10
Best Home Equity Loans: Compare Lenders
Find A Home Equity Loan In Your State
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AmeriSave Mortgage
Availability
49 U.S. States
Not available in New York
Minimum Credit Score
600
Loan Minimums
$60,000 for purchase and refinance; $25,000 for home equity
NMLS: #1168
49 U.S. States
Not available in New York
600
$60,000 for purchase and refinance; $25,000 for home equity
Compare the Best Home Equity Loan Lenders
| COMPANY | FORBES ADVISOR RATING | APRS STARTING AT | HOME EQUITY LOAN AMOUNT | LEARN MORE |
|---|---|---|---|---|
|
7.34%
|
$10,000 to $500,000
|
Via Navy Federal Credit Union's Website
| |
|
7.79%
|
$35,000 to $300,000
|
Compare rates from participating lenders in your area via Bankrate.com
| |
|
Does not disclose online
|
$45,000 to $350,000
|
Compare rates from participating lenders in your area via Bankrate.com
|
Best Home Equity Loan Companies: A Closer Look
Navy Federal Credit Union
Best Home Equity Loan Lender for Military Members and Veterans
Navy Federal Credit Union
APRs starting at
7.34%
Home equity loan amount
$10,000 to $500,000
Minimum credit score
Does not publicly disclose
7.34%
$10,000 to $500,000
Does not publicly disclose
Navy Federal Credit Union Home Equity allows qualified military members, veterans and their spouses to borrow up to 100% of their home equity—a significant benefit since many home equity loan lenders cap borrowing at 80% to 85%. Navy Federal offers loan amounts from $10,000 to $500,000 with terms ranging between five and 20 years. Plus, Navy Federal pays all closing costs on new fixed-rate home equity loan applications.
- Offers high lending amounts
- Borrow up to 100% of your home’s equity subject to credit evaluation, loan amount and occupancy
- No early prepayment penalties
- Only active military members, veterans and their spouses are eligible
- Does not offer rate-buy downs
How to apply
Borrowers can apply online, by phone, via mobile app or at a branch. Navy Federal home equity loans are available in all 50 states and Washington, D.C. Customer support by phone is available Monday to Saturday from 7 a.m. to midnight EST and Sunday from 9 a.m. to midnight EST.
Speed
The average time borrowers close on a home equity loan with Navy Federal Credit Union ranges between 45 and 55 days.
Discover
Best Home Equity Loan Lender for Fee Savings
Discover
APRs starting at
7.79%
Home equity loan amount
$35,000 to $300,000
Minimum credit score
680
7.79%
$35,000 to $300,000
680
Discover Home Equity stood out to us because it doesn’t charge several upfront fees and closing costs, which keeps a nice sum of cash in your pocket.
- Offers various term lengths
- No origination fee, appraisal fees or closing costs
- 90% combined loan-to-value (CLTV) limit
- Doesn’t offer home equity products in all states or in U.S. territories
- Minimum borrowing requirement of $35,000
How to apply
Borrowers can apply for a Discover home equity loan online or over the phone. Discover’s home equity products are unavailable in Iowa, Maryland and all U.S. territories. Phone support is available Mondays to Fridays from 8 a.m.to Midnight ET and Saturdays and Sundays from 10 a.m. to 6 p.m. ET.
Speed
The average time borrowers can expect to close a home equity loan with Discover is 55 days.
Rocket Mortgage
Best Home Equity Loan Lender for Online Application Process
Rocket Mortgage
APRs starting at
Does not disclose online
Home equity loan amount
$45,000 to $350,000
Minimum credit score
680
Does not disclose online
$45,000 to $350,000
680
Rocket Mortgage earns the best online home equity loan lender title for its nationwide presence and comprehensive digital application process.
- Fully online lender
- 90% CLTV limit with a minimum 740 credit score
- Readily available customer support by phone or chat
- High minimum credit score and loan amount requirements
- Must pay closing costs
How to apply
Borrowers can apply for a Rocket Mortgage home equity loan online or through the Rocket Mortgage mobile app. Rocket Mortgage home equity loans are available in all 50 states and Washington D.C.. Phone support is available Monday to Friday from 7 a.m. to midnight ET, Saturday from 9 a.m. to 8:00 p.m. ET, and Sunday from 9:00 a.m. to 7 p.m. ET.
Speed
Expect to close a home equity loan with Rocket Mortgage in about 45 days.
What should borrowers consider when choosing a home equity loan?
What should borrowers consider when choosing a home equity loan?
Scott Bridges
Chief Consumer Direct Lending Production Officer
James Sias
Head of Mortgage Revenue at Fifth Third Bank
Sarah Alvarez
Vice President, Mortgage Banking at William Raveis Mortgage
When choosing a home equity loan, a potential borrower should determine how much money they need to borrow and how quickly it needs to be repaid. Longer long terms do equate to lower monthly payments, but they also have increased amounts of interest paid over the life of the loan.
Chief Consumer Direct Lending Production Officer
Whether a home equity loan is the right choice for you depends on your individual financial circumstances and goals. Interest on a home equity loan may be tax-deductible if the loan is used for home improvements. Borrowers should consult a tax advisor to understand how current tax laws apply to their situation.
Head of Mortgage Revenue at Fifth Third Bank
It’s very important that anyone considering a home equity loan spends time talking to different lenders or, to save time, works with a mortgage broker with access to many different lenders. The offerings are constantly shifting, and not all products are the same. For example, some lenders offer a reduced introductory rate or will cover closing costs to sweeten the deal.
Vice President, Mortgage Banking at William Raveis Mortgage
How Home Equity Loans Work
Home equity loans, a type of second mortgage, provide a lump sum that you can put toward just about any legal expense, such as home improvements or debt consolidation. Home equity loans typically come with fixed interest rates, and you’ll repay the loan in monthly installments over a set term.
As with other mortgages, your home serves as collateral to secure the loan. Because this reduces the risk for the lender, you can typically get a lower interest rate on a home equity loan compared to alternatives like personal loans or credit cards. However, you risk losing your property if you can’t make your payments.
How To Calculate Your Home Equity
Home equity is the amount that remains after you subtract your mortgage balance from the market value of your property.
For example, if your current home value is $450,000 and you still owe $270,000 on your mortgage, your equity is $180,000.
To estimate your home’s value, you can look at a recent tax assessment or compare sale prices of similar homes in your area. You also can hire a professional real estate appraiser for a more precise valuation. Lenders typically require an appraisal as part of the home equity loan process.
Home Equity Loan Requirements
Simply having equity doesn’t mean lenders will automatically approve you for a home equity loan. While eligibility criteria can vary by lender, here are the minimum requirements you’ll typically have to meet to qualify:
- Sufficient home equity: Most lenders require at least 15% to 20% equity, though some might allow as little as 10%.
- Good credit score: This usually means having a credit score of 670 or higher. Your credit score also impacts the rates you’re offered—the higher your credit score, the lower your rate.
- Good payment history: Lenders want to see that you’ve responsibly managed your other debts with on-time payments.
- Low debt-to-income (DTI) ratio: Your DTI ratio compares your income to your monthly debt payments. Lenders generally require a DTI ratio of 43% or less for a home equity loan.
- Stable income: Lenders want to see proof of sufficient, stable income that shows you can reasonably afford another loan. For example, a lender will likely request employment verification and proof of income, such as through tax returns, pay stubs or W-2s.
- Homeowners insurance: This insurance protects the lender’s investment in a home equity loan.
- Professional home appraisal: Most lenders set up a home appraisal as part of the approval process. This determines your property value and equity.
Home Equity Loan Limits: How Much Can You Borrow?
How much you can borrow with a home equity loan depends on your equity and loan-to-value (LTV) ratio. Your LTV ratio is a key risk assessment metric that lenders review when comparing a prospective borrower’s remaining mortgage balance against the property’s value.
If you have more than one mortgage on your home, lenders will calculate your combined loan-to-value (CLTV) ratio. Your CLTV ratio includes all outstanding debt tied to your property—not just your primary mortgage balance. This ensures that the lender reviews the total debt secured by your property when determining your maximum amount of home loan financing.
In most cases, lenders won’t let you borrow the full value of your home equity. Typically, they prefer to lend no more than 80% of your home equity to avoid default risks. However, you may be able to borrow more depending on the lender and the property’s location.
Calculating Your LTV Ratio
To calculate your LTV ratio, divide your outstanding mortgage balance by your home’s appraised value. For example, say your property is appraised at $450,000, and you still owe $270,000 on your mortgage. In this case, your LTV ratio would be 60% ($270,000/$450,000).
Lenders generally consider low LTV ratios as a signal of a less risky investment. Because of this, you’re more likely to qualify for a competitive interest rate with a lower LTV ratio.
Calculating Your Loan Amount
Continuing with this example above, say the lender you’re looking at is willing to accept up to an 80% LTV ratio. In this case, 80% of your appraised home value would be $360,000 ($450,000 x 0.80). Subtracting your remaining mortgage balance from this leaves you with $90,000, which would be the maximum amount you could borrow with a home equity loan from this lender.
Use the Forbes Advisor home equity loan calculator to get a sense of how much you’ll be able to borrow based on your LTV ratio and credit score.
What Can You Use Home Equity For?
There are no restrictions, other than legality, on what you can do with your home equity funds. Some common ways to use a home equity loan include:
- Debt consolidation
- Home improvements
- Medical expenses
- College costs
- Vehicle purchases
- Wedding expenses
- Startup business costs
- Retirement income
- Emergency expenses
It’s critical to make sure you can comfortably afford to repay a home equity loan before you borrow. While you can certainly use this type of loan for a lavish vacation, luxury items or even day-to-day bills, it’s generally not a good idea. Remember, you’re using your home to secure the loan—so if you default on your payments, you could lose your property.
Home Equity Loans: Pros & Cons
| PROS | CONS |
|---|---|
|
Predictable monthly payments
|
Risk of foreclosure if you default
|
|
Allows for large lump sum that borrowers can use for any purpose
|
Requires you to take on debt
|
|
Allows you to maintain your current mortgage rate and loan terms
|
Closing costs and fees can run between 2% and 5% of the loan, which may offset the benefits of the lower interest rate
|
|
Typically offer competitive interest rates compared to unsecured loans (loans that do not require property or other forms of collateral for approval) such as credit cards and personal loans
|
Reduces your home equity
|
|
Interest is potentially tax deductible if the funds are used for buying, building or renovating a residence
|
Risk of over-borrowing and over-spending the proceeds on inconsequential items or pursuits
|
|
Using a home equity loan for substantial home improvement could increase the overall property value
|
Closing costs may offset the benefits if the purpose is to consolidate high-interest debt into a lower-rate loan
|
|
Can help to reduce debt and improve cash flow by consolidating multiple higher-interest debts into a single lower-interest-rate loan
|
Fixed interest rate prevents borrowers from benefiting from lower rates if they decrease during the loan term
|
|
Your home value could drop, putting you at risk of being underwater on your loan
|
How To Compare the Best Home Equity Loan Lenders
When comparing home equity loan lenders, the best one for you will depend on your financial situation and priorities. Here are some prominent factors to weigh as you conduct your research:
- Types of lenders: Cast a wide lender net in your research by considering traditional banks, credit unions, mortgage brokers and online lenders. This can help you get a sense of their unique advantages and disadvantages, as well as determine what kind of lender best suits your needs.
- Interest rates: Your interest rate has a major impact on your overall borrowing costs. Shop around and compare your rates from as many lenders as possible to find a good deal more easily. Additionally, don’t just rely on published rates—call the lenders for personalized quotes or get prequalified to see your potential rate options. Remember to compare rates for the same loan term to get an apples-to-apples comparison.
- Loan amounts: Consider how much you need to borrow, and look for lenders that support your goal. Remember that your total equity and LTV ratio will impact how much you qualify for.
- Repayment terms: Longer repayment terms come with lower monthly payments, but you’ll pay more in interest over time. In comparison, shorter terms have higher payments, but you’ll save on interest. It’s usually best to choose the shortest term you can afford to keep your interest costs as low as possible.
- Fees and closing costs: You’ll typically pay 2% to 5% of your loan amount in closing costs. Lenders might also charge other fees, such as fees for late or returned payments. Compare how much individual lenders charge to see what makes financial sense.
- Eligibility requirements: Different lenders have varying criteria for qualification, and some are less stringent than others. For example, if you have a lower credit score, search for lenders that cater to borrowers with less-than-perfect credit.
- Customer service: A home equity loan is a major financial commitment that could span years. As such, you’ll want to know a lender is accessible and responsive should you need assistance. Check reviews on sites like the Better Business Bureau, Trustpilot and Google to gauge experience from other customers.
Once you’ve narrowed down your top lenders and preferred term length, compare loan estimates to identify which lender provides the most affordable monthly payments.
6 Steps To Getting a Home Equity Loan
If you’re ready to get a home equity loan, follow these steps:
1. Estimate Your Home Value
2. Check Your Credit
3. Research Lenders and Pick a Loan Option
4. Gather Key Documents
5. Submit an Application and Supplemental Information
6. Close On the Loan
Is Getting a Home Equity Loan Right for You?
Home equity loans can be a great option to access the cash in your home. Even so, whether you should take out a home equity loan will depend on your unique situation.
Nonetheless, if you’re a homeowner in a strong financial situation and need a lump sum of money on the fly for a single large expense, such as home renovation, an eye-popping medical cost or consolidating multiple higher-interest loans into a single lower-interest-rate loan, then a home equity loan could be right for you.
Additionally, if you prefer certainty, the predictable payments of a home equity loan may help you sleep easier at night compared to riskier financing methods.
Methodology
We graded the best home equity lenders based on features that have a meaningful impact on the cost of a home equity loan and a borrower’s experience, including interest rates, loan options, minimum credit score, accessibility, closing time, customer service, discounts and the customer sentiment index.
Our scoring method is broken down as follows:
- Interest rate. 17.50%
- Accessibility. 7.50%
- Customer service experience. 7.50%
- Loan options. 8.75%
- Time to close. 8.75%
- Minimum credit score. 5.00%
- Discounts. 5.00%
- Customer sentiment index. 40.00%
We chose to focus on these core elements to bring forward lenders that offer the most competitive rates while also providing a satisfactory customer experience accessible to borrowers of all financial backgrounds. We believe this scoring system best reflects consumers’ top priorities when comparison shopping for mortgage lenders.
To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Reviews Mortgage Lenders.
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Frequently Asked Questions (FAQs)
What lender is best for a home equity loan?
The best lender for a home equity loan will depend on your unique situation and needs. For example, if term length is a priority, a lender offering more options may be the best fit. Or if you want an online-only experience, then an online lender could be a good choice.
Ultimately, make sure to shop around and compare your choices from as many lenders as possible when narrowing down your options.
Can I qualify for a home equity loan if I have bad credit?
It depends on the lender and other aspects of your application. Though qualifying for a home loan with a credit score below 680 will typically be more challenging, if you have substantial equity in your home and your financial situation is strong, such as you earn a reliable income and your DTI is well below 43%, you will improve your qualification chances.
Can I use a co-signer with a home equity loan?
Yes. Having a co-signer such as a financially stable family member could improve your chances of loan approval. However, keep in mind that a co-signer shares responsibility for the loan. Any missed or late payments can harm both your credit scores, and the co-signer is legally on the hook if you don’t pay back the loan.
What is a good rate for a home equity loan?
A good rate is generally considered to be one below the national average. Remember that the actual rates you’re offered will vary by lender as well as your financial profile. Also keep in mind that home equity loan rates can fluctuate daily—even hourly—so it’s essential to monitor trends to help you determine when you see a competitive rate.
How much would a $50,000 home equity loan cost per month?
Monthly payments on a $50,000 home equity loan can vary widely depending on your home value, outstanding mortgage balance, loan term length, credit profile, lender and location.
For example, if you took out a $50,000 home equity loan with a five-year term at an 8.25% rate, the fixed monthly payment would be roughly $1,020. For a 10-year loan at 8.5%, expect to pay around $620 monthly.