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How to Apply for a Home Equity Loan or Line of Credit (HELOC)Review our step-by-step guide to help you through the home equity loan process. Learn Moreabout How to Apply for a Home Equity Loan or Line of Credit (HELOC)What Is Home Equity?Learn about home equity and how you can use it. Learn Moreabout What Is Home Equity?Registered Mortgage Loan OriginatorsSee our list of licensed Mortgage Loan Originators. Learn Moreabout Registered Mortgage Loan OriginatorsStill have questions? Visit our Equity FAQs.
1 Home Equity Lines of Credit are variable-rate lines. Rates are as low as 7.250% APR and are based on an evaluation of credit history, CLTV (combined loan-to-value) ratio, line amount and occupancy, so your rate may differ. The plan has a maximum APR of 18%. For loan amounts of up to $250,000, closing costs that members must pay typically range between $300 and $2,000. The closing costs depend on the location of the property, property type, and the amount of the Equity Line. Members may borrow against their available credit line for a period of 20 years, after which any existing balance must be paid in full within the following 20 years. Rates are subject to change—information provided does not constitute a loan commitment. Home Equity Lines of Credit are available for primary residences, second homes and investment properties. Primary residences are owner-occupied, principal residences only. Second home properties must be owner-occupied at some point during the year. Investment properties are non-owner occupied. All lines for amounts less than $25,000 require a 1.00% increase in APR. Second home lines require a 1.00% increase in APR and may be subject to other restrictions. Investment lines require a 2.00% increase in APR with a maximum line amount of $100,000 and a maximum CLTV of 70%. You must carry homeowners insurance on the property that secures this plan. Home Equity Lines of Credit are not available in Texas. Lifetime Floor: The minimum APR that can apply during the Home Equity Line of Credit Plan is 3.99%. Our Home Equity Line APR varies based on the U.S Prime Rate and is updated to the published rate in the Wall Street Journal on the first workday of every month. We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.Your house’s value may surprise you. With home prices rising dramatically in the last few years, homeowners have seen a major increase in equity. With mortgage rates at two-decade highs, people wanting to borrow against their home are forgetting the cash-out refinance and turning instead to home equity loans. Here’s how these installment loans work, and how to find the best rates. Interest rates could change soon! Home equity loans could get more expensive if the Federal Reserve increases rates again. Lock in a rate you can afford now. This Week’s Home Equity Loan RatesHome equity loan rates are climbing given inflation and ongoing interest rate hikes by the Federal Reserve. Here are the average rates for home equity loans and HELOCs, as of Dec. 7, 2022. Loan TypeThis Week’s RateLast Week’s RateDifference$30,000 HELOC7.30%7.93%– 0.6310-year, $30,000 home equity loan7.91%7.96%– 0.0515-year, $30,000 home equity loan7.%7.91%– 0.05How These Rates Are CalculatedThese rates come from a survey conducted by Bankrate, which like NextAdvisor is owned by Red Ventures. The averages are determined from a survey of the top 10 banks in the top 10 U.S. markets. NextAdvisor’s Guide to Home Equity Loans
The Best Home Equity Loan Lenders of August 2022Editorial IndependenceAs with all of our home equity loan and home equity line of credit (HELOC) lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here. Good for wide nationwide availability U.S. Bank Editor’s Score: (4.4/5) Editor’s Score: (4.4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for wide nationwide availability U.S. Bank Editor’s Score: (4.4/5) Editor’s Score: (4.4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV allowed: NextAdvisor’s TakePros
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The Bottom Line Based in Minneapolis, Minnesota, U.S. Bank is the fifth largest banking institution in the U.S. It offers both home equity loans and HELOCs in 47 states, with the option of interest-only HELOCs available to qualified borrowers. You also have the option to lock all or part of your outstanding HELOC balance into a fix-rate option during your draw period. Available loan amounts for HELOCs and home equity loans range from $15,000 to $750,000, and up to $1 million for properties in California. There are no closing costs on home equity loans or HELOCs from U.S. Bank, but you’ll be charged an early closure fee of 1% of the line amount ($500 max) if you close your HELOC within 30 months of opening. In addition, HELOC borrowers may be charged an annual fee of up to $90, which can be waived with a U.S. Bank Platinum Checking Package. U.S. Bank offers a rate discount of 0.5% for home equity loan borrowers who set up automatic payments from a U.S. Bank personal checking or savings account. You can apply for a home equity loan or HELOC through an online application, by phone, or by visiting a U.S. Bank branch in person. If you want a loan estimate for a home equity loan — which includes the estimated interest rate, monthly payment, and total closing costs — without completing a full application, you can get one by speaking with a banker over the phone. We like U.S. Bank because of its extensive nationwide availability, many customer support options, and excellent price transparency — meaning you can get a personalized rate quote and fee information just by filling out some basic information, no credit check required. Good for price transparency TD Bank Editor’s Score: (4.1/5) Editor’s Score: (4.1/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for price transparency TD Bank Editor’s Score: (4.1/5) Editor’s Score: (4.1/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review.
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The Bottom Line Primarily operating on the East Coast, TD Bank is one of the 10 largest banks in the U.S. and serves more than 9.7 million customers. TD Bank offers Home Equity Loans and HELOCs in 15 states, with the option for interest-only and rate-lock HELOCs. Loan amounts for home equity loans start at $10,000, while line amounts for HELOCs start at $25,000. For a home equity loan or HELOC with TD Bank, closing costs only exist on loan amounts greater than $500,000, but you will be required to pay a $99 origination fee at closing regardless of your loan amount. There is also an annual fee of $50 on HELOCs unless your loan amount is less than $50,000. You’ll be charged an early termination fee of 2% of the outstanding balance if your HELOC is closed within 24 months from opening. Additionally, you’ll receive a 0.25% rate discount if you set up auto-pay from a TD personal checking or savings account. If you decide to apply for a TD Bank home equity loan or HELOC, you can do so online, by phone, or by visiting a TD Bank in person. The online application includes a calculator that will tell you the maximum amount you can borrow based on the information you input, but you can also see a full breakdown of rates, fees, and monthly payments by entering some basic information online. No credit check is required for this service. Though its nationwide availability is limited, we like TD Bank because it has a wide variety of product offerings — including interest-only and rate-lock options on its HELOCs. The bank’s good online user experience and price transparency make it easy to work with this lender, and the customer service is very accessible. Good for wide range of customer service options Connexus Credit Union Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for wide range of customer service options Connexus Credit Union Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line With over 420,000 members in all 50 states, Connexus Credit Union has a far reach in the United States. The credit union offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland, and Texas). Loan amounts for home equity loans and HELOCs range from $5,000 to $200,000. Within its HELOC product offerings is an interest-only HELOC which may allow you to pay a lower monthly payment. Since Connexus is a credit union, its products are only available to members. But, membership eligibility is open to most people: you (or a family member) just need to be a member of one of Connexus’s partner groups, reside in one of the communities or counties on Connexus’s list, or become a member of the Connexus Association with a $5 donation to Connexus’s partner nonprofit. Connexus does not specify any rate discounts, but it does offer an introductory rate for the first six months of your loan term. You won’t have to pay an annual fee for a home equity loan or HELOC with Connexus, but closing costs can range from $175 to $2,000 depending on your loan terms and property location. To apply for a home equity loan or HELOC with Connexus, you can fill out a 3-step application online. Though the application process is quick, you won’t be able to see a personalized rate or product terms without a credit check. Connexus offers expansive nationwide availability and has several product offerings, part of the reason this lender ranked highly for us. Its straightforward application process is another bonus that makes applying for a home equity loan or HELOC easy. Good for wide range of product offerings KeyBank Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for wide range of product offerings KeyBank Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line Based in Cleveland, Ohio, KeyBank has been around for nearly 190 years. KeyBank offers home equity loans to customers in 15 states and HELOCs to customers in 44 states. Aside from a standard HELOC, KeyBank also offers interest-only and rate-lock options. Home equity loan amounts of $25,000 and up are available, while HELOCs have line amounts of $10,000 and up. KeyBank HELOCs come with an annual fee of $50, but no closing costs unless your closing is performed by a closing agent. In that case, your closing fee could be up to $400. KeyBank offers a 0.25% rate discount for clients who have eligible checking and savings accounts with KeyBank. Additionally, home equity loans have an origination fee of $295. The KeyBank application allows you to apply for multiple products at one time. If you’re not sure whether KeyBank loans are available in your area, the application will tell you once you input your zip code. If you’re an existing KeyBank customer, you’ll have the option to skim through the application and import your personal information from your account. We like KeyBank because of its extensive product offerings. The streamlined application process for existing customers is helpful, but both existing and new customers will likely be pleased with the online user experience and availability of customer service that KeyBank offers. Good for online application user experience Spring EQ Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for online application user experience Spring EQ Editor’s Score: (4/5) Editor’s Score: (4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line Spring EQ may be a relatively new bank founded in 2016, but it has already earned a positive reputation from customers across the 38 states it serves. Spring EQ offers home equity loans, HELOCs, and interest-only HELOCs, providing borrowers with flexible loan options. Home equity loan amounts range from $5,000 to $500,000, while HELOC line amounts range from $50,000 to $500,000. Spring EQ loans may be subject to an origination fee of $995 and an annual fee of $99 in some states. Spring EQ does not specify any rate discounts. The Spring EQ loan application process is transparent and easy to understand. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their social security number. To be eligible for a home equity loan or HELOC with Spring EQ, you’ll need a credit score of 620 or higher, along with a debt-to-income ratio of 45% or less. We ranked Spring EQ highly because of the lender’s price transparency, which allows potential borrowers to get pre-qualified for a loan with only basic information. This makes it easy to compare rates without needing to provide sensitive personal information or undergo a hard credit check. Additionally, the online experience is user-friendly and the application’s breakdown of rates, fees, and terms is easily digestible for customers. Good for rate match guarantee Third Federal Savings & Loan Editor’s Score: (3.9/5) Editor’s Score: (3.9/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for rate match guarantee Third Federal Savings & Loan Editor’s Score: (3.9/5) Editor’s Score: (3.9/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line Opened in the midst of the Great Depression in 1938, Third Federal Savings & Loan sought to help unemployed and underemployed Ohio residents achieve home ownership. Since its opening, Third Federal has expanded significantly, now offering HELOCs in 26 states and home equity loans in eight states. Home equity loans and HELOCs are available in amounts from $10,000 to $200,000. Home equity loans and HELOCs with Third Federal come with an annual fee of $65 (waived the first year) but no application fees, closing fees, or origination fees. If you set up autopay from an existing Third Federal account before closing, you’ll be eligible for a 0.25% rate discount. Additionally, Third Federal offers a lowest rate guarantee on its HELOCs and home equity loans, meaning Third Federal will offer you the lowest interest rate relative to other similar lenders or pay you $1,000. You can apply for a home equity loan or HELOC on the Third Federal website. Both applications are included on the same page along with multiple rate and term options, allowing the customer to assess what will be best for them. Third Federal also provides helpful tools and tips on its application page to answer questions that borrowers may have. You won’t have to register an account to apply, but you’ll still be able to save your application and return to it later. We like Third Federal’s application process and the lender’s price transparency. If you’re not sure what kind of home equity product you’re looking for, the website provides useful information to help you decide. Third Federal also offers a unique product not commonly found among other lenders: a 5/1 adjustable-rate home equity loan, where the rate is fixed for the first five year and then adjusts annually, much like how an adjustable-rate mortgage works. However, you won’t be eligible for this product unless you live in one of the eight states in which Third Federal offers home equity loans. Good for Texas borrowers Frost Bank Editor’s Score: (3.7/5) Editor’s Score: (3.7/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for Texas borrowers Frost Bank Editor’s Score: (3.7/5) Editor’s Score: (3.7/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line Headquartered in San Antonio, Texas, Frost Bank’s products are only available to Texas residents. Among the products offered are home equity loans, HELOCs, and interest-only HELOCs. If you’re not sure which one of these products is best for you, the Frost Bank website provides a loan product selection tool to help you consider your options. Home equity loans come with loan amounts of $2,000 and up, while HELOCs come with line amounts of $8,000 and up. Frost Bank does not require an application fee or an annual fee. Additionally, there are no closing costs for the borrower. If you have automatic payments set up from a Frost Bank checking or savings account, you’ll be eligible for a 0.25% rate discount. You can apply for a home equity loan or HELOC on the Frost Bank website, but first you’ll need to create an account. According to the website, the application will only take you about 15 minutes. If you’re not located in Texas, you won’t be able to apply. Though Frost Bank’s nationwide availability is very limited, the bank has a helpful product selection tool, easy application process, and good price transparency. Frost Bank’s customer service is very accessible – another reason for its high rating. Good for rate discounts Regions Bank Editor’s Score: (3.5/5) Editor’s Score: (3.5/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for rate discounts Regions Bank Editor’s Score: (3.5/5) Editor’s Score: (3.5/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line As one of the nation’s largest banking, mortgage, and wealth management service providers, Regions Bank serves customers across the South, Midwest, and Texas. Regions offers home equity loans and HELOCs in 15 states. Its HELOC offerings also come with a rate-lock option for customers who want it. Home equity loans have loan amounts of $10,000 to $250,000 and HELOCs have line amounts ranging from $10,000 to $500,000. For home equity loans and HELOCs, Regions offers rate discounts between 0.25% and 0.5% to those who elect to have their monthly payments automatically debited from a Regions checking account. For home equity loans, there are no closing costs. HELOCs, however, can have closing costs between $150 and $2,000, but Regions will pay these costs if the HELOC amount is $250,000 or less. You can apply for a Regions home equity loan or HELOC online, in-person, or over the phone. You’ll have to create an account with Regions to apply. Before you create an account, though, you can use the bank’s own rate calculator to estimate your rate and monthly payment amount. We like Regions because of the variety of application options it offers and the ease of applying online. Regions provides several ways to contact customer service, ensuring that customers can get questions answered quickly. Though Regions only offers its products in 15 states, it gives customers in these states the flexibility to choose between home equity loans, HELOCs, and rate-lock HELOCs. Honorable mentionsGood for no fees or closing costs Discover Editor’s Score: (2.9/5) Editor’s Score: (2.9/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for no fees or closing costs Discover Editor’s Score: (2.9/5) Editor’s Score: (2.9/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: Maximum LTV: NextAdvisor’s TakePros
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The Bottom Line A financial services company known primarily for its credit cards, Discover also offers home equity loans as part of its suite of banking products. Home equity loans are available in 48 states, but the lender does not offer home equity lines of credit (HELOCs) at all. For Discover’s home equity loans, possible loan amounts range from $35,000 to $300,000. The lender charges no origination fees, application fees, appraisal fees, and mortgage taxes. You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website. Discover offers wide nationwide availability for its home equity loans and good price transparency, but its lack of HELOC offerings may be a limiting factor for consumers looking for additional product options. In addition, Discover offers limited customer service options — your only option to get help is by phone, with no in-person service or online options like email or live chat. Good for high loan-to-value ratio options BMO Harris Bank Editor’s Score: (3.4/5) Editor’s Score: (3.4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Good for high loan-to-value ratio options BMO Harris Bank Editor’s Score: (3.4/5) Editor’s Score: (3.4/5) Last updated August 1, 2022 All reviews are prepared by NextAdvisor staff. Opinions expressed therein are solely those of the reviewer. The information, including rates and fees, presented in the review is accurate as of the date of the review. Products offered: Home equity loan terms: HELOC terms: 10-year draw period, 20-year repayment periodMaximum LTV: 85% for HELOCs; 89.99% for most home equity loansNextAdvisor’s TakePros
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The Bottom Line As the 8th largest bank by assets in North America, BMO Harris Bank (a subsidiary of the Canadian financial services company Bank of Montreal) serves more than 12 million customers globally. Currently, BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. Loan amounts for home equity loans start at $5,000 and up while HELOC lines start at $10,000 and up. The normal maximum combined loan-to-value ratio allowed is 85% for HELOCs and 89.99% for home equity loans, but a 100% max CLTV option is available for low-to-moderate income borrowers or Low to Moderate Income Census Tract customers who need to make home improvements. There is no application fee for a home equity loan or line of credit with BMO Harris. In addition, BMO Harris will pay closing costs for loans secured by an owner-occupied 1 to 4-family residence, but borrowers will have to pay a $75 annual fee for a HELOC. If you authorize auto pay from a BMO Harris checking account, you’ll be eligible to receive a 0.50% rate discount. You can apply for a home equity loan or HELOC online or in-person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates does not require a hard credit check. We like that BMO Harris offers both home equity loans and three types of HELOCs almost nationwide, but the lender fell short because of its low price transparency. Additionally, the online application requires your social security number and has some elements that could be confusing for customers. How We Chose These LendersNextAdvisor developed a framework to evaluate home equity lenders using a weighted average score between 1 and 5 based on the following criteria. A higher weight was given to the criteria we determined to be most important:
What We Did Not Evaluate In Our Scoring When comparing lenders, we did not evaluate factors like pricing (interest rates and fees) and borrower requirements (like minimum credit scores). Home equity rates and fees can change often and are based on each borrower’s specific credit profile. Each lender also has its own unique underwriting requirements and process, which are often not publicly available. Therefore, we don’t believe it’s possible to accurately evaluate rates, fees, and credit score requirements from lender to lender. It’s important to note that lower rates may not actually lower the total cost of borrowing if they’re offset by higher fees. If a company offered both home equity loans and HELOCs, we evaluated its home equity lending as a whole rather than any specific product. To find the best deal, get personalized rate and fee quotes from multiple lenders, then use NextAdvisor’s loan calculator to calculate the total cost of borrowing and monthly payment to accurately compare lenders. Home Equity Loans TodayInterest rates have risen across the board, making all forms of borrowing more expensive. However, home equity loan rates have risen at a slower rate, making them more attractive than their main competitor, cash-out refinancing. When mortgage interest rates were at historic lows during the pandemic, many homeowners used cash-out refinancing to get cash while simultaneously reducing their mortgage rate. With a cash-out refi, homeowners refinance for more than they owe on their existing mortgage and receive the difference as cash. Now that mortgage rates are rising, homeowners can’t always get a lower rate with a cash-out refi. Many homeowners who refinanced during the low rate environment of 2019 and 2020 don’t want to lose their current mortgage rate just to access their home equity. By contrast, second mortgages like home equity loans and home equity lines of credit (HELOCs) don’t alter a homeowner’s primary mortgage. This lets them borrow against the value of their home equity without needing to exchange their primary mortgage’s current rate for a new, higher one. Home equity loans also offer some protection from rising interest rates, in contrast to variable-rate HELOCs. That’s because most home equity loan interest rates are fixed. The rate you lock in when you take out your loan will be constant for the entire term of the loan, even if market interest rates rise. Home Equity Rates Are on the RiseInflation remains high, but November’s numbers offered a glimmer of hope that it’s starting to slow. The Consumer Price Index was up 7.1% year-over-year in November, lower than expected for the second consecutive month. That has implications for the Federal Reserve’s efforts to bring price growth down, but it also means a lot for consumers, especially those looking to borrow money. “This is certainly welcome news. But it’s difficult to say that it’ll be convincing for the Fed policy makers quite yet,” says Jeffrey Roach, chief economist at LPL Financial, a national broker-dealer. “It’s certainly going in the right direction, deceleration in price growth, but it’s still growing.” This week, the Fed will hold its last meeting of the year. Experts predict they will announce an increase of half a percentage point to the federal funds rate, a short-term interest rate that determines what banks charge each other to borrow money. that affects the cost to borrow money across the economy. If the Fed does go ahead with an increase of 50 basis points, it would be considered a step-down in their aggressive rate-hiking regime. In their past four meetings, the Fed has hiked its rate by three quarters of a percentage point. “The market’s baking it into their expectations. I don’t expect much of a surprise. It’s going up. They’re raising rates,” says Vikram Gupta, executive vice president and head of home equity at PNC Bank. “Whether it’s 50 or 75 [basis points], I don’t think necessarily matters.” HELOCs often have variable interest rates that are directly tied to an index – the prime rate – that moves in lockstep with the federal funds rate. When the Fed hikes rates, it becomes more expensive to borrow with a HELOC. Home equity loans with fixed rates aren’t as directly affected, but those rates are set based on the lender’s cost of funds, which also rises as rates go up. “Many economists expect rates to stabilize and, if we were to head into a recession, rates possibly could begin to slowly come down,” says Rob Cook, vice president of marketing, digital and analytics for Discover Home Loans. “Given all of the uncertainty, though, homeowners should generally expect rates to stay elevated in the near to mid-term.” Best Home Equity Loan Lenders and Rates of December 2022Here are the best home equity loan rates of December 2022: LENDERAPRLOAN AMOUNT RANGELOAN TERMSMAX LTVU.S. BankStarting from 7.45%$15,000 – $750,000 (up to $1 million for properties in California)Up to 30 years80%TD Bank6.49% to 9.76%$10,000 and up5, 10, 15, 20, or 30 years89.99%Connexus Credit UnionStarting from 7.24%$5,000 – $200,0005 to 15 years90%KeyBankStarting from 10.79% (0.25% KeyBank client discount not included)$25,000 and up5 to 30 years80% for standard home equity loans, 90% for high-value home equity loansSpring EQFill out application for personalized rates$5,000 – $500,0005 to 30 years90%Third Federal Savings & LoanStarting from 6.29%$10,000 – $200,0005 to 30 years80%Frost BankStarting from 5.24% (0.25% AutoPay discount not included)$2,000 and up7 to 20 years for second lien, 10 to 20 years for first lien80%Regions Bank6.375% to 13.00% (0.25% AutoPay discount not included)$10,000 – $250,0007,10, 15, or 20 years80%Discover (honorable mention)6.74% – 12.99%$35,000 – $300,00010, 15, 20 and 30 yearsNot specifiedBMO Harris Bank (honorable mention)Starting from 6.74% (0.5% AutoPay discount not included)$5,000 and up5 to 20 years89.99%The APRs shown above are accurate as of Dec. 1, 2022. They are the only APRs openly available among the lenders we assessed. The NextAdvisor editorial team updates this information regularly, although it is possible APRs have changed since they were last updated. As with any type of lending, your interest rate will depend on multiple factors, including your credit score, income, desired loan amount and term, how much equity you have in your home, and more. To know your exact rate from a particular lender, you’ll need to pre-qualify or submit an application with the lender. How Does a Home Equity Loan Work?A home equity loan is a fixed-rate installment loan secured by your home. You’ll get a lump sum payment upfront and then repay the loan in equal monthly payments over a period of time. Because your house is used as collateral, the lender can seize it if you default. Home equity is the difference between the value of your home and what you owe on the mortgage. A home equity loan lets you borrow against that equity. The more equity you have, the more you can borrow. Lenders typically allow a maximum loan-to-value ratio of 80% to 85%. This means that the combined value of your home equity loan and primary mortgage balance cannot exceed 80% to 85% of your home’s appraised value. Home equity loans usually have anywhere from five- to 30-year terms and come with a fixed interest rate, meaning whatever rate you lock in at the beginning of the loan term will remain throughout its duration. That’s a positive in an environment where interest rates continue to rise. Tax deductions and limitsThe interest you pay on a home equity loan is tax deductible if you use the money on home renovations that improve the value of your residence. You can deduct the interest on up to $750,000 of home loans if you’re married and filing jointly or a single taxpayer. If you’re married and filing separately, you can deduct the interest you pay on up to $375,000 of home loans. These limits cover the amount of your combined home loans, including your primary mortgage and home equity loan. You can’t deduct home equity loan interest if you use the money for other purposes, such as paying for college tuition or consolidating debt. What to Use A Home Equity Loan ForA home equity loan is a good choice if you need a large sum of cash all at once. You can use that cash for anything you’d like. However, some uses of the funds from home equity loans make more sense than others:
Experts don’t recommend using a home equity loan for discretionary expenses like a vacation or wedding. Instead, try saving up money in advance for these expenses so you can pay for them in cash without taking on unnecessary debt. Pros and Cons of Home Equity LoansPros
Cons
How to Apply for a Home Equity LoanApplying for a home equity loan is similar to applying for any mortgage loan. You’ll need both a solid credit score and proof of enough income to repay your loan. Here are the steps to apply for a home equity loan:
Home Equity Loan Monthly PaymentsHow much you pay each month for a home equity loan depends on three main factors: how much you borrowed, your loan’s interest rate, and how many years you have to pay back your loan. If you take out a 10-year home equity loan for $10,000 with an interest rate of 6%, you’d pay $111 a month. You’d also pay a total of $3,322 in interest during the life of your loan. If you raise the loan amount to $50,000, you’d pay $555 a month and $16,612 in total interest. And if you borrow $100,000, you’d pay $1,110 a month and $33,225 in total interest during your 10-year repayment period. 10-year loan at 6% interestLoan amountMonthly paymentTotal interest paid$10,000$111$3,322$50,000$555$16,612$100,000$1,110$33,225But what if you take out a longer-term home equity loan for something like 15 years at 6% interest? If you borrow $10,000 for this longer term, you’d pay $84 a month and $5,189 in total interest for the life of your loan. If you borrow $50,000, you’d pay $422 a month and a total interest amount of $25,947. Finally, if you borrow $100,000, you’ll pay $844 a month and $51,894 in total interest. 15-year loan at 6% interestLoan amountMonthly paymentTotal interest paid$10,000$84$5,189$50,000$422$25,947$100,000$844$51,894Taking out a shorter-term home equity loan means you’ll have a higher monthly payment. But you’ll also pay less in interest over the life of your loan. The opposite is true for longer-term loans: You’ll pay less each month but more in interest overall. Your interest rate will also affect your monthly payment and the total cost of the loan. Given the same loan amount and loan term, a higher interest rate will result in a higher monthly payment and more money paid in interest over the life of the loan. That’s why it’s important to shop around with multiple lenders to find the lowest interest rate. You can use NextAdvisor’s loan calculator to see how much it would cost to borrow money with a home equity loan at different interest rates and terms. Home Equity Loan vs. HELOCAnother common type of home equity financing is a home equity line of credit (HELOC). HELOCs are not traditional loans where you get paid a lump sum upfront. Instead, they work like a revolving line of credit, similar to a credit card secured by your home. You only have to pay for what you spend, plus interest. Another key difference is that HELOCs typically come with a variable APR, which means your interest rate can rise and fall depending on the prime rate. That differs from home equity loans, which generally have a fixed interest rate that never changes. A home equity loan is usually a better choice if you need to borrow money for one big purchase, such as a kitchen remodel, or to pay off high-interest-rate credit card debt. A HELOC makes more sense when you want access to a steady line of credit to cover a range of projects and expenses. HOME EQUITY LOANHELOCFixed-term loanRevolving credit lineFixed APRVariable APR (usually)Pay full loan amountPay only what you spendHome used as collateralHome used as collateralFunds for as long as they lastSet draw periodLump sum at the onset of loanOngoing cashInterest can be deducted for home projectsInterest can be deducted for home projectsAlternatives to a Home Equity LoanAlthough home equity loans are one of the best ways for homeowners to finance large expenses, they’re not the only option. Popular alternatives to a home equity loan include: Cash-out mortgage refinancingA cash-out refinance is when you pay off your existing home loan by getting a new one that’s larger than what you currently owe. You then get a check for the difference and can use that money on anything you’d like. Once you complete a cash-out refinance, you’re left with a new mortgage loan with new rates and terms. You’ll pay this loan back in monthly installments, with interest, just like your previous mortgage. How much cash you can pull out of your home with a cash-out refinance depends on how much home equity you have. Lenders will typically require you to keep at least 20% equity in your home. For example, if your house is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 worth of equity. You can refinance to a new mortgage worth up to $200,000 while still keeping 20% ($50,000) equity in your home. After you use the funds to pay off your existing mortgage, you’ll be left with $50,000 in cash (minus any closing costs). Cash-out refinancing makes sense when you can get a lower refinance rate than your existing mortgage rate. However, that may be difficult for many homeowners in this current rate environment. When mortgage rates are high, home equity loans — which don’t alter the rate on your primary mortgage — tend to be a cheaper option than cash-out refinancing. Personal loansA personal loan lets you borrow a fixed sum of money at a fixed interest rate, to be repaid over a fixed period of time. The terms of these loans vary but generally run from 12 months to seven years, though it’s possible to find personal loans with longer terms. Your interest rate will vary depending on your credit score, loan term, and how much you borrow. Generally, though, personal loans come with higher interest rates than home equity loans because the debt is unsecured and thus riskier for the lender. On the plus side? Personal loans typically do not require collateral. If you stop making your payments, your lender will not be able to foreclose on your home. However, you could still face other serious consequences, so try to always make your payments on time and in full, if possible. Home equity line of credit (HELOC)Home equity lines of credit, better known as HELOCs, work a bit like a credit card where your home acts as collateral and your home equity determines the credit limit. During the draw period, you can keep borrowing money up to your HELOC’s credit limit. Then, when the draw period ends and the repayment period begins, you’ll pay back what you borrowed. You may get approved for a large credit line, but you’ll only need to pay back what you use, plus interest. If you qualify for a HELOC of $50,000 and only use $20,000 of that amount to pay for a bathroom remodel, you’ll pay back only $20,000, plus interest. If you then borrow an additional $10,000 to upgrade your kitchen, you’ll pay that back with interest, too. HELOCs are a good choice when you’re not sure exactly how much money you need to finance or if you just want a line of credit on hand to tap into as needed. The drawback of HELOCs is that they usually come with variable interest rates. This means that your interest rate and monthly payment could rise depending on the prime rate. Frequently Asked Questions (FAQ)What is home equity?Home equity is the difference between what you owe on your mortgage and what your home is currently worth. In other words, it is your stake in the property, or what you could make if you sold before paying down the mortgage in full. How do you calculate your home equity?Calculating your home equity is a simple equation, found by subtracting how much you owe on your mortgage from your home’s estimated market value. For example, if you own a home worth $350,000 and owe $200,000 on your mortgage, your home equity is worth $150,000. Where can I get a home equity loan?You can get a home equity loan from a number of different lenders. Check for the best rates from local banks and credit unions, national banks, and online lenders. Are home equity loan rates higher than mortgage rates?Because most home equity loans are second lien products — meaning that if you default, your home equity loan lender is second in line to foreclose on your home, after your primary mortgage lender — they typically have slightly higher interest rates than primary mortgages. Despite the higher rate, a home equity loan can still be cheaper than a cash-out refinance in some circumstances because the interest rate only applies to the amount you’re borrowing, not your entire mortgage balance. How do I get the lowest home equity loan rate?The lowest home equity loan rates are typically only available to the most creditworthy borrowers, so take what steps you can to raise your credit score before you apply for a home equity loan. Beyond that, the most important thing is to shop around and compare offers from multiple lenders in order to find the best rate. Be sure to also factor in closing costs and fees so you can accurately compare the total cost of borrowing. What is the three-day cancellation rule?Under federal law, you have three business days from the day you sign your loan agreement on a home equity loan to reconsider and cancel your loan without penalty, if you so wish. You can cancel your loan for any reason, but the three-day cancellation rule only applies to home equity loans and HELOCs secured by your primary residence — not a vacation home or rental property. Mortgage refinances are also subject to the same three-day cancellation rule, also known as the right of rescission. What is the interest rate on a home equity line of credit?As of Dec. 7, 2022, the current average home equity loan interest rate is 7.74 percent. The current average HELOC interest rate is 7.30 percent.
What is the monthly payment on a $50000 HELOC?Loan payment example: on a $50,000 loan for 120 months at 8.00% interest rate, monthly payments would be $606.64.
What is the downside of a home equity loan?Cons of Home Equity Loans
Just like any form of debt, home equity loans have some drawbacks, too. Receiving a lump sum of cash all at once can be dangerous for the undisciplined, and the interest rates — while low compared to other forms of debt — are higher than primary mortgages.
What is the highest interest rate on a HELOC?U.S. Bank's HELOCs have APRs that range from 4.95% to 9.35% as of July 11. Its starting rate was below the national average at the time. U.S. Bank also offers HELOCs to borrowers with credit scores as low as 620, which is slightly below most other lenders.
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