Who are the Best HELOC Lenders?
A home equity line of credit, or HELOC is one of the ways you can access the value you’ve built in your home. A home equity line of credit is the main alternative to a home equity loan, and individuals often approach an institution that offers both products to consider which option makes the most sense for their needs.
We took a look at the home equity lenders across the country, and analyzed a variety of factors including interest rates, fees, and credit lines to determine who were the best HELOC Lenders. Below is a list of our findings.
What is a “Home Equity Line of Credit?”
A HELOC, or Home Equity Line of Credit, is a line of credit which is borrowed against the value of your home. This is what’s known as a “secured credit line” and it functions much like a credit card, except you are agreeing to sign over a portion of your home’s equity, should you not be able to repay the loan. Put it all together and you understand the name: home equity line of credit.
So what’s the advantage of a HELOC? Well, because your debt is backed by a tangible asset, there is a lot less risk for banks to loan you money. Less risk for the bank means lower interest rates for you, and higher credit limits. For reference, the average APR (“average percentage rate”, or interest) for credit cards in 2019 was 15%. By comparison, the APR for home equity lines of credit is between 4-6%.
Common uses for HELOCs include funding home improvements (which add to your home’s value), and consolidating debt from various accounts into one with a lower rate. It should not be confused with “home equity loan” which functions similarly, except it’s a one time lump sum loan instead of a line of credit.
Determining the Best HELOC Rate for You
When it comes to finding the best HELOC lender for you, there are a few things to consider.
- What is the cost? This is the first and primary thing to consider. Cost is mostly your HELOC rate, and a few other costs associated with the loan – typically application fees, closing costs, and annual fees.
- What are the loan terms? HELOCs have what’s known as a “draw period” which is the period of time during which you can access your credit line, and a repayment period to close the loan. You’ll also want to see if check if you’re getting a variable interest rate (meaning it the amount you pay changes based on the market), or a fixed interest rate – meaning you make the same monthly payments throughout the life of the loan.
- Credit limit/loan amount. You’ll also want to consider your target credit limit or loan amount, and where you are able to achieve that. Typically your credit limit depends on several factors including your debt-to-income and loan-to-value ratio, credit score, and your home value. This may play a large or small role for you depending on how much you need (for reference minimum HELOC limits tend to be $50k, with the high end being around $700k).
- Financial Institution. Finally, you’ll want to consider a bank’s reputation, particularly if you care about having an in-person branch compared to an online lender. Many people choose to get a HELOC with the company they bank with, and there are often times times discounts for doing so.
Now that you know what to look for, we’re going to walk you through the best HELOC lenders out there, so you can compare and determine which one best suits your needs.
Best Home Equity Line of Credit Lenders
Best for branch locations: Bank of America
- Interest Rate: 5.9%
- Fees: None
- Discounts: 0.25% for automatic payments, 0.375% Preferred Rewards® customers
Bank of America currently offers a variable interest rate of 5.9%, with an introductory rate of 3.74% for the first 12 months. Bank of America is one of largest national bank in terms of locations, and also offers a great online application complete with chat support and educational tools. While their existing customer discount is slightly lower than others, their waving of all fees for HELOCs up to $1 million is a very generous kicker.
Best for existing customers: Chase Bank
- Interest Rate: 5.75% to 7.64%
- Fees: $50 origination, $50 annual
- Discounts: Up to 0.62% off and waived annual fee for Chase Customers with qualifying accounts
All Chase HELOCs are assigned on a 10-year draw period and 20-year repayment period. Credit lines are variable rates with the ability to lock in all or part of the loan at a fixed rate throughout the course of the loan. Existing Chase customers can receive a 0.25% discount for a qualified Chase account, 0.12% for setting up automatic payments, and 0.25% for showing proof of home improvement worth $30k or more. Qualified accounts can also get the $50 annual fee waived. While Chase has a big national presence, their HELOCs are not available in Hawaii, Alaska or South Carolina.
Best for low rates and large draw amounts: Flagstar Bank
- Interest: Prime Rate (currently 5.74%)
- Fees: None if account is open for 3 years
- Discounts: 1% discount for Flagstar customers who meet requirements
When it comes to price, it’s hard to beat Flagstar. While their interest rate is in line with others that use the Wall Street Journal prime rate, their HELOCs have no fees, and they offer an introductory rate of 3.49% for 6 billing cycles. They also offer a hefty 1% discount for individuals with a Flagstar checking account who draw at least $25k at closing and set up automatic payments from their Flagstar accounts. Flagstar is exception in that they provide both very high range of draw amounts, from $10k, to $1 million. Their main drawback is limited branch locations and below average customer service ratings.
Best for introductory discounts: SunTrust
- Interest: 5.25% to 6.72%
- Fees: $65 annual fee, waved for Signature Advantage or Premier Line customers
- Discounts: 0.25% discount for automatic payments from a SunTrust bank account
SunTrust offers loans with a 10-year draw period and 20-year repayment, with lines of credit between $10k and $50k. While not as big as many of the national chains, SunTrust offers robust online and mobile platforms for those who don’t have an in person branch. Suntrust home equity line of credit rates They offer a great introductory rate discount of 1.26% for the first 12 months, when taking an initial advance of $25k or more at closing. Their largest drawback is a hefty early closure fee of between $100 and $2,000 if the account is closed earlier than 3 years.
Best for speedy application process and low fees: Figure
- Interest: 4.99%
- Fees: 0-3%
- Discounts: None
Figure is an extremely unique home equity lender, with an entirely digital application process, with a blockchain and AI based platform to automate the loan process. Because of this, Figure is very quick – offering same-day approval, and funding in as little as 5 days. While most HELOCS have a variable APR based on the prime rate, Figure offers a fixed rate of as low as 4.99%. They also accept second mortgages and applications with credit scores as low as 600. As a new, tech-based lender, Figure has faced skepticism, though reviews appear to vary by individual.
Credit Unions That Offer HELOCs
Apart from traditional banks, credit unions are a great resource for HELOCs. If you prefer the cooperative and non-profit nature of a credit union, there are a number of options to consider when looking for a home equity line of credit.
Rated as one of Nerdwallet’s best Credit Unions in 2018, Alliant is a great option for a credit union HELOC. They offer flexible terms of up to 30 years, with low rates of 4.75%. They also offer interest only payment for the first 10 years, and allow borrowing up to 90% the value of your home. The drawback is Alliant currently only operates in 29 out of 50 states.
Bethpage Federal Credit Union offers no closing costs, and interest-only payments for the first 10 years of the loan (for loans under $500k). They offer a very low introductory offer of 3.99%, and a variable rate equal to the prime rate for the remaining lifetime of the loan (currently 5.50%). Bethpage allows for lines of credit up to $2M, however these will minor closing costs. They also offer the option to lock in some or all of the loan at a fixed rate.
Connexus is a cooperative that returns profits to its member owners, and currently serves 326,000 members in all 50 states. Their HELOCs offer a 15 year draw and repayment period, with a variable rate of 6.75%, and a low introductory offer of 3.49% for the first 6 months. They offer low minimum lines of $5,000 and minimum payments of $25.
Military Membership Credit Unions That Offer HELOCs
With 8 million members, Navy federal is the largest natural member credit union in the country. Serving active and former military members and their families, Navy Federal offers a full range of service including HELOCs and home equity loans. They have very generous terms, including the ability to borrow up to 95% LTV and a 20 year draw and repayment period, as well as no application or annual fees. Their rates follow the U.S. prime rate and they offer a 0.25% discount for automatic payments.
While primarily serving military members and their family PenFed Credit Union is available to non members through certain organizations, or donations to join their membership. PenFed offers tiered interest rates based on the prime rate, and your loan-to-value ratio. For LTVs of 80% or less, they offer the prime rate (currently 5.50%), for 80% to 85% LTV they offer the prime rate 0.5% and for 85% to 90% LTV they offer prime + 1.0%. The main drawback of PenFed is they only allow a draw amount up to $400k. Their branches are also primarily located on the east coast.
What is Prime Rate?
When browsing HELOC rates you’ll often see variable rates that say “Prime Rate”. What this means is that the financial institution you are borrowing from is basing its loan rate off a national “prime rate” that’s agreed upon by all the banks. This changes daily, and while it will move up and down over time based on underlying factors (like the U.S. interest rate), it generally doesn’t see large swings – with the exception of major events.
HELOCs, which tend to almost always have variable rates, are more prone to using the prime rate than home equity loans. Lenders will either give you exactly the U.S. prime rate, or a specified percentage above it, based on your loan terms and personal eligibility. Because so many lenders base their rates on the prime rate, it makes it easier as a lender to compare other factors.
While we offer guidance on the best HELOC lenders, much of the decision on where to borrow from will always be subjective. Where you bank, or if you desire a membership at a credit union are large individual factors (as there are almost always discounts for existing bank members). Some people prefer applying with a person in-branch, and others love the convenience of borrowing online.
However, within that framework, it’s safe to say everyone always wants the lowest price. Be sure to check how your interest rate compares to the prime rate, and what your options are for locking in part of all of your HELOC at an existing rate. Also keep in mind application fees, closing fees, early closure fees, and annual fees.
Finally, before you go into a loan, know your personal financial situation and what loan makes the most sense for you. How much credit do you want, and over what time period? How much does your loan amount compare to your home value, existing debt, and income? Do you want flexibility or do you prefer to know how much you’re paying every month? Have you considered a home equity loan?
Armed with these factors, and our list of best heloc lenders in the nation, you’ll be able to make a decision that will leave you in the best financial situation.