Home Equity Rates

Select a Loan Type:

HELOC
Home Equity
A Home Equity Line of Credit (HELOC) is a revolving line of credit, meaning you can continually borrow from it and pay it back over a set time frame. The credit limit is based on your home value with variable rates.
A Home Equity Loan (HELOAN) is a second mortgage that allows you to borrow against the value of your home. Funds are delivered as a lump sum, and typically have fixed rates. Your home equity is calculated by taking the appraised value of your home and subtracting how much you owe on your mortgage.

Top 3 HELOC Choices

Top 3 HELOAN Choices

HOME EQUITY LOAN LENDERSHELOC LENDERS PROMO / INTRO RATE STANDARD RATE
flagstar bank - Rates
PROMO

3.49%

STANDARD RATE

5.74%

connexus - Rates
PROMO

3.49%

STANDARD RATE

6.57%

fifththirdbank - Rates
PROMO

3.49%

STANDARD RATE

5.40%

keybank - Rates
PROMO

N/A

STANDARD RATE

4.06%

thirdfederal - Rates
PROMO

N/A

STANDARD RATE

4.87%

usbank - Rates
PROMO

N/A

STANDARD RATE

4.89%

Next Best with Good Rates

HOME EQUITY LOAN LENDERSHELOC LENDERS PROMO / INTRO RATE STANDARD RATE
bethpage - Rates
PROMO

3.99%

STANDARD RATE

5.25%

citybank - Rates
PROMO

3.99%

STANDARD RATE

6.34%

bankofthewest - Rates
PROMO

4.49%

STANDARD RATE

6.03%

bankofamerica - Rates
PROMO

5.09%

STANDARD RATE

6.43%

thirdfederal - Rates
PROMO

N/A

STANDARD RATE

4.49%

figure - Rates
PROMO

N/A

STANDARD RATE

4.99%

penfed - Rates
PROMO

N/A

STANDARD RATE

5.50%

springeq - Rates
PROMO

N/A

STANDARD RATE

4.99%

discover - Rates
PROMO

N/A

STANDARD RATE

4.99%

flagstar bank - Rates
PROMO

N/A

STANDARD RATE

5.30%

penfed - Rates
PROMO

N/A

STANDARD RATE

5.34%

tdbank - Rates
PROMO

N/A

STANDARD RATE

5.61%

alliant - Rates
PROMO

N/A

STANDARD RATE

5.75%

citybank - Rates
PROMO

N/A

STANDARD RATE

6.59%

Introduction to Home Equity
HELOCs vs HELOANs
HELOC Interest Rates
HELOAN Interest Rates

Introduction

If you find yourself in a position where you need to come up with a large sum of money in short order, then a home equity loan or home equity line of credit may be the ideal solution for you.

These versatile loans are drawn against the equity in your home and can be used for any purpose, such as medical, dental or long-term care expenses, college tuition and other costs related to education, debt consolidation, home improvements or the purchase or repair of a car. The amount of time that it takes for you to get your money from one of these loans will vary depending on your credit score and credit history, the amount you are borrowing and the market value of your home. Your home equity rate will also depend on these factors.

Compare top home equity lenders by category

Out of the previous list of home equity lenders, the best companies for consumers in various categories are listed below: 

Best overall home equity lender – PenFed Credit Union

PenFed is available in all 50 states and charges no lender or origination fees for its home equity loans. Closing time can run anywhere from 11 to 35 days, which is shorter than the national average. Loan pre-approval usually takes less than three days. The minimum acceptable credit score is 620. 

Pros

  • Low rates
  • Low minimum credit score
  • Members discounts of up to $2,500
  • No lender fees

Cons

  • Limited selection of mortgage products
  • Alternative data is not taken into account

Best home equity lender for people with poor financial history – Bank of America

BOA offers flexible terms and assistance with closing costs and making a down payment. There are no maximum income or earning limitations. Both variable and fixed-rate loans are available with flexible qualification guidelines. BOA can sometimes provide zero down-payment loans with 100% financing for those who qualify. BOA also has no maximum income or earnings limitations and the application process generally takes about 5 minutes. All borrowers with a credit score of at least 620 are eligible for a HELOC with BOA. 

Pros

  • Zero down payment loans available
  • No maximum income or earnings limitations
  • Quick and easy application process
  • Reasonable credit score requirements

Cons

  • Interest rates may be higher than other lenders

Best home equity lender for people with good financial history – US Bank

US Bank offers low-interest home equity loans to borrowers who have credit scores of at least 660. Their home equity loans start at 3.8% but will vary according to the borrower’s credit score and other factors. Those with credit scores above 660 can usually get a very good deal. These loans come in 10, 15 and 30 year terms and can be for any amount between $15,000 and $750,000. Loans are approved three business days after closing. 

Pros

  • No non-escrow related closing costs
  • 0.50% rate discount for automatic payments

Cons

  • Early fee for loan closure during the first 2.5 years

Best home equity lender with an extended repayment term – Spring EQ

Spring EQ offers home equity loans with terms of up to 30 years. This is longer than many other home equity lenders offer. They have competitive rates and also can offer loans for up to 97.5% of the home value. Their minimum credit score is 640. However, they are currently only available in six states, with four more pending. Borrowers can enjoy a seamless digital process when they apply for a loan. 

Pros

  • High LTV allowed
  • Competitive rates
  • Quick and easy application process

Cons

  • Only available in a few states
  • Higher credit score requirements than some lenders

Best home equity lender for low fees – US Bank

Many competitors charge some form of closing costs as well as origination fees, but US Bank charges no upfront closing costs or fees and also offers competitive rates. Their minimum credit score is 660 and they offer loans up to 90% of the value of the home. Their maximum debt-to-income ratio is 50%. 

Pros

  • No upfront closing costs or fees
  • Competitive rates
  • High debt-to-income ratio allowed

Cons

  • Higher credit score requirements than many other lenders

Best home equity lender for flexibility – TD Bank

TD Bank offers home equity loans with terms ranging from 5 to 30 years, which are some of the most flexible in the industry. Their minimum credit score is 660 and their rates start anywhere from 4.59% to 5.99%. Their maximum LTV is 80%, and their maximum debt-to-income ratio is 41%. 

Pros

  • Low interest rates 

Cons

  • Lower maximum LTV than some other lenders
  • Lower maximum debt-to-income ratio allowed than some other lenders
  • Higher minimum credit score than some other lenders

Best home equity lender for big expenses: Spring EQ

All home equity loans can be used for major expenses, so the best lender in this category will vary for consumers in differing situations. Some may want the lowest rate while others will want more flexibility in the terms of their loan. Spring EQ allows borrowers to take out loans equal to 97.5% of their home’s value. If you’re looking for the biggest loan you can find, this is likely to be your best choice. 

Compare top HELOC lenders by category

Here is the list of the best HELOC lenders in each category:

Best overall HELOC lender – TD Bank

TD Bank offers low rates and great service. The minimum required credit score is 660 and the maximum DTI ratio is 43%. There is an annual fee of $50, but there are no closing costs if the loan amount is under $500,000. Their low rates and lack of closing costs make them one of the best overall lenders in the market. 

Pros

  • No closing costs
  • Low rates
  • Good service

Cons

  • Maximum DTI ratio lower than many other lenders
  • Annual fees
  • Higher credit score requirements than many other lenders

Best HELOC lender for people with bad financial history – First Bank

First Bank can extend a HELOC to borrowers who have a credit score of at least 600. They allow loans for up to 80% of the home value and their maximum DTI ratio is 40%. Their APRs range from 4% to 21%, with a 10 year draw period and a 10 year repayment period. Their relatively low credit score threshold makes them one of the best lenders for those who have a bad financial history. 

Pros

  • Lower minimum credit score than most other lenders
  • Low rates

Cons

  • Lower LTV allowed than many other lenders
  • Shorter repayment period
  • Maximum allowable DTI ratio lower than many other lenders

Best HELOC lender for people with good financial history – US Bank

U.S. Bank’s HELOCs range from 3.45% to 8.6% on the low end and cap out at 18% under state law. Approval comes 3 days after the closing date. The minimum credit score that they will accept is 660. U.S. Bank’s rates are among the lowest in the industry for those who have a good financial history. 

Pros

  • No closing costs except for those related to escrow
  • 0.50% rate discount for automatic payment enrollment

Cons

  • There may not be an interest-only payment available for lines of credit
  • Early repayment penalty during first 2.5 years

Best HELOC lender with an extended repayment term – HSBC

HSBC offers HELOCs with a draw period of 10 years and a 20 year repayment period. Their rates go as low as 1.74% for those who qualify and have a maximum LTV of 80%. The maximum DTI ratio is 40%. HSBC offers some of the best loans for those who need an extended repayment plan because of their low rates and other friendly loan terms.  

Pros

  • Very low rates
  • Longer repayment period than some other lenders

Cons

  • Lower maximum LTV allowed than some other lenders
  • Lower maximum DTI ratio allowed than some other lenders

Best HELOC lender for low fees – US Bank

US Bank has no closing costs for its HELOCs and charges competitive rates. Their maximum LTV is 90% and their maximum DTI ratio is 50%. They have a 10 year draw period with a 20 year repayment period. The lack of closing costs makes them one of the best lenders for low fees. 

Pros

  • Higher maximum LTV allowed than many other lenders
  • Higher maximum DTI ratio allowed than many other lenders
  • No closing costs

Cons

  • Higher interest rates than some other lenders

Best HELOC lender for flexibility – Navy Federal Credit Union

Navy Federal Credit Union offers HELOCs that have a 20 year draw period and a 20 year repayment period. Their rates start at 3.99% and their maximum LTV is 95%. However, you must have a credit score of at least 720 to qualify. The maximum DTI ratio that they will accept is dependent upon a number of factors such as credit score and LTV. Navy Federal Credit Union is one of the most flexible lenders because of its extended draw and repayment periods. 

Pros

  • Longer draw period than most lenders allow
  • Low rates

Cons

  • Very high credit score requirements
  • Maximum DTI ratio depends on several different factors

Best HELOC lender for big expenses 

All HELOCs from any lender can be used to pay for big expenses. The best lender in this category will vary from one lender to another depending upon the borrower’s financial circumstances and what they are looking for. US Bank has very low fees while Navy Federal Credit Union offers the most flexible repayment terms. But Spring EQ allows for the highest LTV, at 97.5% of the home’s equity. 

Key differences between HELOCs and home equity loans

Home equity loans and HELOCs have some key differences.  Fund withdrawal, interest rates, closing costs, and repayment terms all differ between them. Which is best for you depends on your situation. Here’s what you should know.

Lump sum vs revolving credit 

As mentioned previously, home equity loans are paid out upfront in a lump sum, whereas the borrower must draw on a home equity line of credit in order to access the funds. This can be done using a check or debit card. But both types of loans fall under the jurisdiction of the NMLS (Nationwide Mortgage Licensing System and Registration). 

Fixed-rate vs variable rate interest 

Most home equity loans charge a fixed interest rate that lasts through the life of the loan. But most HELOCs charge a variable rate of interest. Borrowers who apply for a HELOC should be sure that they can afford to make a higher payment if interest rates start to rise. 

Repayment terms 

Homeowners must immediately begin repaying a home equity loan starting in the month after they get the loan. The loan term may be anywhere from a five to 30 year repayment period, depending upon terms the lender is willing to extend to the borrower. HELOCs don’t have to be repaid until the repayment period begins (see below).  

Closing costs and fees

The closing costs and application fees for home equity loans and HELOCs are basically the same in most cases. There is often an appraisal fee, an origination fee, and a processing fee. Other fees may also apply depending upon the circumstances.

How does a HELOC work?

Why take out a HELOC?

HELOCs can be used to pay for any type of major expense. One of the most common uses is for debt consolidation or to pay off high-interest debt such as credit card debt, personal loans, or student loans. People also take out HELOCs to buy new cars, pay for major one-time expenses such as vacations, weddings, or funerals, make home improvements, or pay for education expenses. There are no restrictions on how the funds from a HELOC can be used. Furthermore, HELOCs usually don’t have ongoing expenses attached to them like fixed-rate home equity loans do. And you don’t have to draw out your entire balance up front with a HELOC; you can just take as much as you need and leave the rest untouched if you want to. 

HELOCs can also be used in conjunction with a primary mortgage loan to pay for a house without having to pay PMI. For example, if you only have enough cash to make a 5% down payment, you could take out a HELOC equal to 15% of the home’s value in addition to your primary loan in order to cover the full cost of the down payment necessary to avoid having to pay PMI.

You can start shopping for a HELOC once you have decided that you’ll need to tap into the equity in your home to pay for a major expense. A quick online search will yield a long list of possible lenders (like the list above), or the lender that you used for your primary mortgage may be able to get you a good deal. And it may be easier to get a second mortgage (or line of credit) from the company that you did your current mortgage through. 

The annual percentage rate that you pay on your HELOC will depend upon a few different factors, including your credit score, the outstanding balance of your primary mortgage, the prime rate, the combined loan-to-value ratio, the appraised value of your home, and the life of the loan. But a HELOC may be cheaper in price than any type of refinancing, such as a cash-out refinance or any other type of refinance.  

How do you qualify for a home equity line of credit

In order to qualify for a home equity line of credit, you’ll need to have a certain amount of equity built up in your home. You will also need to meet the minimum credit score required by the lender. The minimum score needed can vary somewhat from one lender to another, so be sure to shop around to see who can help you.  

The size of your HELOC will depend upon the balance of your primary loan and your home’s current market value. For example, if you bought a home for $300,000 and took out a mortgage for $240,000, then lenders might be willing to give you a HELOC that brings your total debt to 85% of the value of your home, which in this case would be $15,000. The loan-to-value (LTV) ratio is an important number in this equation. 

Stages of a home equity line of credit 

The draw period 

There are two separate periods of time in the life of a HELOC. The draw period is the period of time during which the borrower can draw funds from the HELOC. This period usually lasts from five to ten years, with a 10-year draw period being the most common length of time that is offered.  Once the draw period has expired, the borrower can no longer draw funds out of the HELOC

The repayment period 

The repayment period follows the draw period, and it can last from 10 to 20 years in most cases. The repayment period is the period of time during which the borrower must repay the loan amount that was taken out during the draw period. HELOCs charge a variable interest rate during this period.

How to apply for a home equity line of credit

In order to get a home equity line of credit, you will have to fill out an application upfront with your lender and get approved. You can do this through online banking or in person at your local bank or credit union. You can also find a plethora of lenders online that may be able to offer you a better deal. Most online applications are quick and easy to fill out. 

In most cases, you will have to have a minimum credit score of at least 620, but a score of 670 or higher is preferred. You will also have to have enough equity in your home for your lender to be able to let you borrow a portion of it. You will also have to pay closing costs and appraisal fees that are deducted from the line of credit balance, along with possible annual fees. You may also be able to get a rate discount if you are willing to pay an origination fee. 

And, of course, your lender will have to pull a credit report showing your credit history in order to know what your credit limit is and how large your credit balance can be before giving you credit approval. If your credit score is good, then you’ll get a lower interest rate. But be sure to read all of the fine print before signing on the dotted line. Find out what your lender’s repayment terms are and whether they offer an introductory rate. 

The best HELOC rates can be found if you’re willing to do enough research. And a good lender will see that your loan application process goes quickly and smoothly. 

Pros and cons of a home equity line of credit 

Home equity lines of credit allow you to tap into the equity in your home to cover major expenses. They usually charge lower rates of interest than home equity loans or other forms of credit such as personal loans or credit cards. And the interest on this type of loan can be tax deductible if you can itemize your deductions. 

Just know that your monthly payment for a HELOC will also go up if interest rates rise, so be prepared to deal with this if rates start to increase. And if you become unable to make the monthly payments on your HELOC debt, your lender could repossess your house. The lower interest rate may not be worth it in some cases. You can help to prevent missed payments by setting up an automatic payment plan.  

How does a home equity loan work?

Why take out a home equity loan? 

Like home equity lines of credit, home equity loans can be used for any purpose. They can pay for special events such as weddings or vacations, new cars, home improvement projects, or home renovations. They should be considered when you encounter a major expense that you can’t pay for out of pocket. Home equity loan rates are usually cheaper than other types of loan rates because you are using your home as collateral. 

How do you qualify for a home equity loan

In order to qualify for a home equity loan as a secondary lien position, you have to have a good credit score and enough equity in your house to allow for another loan to be taken out on it. Most lenders will not let you take out a home equity loan that together with your primary mortgage exceeds 85% of the current market value of your home. Your total debt-to-income ratio also cannot exceed a certain percentage, such as 36%. You will also usually have to carry adequate property insurance and flood insurance if you live in a flood zone. 

How to apply for a home equity loan 

First, you will have to find a mortgage lender that advertises a rate that is competitive. FDIC insured banks such as Bank of America and U.S. Bank advertise both online and in the print media such as The Wall Street Journal. You will need to shop around some to see who will give you the lowest rates for the best home equity loan. There are many lenders that can offer low rates to those with good credit, but some deals are better than others. Federal credit unions, HELOC lenders and home equity lenders also all advertise through these avenues.  

As with a HELOC, you will have to fill out an application with your lender to determine your eligibility to get a home equity loan. You will have to disclose your financial condition to the lender so that they can determine whether you qualify for a loan or not. You may also need to get your home appraised so that the lender will know how much money they can loan you. It may take a few business days for the lender to come to a decision in some cases, while you may get instant approval in others where your credit is good and the loan options are favorable to the lender. But the process should take no longer than for a refinance loan in most cases. 

Repaying a home equity loan 

The payment schedule for a home equity loan is very straightforward. In most cases, you will have to make your first payment on the loan in the month following the month in which you were approved for the loan. You will have to make monthly payments on the loan until the loan is repaid in full. This can last anywhere from 5 to 30 years depending upon the term of the loan. 

In most cases, you will make this payment from your checking account or savings account, but you can also use a credit card if the lender allows for it. Also be sure to find out whether your loan comes with prepayment penalties in case you become able to pay it off early. But home equity loans are usually low-rate loans, so the payments shouldn’t be too high. It is usually much better than high-interest debt when it comes to borrowing alternatives. 

Pros and cons of a home equity loan 

Unlike HELOCs, home equity loans are usually fixed-rate loans. Although your monthly payments with a home equity loan may be higher than those of a HELOC at first, they also will not go up if interest rates rise. You will always know exactly how much you’ll have to pay every month with a home equity loan

Furthermore, you may also be able to deduct the interest you pay on this type of loan on your taxes if you used the money to buy or build your primary residence. But if you become unable to make your monthly payments, then your lender may foreclose on your home in order to get its money back. So be sure to contact your lender immediately if you should become unable to make your loan payments in a timely fashion. 

Home equity loan/HELOC FAQs

Did COVID-19 affect home equity loan/HELOC laws?

The coronavirus did not affect the laws governing HELOCs and home equity loans per se, but some major lenders have stopped taking applications for these loans. Just as families and individuals have tightened up their budgets and done what they can to cut costs, so have many lenders. This means that some of them have raised the bar for potential borrowers to meet in order to qualify for this type of loan. Higher credit scores and better debt-to-income ratios may now be required in order to qualify. 

How do I calculate home equity? 

In order to determine the amount of equity that you have in your home, simply subtract your mortgage balance from the current market value of your home. You may need to get an appraisal of your property in order to do this in some cases. 

Do I need a primary mortgage to apply for a home equity loan/HELOC?

No, you don’t have to have a primary mortgage in order to get either type of loan. In fact, you will qualify for a much larger loan if you don’t have a primary mortgage balance or first lien of any kind. And the lender that gave you your primary mortgage may be able to get you a better deal on a second loan on your home than anyone else. 

Does my type of residence matter when applying for a home equity loan/HELOC

As long as you legally own the property you are borrowing on, it does not matter whether you have a single-family residence, a duplex or a condominium. Your current financial condition and creditworthiness is the only relevant variable that lenders consider when they underwrite your loan application. The mortgage rates, line amount and the maximum amount of the loan as well as the repayment terms will remain the same regardless of your type of residence. 

What happens if I sell my loan while I have a home equity loan/HELOC?

Just as with a primary residence, the balance of your home equity loan or HELOC will be repaid from the sale proceeds when you sell your home. You don’t have to take any special action when you sell. Your closing papers will include the repayment agreement.