure out how much you can borrow.

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).

Where can I get a home equity loan?

A variety of banks and credit unions offer home equity loans. 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.

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 is the time to lock in your rate. Rates are lower than historical benchmarks, but many banks have tightened approvals, and some have even temporarily suspended their home equity products.

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 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 mortgage rates, since 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.

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, 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.

Alternatives to a home equity loan

A home equity loan is not the right choice for every borrower. Depending on what you need the money for, one of these options may be a better fit:

  • Home equity line of credit (HELOC): Like a home equity loan, a HELOC lets you borrow from your home's equity. However, you'll borrow from a credit line and repay what you borrow with a variable interest rate.
  • Cash-out refinance: If you can qualify for a lower interest rate than what you're currently paying on your mortgage, you may want to refinance your mortgage. If you refinance for an amount that's more than your current mortgage balance, you can pocket the difference in cash.
  • Reverse mortgage: With a reverse mortgage, you receive an advance on your home equity that you don't have to repay until you leave the home. However, these often come with many fees, and variable interest accrues continuously on the money you receive.
  • Personal loan: Personal loans may have higher interest rates than home equity loans, but they don't use your home as collateral. Like home equity loans, they have fixed interest rates and disburse money in a lump sum.


To select the top lenders that offer home equity loans, Bankrate considered factors that help consumers decide whether a lender is a good fit for them, such as minimum APR and maximum combined loan-to-value ratio. 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. In addition, the lenders featured here were evaluated for notable features like customer discounts and flexible repayment options.

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.