The 7 Most Beneficial Home Equity Loans

ByRichard C. Sloan

Apr 13, 2022
The 7 Most Beneficial Home Equity Loans

Home equity loans are a standard option to borrow money for home upgrades, college costs, or debt consolidation. This loan form usually has cheaper interest rates than credit cards and may be paid back in predetermined monthly installments.

Read on to find out which banks provide the most acceptable home equity loan alternatives such as PaydayNow, as well as some creative ways to use your equity.

Discover what’s best for low rates:

PROS

  • There are no appraisal or application costs at closing, and there are no mortgage taxes to pay.
  • Connecticut, North Carolina, New York, Oklahoma,, and Texas are free from early payment penalties.

CONS

  • For the first 36 months following closing, there is a prepayment penalty of up to $500.
  • There is no information about discounts.

HIGHLIGHTS

  • APR ranges from 3.99 percent to 11.99 percent (Fixed)
  • Loan amounts range from $35,000 to $300,000.
  • Ten to thirty years
  • Time to get approval: 1–2 weeks

Discover is on our list because of its minimal costs: unlike other banks, it doesn’t charge application, origination, or appraisal fees. It also does not need a cash deposit at closing.

The fixed interest rates on Discover’s home equity loans vary from 3.99 percent to 8.99 percent for first liens and from 4.15 percent to 11.99 percent for second liens. You may borrow anything from $35,000 and $200,000, with payback terms ranging from 10 to 30 years.

Criteria for eligibility

Before you officially apply for a home equity loan, you may check whether you qualify with Discover by completing some simple information. To qualify, you must have a credit score of at least 620 and enough equity in your house – often between 10% and 20%.

The amount you may borrow, like with other loans, is determined by your creditworthiness. Over $150,000 loans are only available to customers with a credit score of 700 or higher.

You’ll be allocated a banker who will assist you throughout the process once you’re ready to submit your application. Like many other banks, Discover offers an eClosing option, which enables borrowers to sign many closing paperwork before the actual closure.

Regions Bank is the best bank for flexible repayment terms.

PROS

  • If a consumer joins up for auto-pay, rates start at 3.00 percent APR.
  • A variable-rate HELOC may be changed to a fixed-rate loan.
  • For the first six months of a HELOC, the introductory rate is 0.99 percent.
  • When you join in auto-pay, you will get a rate reduction of 0.25% to 50%.
  • There are no closing charges.

CONS

  • The loaned property must be located in a state with a bank branch.
  • AL, AK, FL, GA, IL, IN, IA, KY, LA, MS, MO, NC, SC, TN, and TX are the only states with branches.

HIGHLIGHTS

  • APR: 3.0% with AutoPay or 3.25 percent -11.625 percent Fixed APR
  • Loan amounts range from $10,000 to $250,000.
  • Term lengths range from 7 to 20 years.
  • Timeframe for approval: not specified

Regions Bank provides fixed-rate home equity loans with no closing charges and annual percentage rates of 3.25 percent or 3.0 percent for auto-pay clients. The loan amounts vary from $10,000 to $250,000, with payback durations of 7, 10, 15, or 20 years.

Regions Bank now provides home equity lines of credit in addition to home equity loans (HELOCs). These range in price from $10,000 to $500,000, with a 10-year draw term and a 20-year payback duration. For the first six months, HELOCs have a fixed introductory rate of 0.99 percent, after which they switch to an adjustable-rate between 3.75 percent and 10.63 percent APR.

Regions Bank will pay all closing fees for loan lines of $250,000 or less. Regions Bank will donate up to $500 if your line of credit exceeds $250,000. If a line of credit is canceled during the first 24 months of its inception, the bank will charge the borrower for these fees. Closing expenses vary.

According to Region’s website, the lender would not accept loan-to-value (LTV) ratios of more than 89 percent for primary and second mortgages and 75 percent for secondary mortgages.

Criteria for eligibility

Your property must be situated in a state where Regions has a branch to be eligible for its home equity programs. Texas, Tennessee, South Carolina, North Carolina, Louisiana, Mississippi, Missouri, Kentucky, Illinois, Indiana, Iowa, Georgia, Florida, Arkansas, and Alabama are where the bank operates physical branches.

Truist’s Top Fixed-Rate HELOCs

PROS

  • There may be fixed-rate repayment alternatives available.
  • Covers the cost of the assessment.
  • Flexible repayment choices

CONS

  • If you close your line of credit within 36 months, you’ll be charged a prepayment penalty.
  • Residents of Alabama, Florida, Georgia, Indiana, Kentucky, New Jersey, and Ohio pay an annual tax.

HIGHLIGHTS

  • 4.50–16.0 percent annual percentage rate (or state maximum)
  • Amounts of loans: not revealed
  • 5 years, 10 years, 15 years, and 20 years
  • Time to Approve: One business day

Truist provides three repayment alternatives for home equity lines of credit: interest-only, fixed, and variable-rate repayments, as well as no-cost closure options.

Variable rates for Truist run from 4.50 percent to 16 percent APR, albeit this varies by state. The least amount you may borrow with a HELOC is $5,000; however, the maximum amount you can borrow is determined by your creditworthiness and the amount of equity you have in your house.

Fixed-rate HELOCs offer 5-, 10-, 15, and 20-year payback durations and may include a $15 set-up charge. On the other hand, variable-rate lines of credit have a drawing term of ten years and a payback duration of twenty years.

Keep in mind that if you terminate your line of credit account within 36 months of establishing it, you may be subject to prepayment penalties. This also means you’ll have to pay back any Trust-paid origination or closing charges, which may total up to $10,000.

Criteria for eligibility

Truist, like other banks, will consider your income, credit score, employment, and debt-to-income and loan-to-value ratios when establishing your eligibility. The bank will also verify your job and request details about your financial obligations and assets.

SunTrust is the best option for quick approval.

HIGHLIGHTS

  • From 4.64 percent to 18.0 percent annual percentage rate
  • Loan amounts range from $10,000 to $500,000
  • The draw period is ten years, with a payback period of twenty years.
  • Time to approve: One business day

SunTrust impressed us with its simple application procedure and speedy approval timeframes. Borrowers may apply online, over the phone, or in person at a local office and obtain a pre-approval letter in as little as 24 hours.

Home equity lines of credit from the bank start at $10,000 and run up to $500,000, with a 10-year draw period and a 20-year payback term.

Variable rates begin at 4.64 percent and may up to 18 percent. Suntrust lets customers select between fixed and variable-rate repayment alternatives for each draw period. Checks, mobile banking, internet banking, and physical branches may all be used to obtain funds up to the permitted credit limit.

As long as your account has been active for three years, SunTrust does not impose closure fees. If you pay off your debt early, you’ll have to compensate SunTrust for any closing charges, which may be as much as $2,000 on average. In addition, each advance accepted under the fixed-rate fixed-term option is subject to a $15 processing fee.

Criteria for eligibility

SunTrust’s home equity line of credit is only accessible in areas where SunTrust has physical locations for owner-occupied single-family leading houses, second homes, and condos.

Investment houses, mobile homes, and prefabricated homes are not eligible for this program.

While SunTrust Bank’s qualifying standards aren’t disclosed, a credit score of at least 620 and a low debt-to-income ratio are encouraged.

US Bank is the best option for borrowers with good credit.

PROS

  • Although early escrow-related expenses may apply, there are no closing costs.
  • Enrolling in automatic payments earns you a 0.50 percent interest rate savings.
  • The interest rate will never exceed 18% APR according to appropriate state legislation.
  • With the option of automatic payment, you may get a 0.50 percent interest rate savings.

CONS

  • Lines of credit may not be eligible for interest-only payments.
  • During the first 30 months, there is a 1% early closing cost of up to $500.
  • In New York, credit lines are limited to $1,000.

HIGHLIGHTS

  • From 3.80% to 3.80% APR (with Auto-Pay)
  • Loan amounts range from $15,000 to $750,000 (with a maximum of $1 million in California).
  • Term lengths range from 10 to 30 years.
  • Time for approval: undisclosed

U.S. Bank provides home equity loans and home equity lines of credit (HELOCs) with no closing expenses. HELOC rates start at 3.65 percent APR and go up to 8.80 percent APR, while home equity loan rates start at 3.80 percent APR for both 10 and 15-year payback terms.

Fixed rates and payback terms of 30 years are available with home equity loans. The loan amounts range from $15,000 to $750,000 (or $1 million for California homes).

While HELOCs have variable rates, you have the option of converting a part of the whole debt to a fixed rate within the 10-year initial draw term. Minimum monthly payments are either 1% or 2% of the total during that period; however, qualified borrowers may make interest-only payments.

The yearly charge for lines of credit is $90, but you may have it waived for the first year if you create a checking account package with the bank. You may use your line of credit to borrow money by going to a local bank, utilizing cheques, ATMs, or a Visa Access Card.

Criteria for eligibility

A credit score of 730 is required, and a U.S. passport. To receive excellent APR rates, open a bank checking or savings account and set up automated payments.

Citizens Bank is the best bank for flexible loan amounts.

PROS

  • There are no appraisal or closing charges.
  • If you use a Citizens Checking account, you may save 0.25 percent with AutoPay.
  • During the 10-year draw term, you may choose between making total or interest-only payments.

CONS

  • Only for Connecticut, Delaware, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, or Vermont.
  • There is a $50 yearly cost on regular HELOCs after the first year.

HIGHLIGHTS

  • APR ranges from 3.0% (with AutoPay) to 21%.
  • Amounts of loans: $10,000–$200,000+
  • Term lengths range from 10 to 15 years.
  • Timeframe for approval: not specified

Citizens Bank provides two types of home equity loans: a conventional HELOC and the Citizens GoalBuilder HELOC.

Both products feature a 10-year borrowing duration, a 15-year payback period, as well as variable interest rates that range from 3.25 percent to 21%. Customers who set up automatic monthly payments from their Citizens Bank checking account might save 0.25 percent on their interest rate.

The key difference between the two HELOC programs is the amount you may borrow in the minimum and maximum amounts. The Citizens GoalBuilder HELOC has a $5,000 to $25,000 credit limit, whereas the normal HELOC has a $17,500 borrowing requirement.

Another distinction is that GoalBuilder HELOC customers do not have to pay yearly fees, but normal HELOC consumers must pay $50 after the first year.

Clients may use the Citizens Bank Mobile app, internet banking, or provided checks to access money.

Criteria for eligibility

Citizens Bank’s credit standards for home equity loans are not made public. All products are subject to credit approval based on credit score, loan-to-value (LTV), and debt-to-income (DTI) ratios.

Owner-occupied 1- to 4-family homes, as well as condos, are eligible. Non-owner-occupied investment properties, co-ops, mobile homes, prefabricated houses, and properties for sale are not suitable. It’s also possible that property or flood insurance may be necessary.

PenFed is the best option for non-owner-occupied properties.

PROS

  • Most closing fees are covered.
  • Owner-occupied and non-owner-occupied property lines of credit
  • The yearly charge is eliminated if you pay $99 in interest over 12 months.

CONS

  • Residents of Florida, Louisiana, Maryland, Minnesota, New York, Tennessee, or Virginia are liable for all local, county, and state taxes.
  • Certain kinds of properties are not eligible for credit lines.
  • Property must be habitable and free of safety hazards to be qualified.

HIGHLIGHTS

  • 3.75 percent – 18 percent APR
  • Loan amounts range from $25,000 to $1,000,000.
  • Terms: A ten-year draw term and a twenty-year payback period are in place.
  • Timeframe for approval: not specified

The Pentagon Federal Credit Union, or PenFed, used to be reserved for military personnel and government workers members, but it is now available to the general public. It has offices in all 50 states and the District of Columbia, Guam, and Puerto Rico.

You may get attractive interest rates on home equity lines of credit as a PenFed member, beginning at 3.75 percent. The loans vary in size from $25,000 to $1,000,000. However, your combined loan-to-value ratio, location, and creditworthiness determine the maximum amount you may borrow.

During draw periods, you may move from a variable to a set rate – or vice versa.

Most closing fees are covered by PenFed, which vary from $500 to $8,500 depending on the credit line. However, you must repay these fees if you shut the line within 36 months after opening it. If you pay off your account before then, you’ll be charged an early termination fee.

The yearly charge for PenFed’s home equity lines of credit is similarly $99, but it may be removed if you pay at least $99 in interest in the first year.

Criteria for eligibility

You must be a credit union member to apply for a PenFed HELOC, which you may do for a nominal charge of $5 to create a savings account. Your eligibility will be determined by your credit, debt-to-income (DTI), and loan-to-value (LTV) ratios after you become a member.

You may borrow up to 80% of your present equity for a condo and 90% for a single-family house if your credit score is above 720. (except in Texas, where the limit is 70 percent ). If your credit score is less than 720, you may borrow up to 75% for a condo and 80% for a single-family house (except in Texas, where the limit is 75 percent ).

Guide to Home Equity Loans

Property equity loans and lines of credit (HELOCs) allow homeowners to borrow money using the value of their homes as security.

These sorts of loans, home improvement loans, and refinancing are the most common methods to fund home upgrades. Both HELOCs and home equity loans are tax-deductible if the money is utilized for home improvements.

What is the definition of home equity?

The difference between your mortgage debt (what you owe) and the current market value of your property is known as home equity. It may rise over time as you pay down the mortgage and your property’s value increases.

Home equity loans come in a variety of shapes and sizes.

Home equity loans, home equity lines of credit (HELOC), and cash-out refinancing loans are all options for tapping into your home’s equity.

All of these loans need you to have enough equity in your house (usually between 15 and 20%), and your acceptance will be based on your credit report, combined loan-to-value ratio, debt-to-income ratio, and employment.

Home equity loans are a kind of home equity loan.

A home equity loan is a fixed-term loan secured by the equity you’ve built up in your property. It’s also known as a second mortgage since it permits borrowers to borrow a large quantity of money that must be paid back in installments. The principal debt on the house is still the original mortgage.

Your debt-to-income ratio (DTI), standard loan-to-value (LTV) ratio, and combined loan-to-value ratio all influence the loan amount (CLTV). Home equity loans are typically for 80 percent to 90 percent of the property’s assessed value. A fixed interest rate and set monthly loan installments are included in the loan conditions.

If you have a solid credit score, home equity loans may offer lower interest rates than even the most accepted credit cards or personal loans, but you risk losing your house if you can’t make payments.

Lines of credit secured by your home (HELOC)

A HELOC, or home equity line of credit, is a credit line that allows borrowers to borrow a certain amount of money depending on the value of their property.

You may withdraw funds during a so-called draw period, during which you can opt to pay simple interest or make principal payments. The draw term is typically 10 years long, followed by a 20-year payback period. You may pay the borrowed amount plus interest in one single sum or installments during repayment.

Most HELOCs have a variable interest rate, while some lenders allow you to switch to a fixed rate.

A home improvement loan, personal loan, or credit card may be a better option than a HELOC if you need money for a one-time cost. Personal loans for home upgrades, on the other hand, are not tax-deductible, although home equity loans, HELOCs, and home improvement loans are. (If you prefer the latter, see how to secure a home repair loan in our guide.)

Refinancing with a cash-out option

Cash-out refinancing is when your existing mortgage is replaced with a new one that is bigger than your present debt. The difference between your previous and new mortgage is paid in cash.

Cash-out refinances offer better terms than standard refinancing loans. You may utilize the money for home upgrades, college tuition, debt consolidation, or pretty much anything else. You would still only have one mortgage if you chose this option, but the loan application process may take longer, and there may be extra fees and closing charges.

Keep in mind that your monthly payments will change with interest rates if you have an adjustable-rate loan. Your monthly payments will be minimal as long as mortgage rates stay low. However, those interest rates may begin to rise at some time, increasing your monthly expenses.

Check to see whether you’ll be responsible for any closing charges or any extra fees. Many banks, for example, will refund closing expenses if you pay off your loan sooner than planned — in most circumstances, within three years – part of your closing charges must be returned. Other banks may levy yearly processing fees on your account.

Before making a choice, get expert counsel.

While having instant access to $50,000 or even $100,000 may be appealing, you must ensure that it is the appropriate decision, particularly during times of financial instability. If you’re unsure how to continue or which choice is best for you, get a second opinion from an independent expert.

What credit score do you need to qualify for a home equity loan?

For home equity loans, most lenders need a minimum credit score of 620, although some may want a higher score. Like with most loans, the lower your interest rate, the better your credit score. The most excellent prices are obtained with a credit score of 740 or above.

Frequently Asked Questions about Home Equity Loans

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

Home equity loans function as a second mortgage, enabling you to borrow against the value of your home. Your house will be foreclosed if you don’t make payments. Unlike home equity lines of credit, you get a lump sum payment at a fixed interest rate. The maximum amount you may borrow is determined by the value of your home and credit history. Home equity loans are available from banks, credit unions, and internet lenders.

How We Selected The Most Appropriate Home Equity Loans

We examined each mortgage lender by analyzing them on the following criteria to narrow down our list of the top home equity loans:

The loan features: For each lender, we looked at the kinds of loans available, the minimum and maximum loan amounts, interest rates, loan periods, and credit score criteria.

We favored transparent lenders about their loan pricing, discounts, fees, and other charges on their website.

We double-checked eligibility standards and approval timeframes throughout the application process. We also looked at application and evaluation costs and whether application services were offered online, over the phone, or in person.

We looked at two key data sources for reputation and customer satisfaction: J.D. Consumer Financial Protection Bureau complaint data and J.D. Power’s U.S. Primary Mortgage Servicer Satisfaction Study (CFPB).