If you’re a homeowner with a good mortgage rate or no mortgage at all, it’s wise to be on the prowl for the best home equity loan rates. Home equity loans allow you to borrow against the percentage of your home that you own, often at a much lower cost.
However, not all home equity loans are created equal since lenders tend to cater their products to specific audiences. You should also watch for lender-specific fees or restrictive eligibility requirements and repayment terms.
To accelerate your search, we selected the best home equity loan rates and lenders available today, placing a premium on those that offer competitive APRs, few fees and reliable service.
Methodology
To find the best home equity loans available today, our editorial and data research teams canvassed the lending market, looking at more than two dozen of the most popular and widely used lenders. We reviewed more than 20 features of each lender to make apples-to-apples comparisons and reach fair conclusions. View our complete methodology below.
- Number of companies reviewed: 25
- Number of data points analyzed: 575
- Number of features we considered: 22
- Number of primary data sources used: 24
Show summary
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Navy Federal Credit Union
: Best home equity loan
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BMO Bank
: Best for nationwide service
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Third Federal Savings and Loan
: Best for low interest rates
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Frost Bank
: Best for Texas borrowers
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Spring EQ
: Best for fast funding
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Fifth Third Bank
: Best for no closing costs
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TD Bank
: Best for high borrowing amounts
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Regions Bank
: Best for fast approval
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KeyBank
: Best for rate discounts
Navy Federal Credit Union
Best home equity loan
Fixed APRs
Starting at 6.64%*
Loan amount
$10,000 to $500,000
Maximum CLTV
95%
Why we picked it
If you’re looking for a home equity loan with flexible borrowing options, Navy Federal Credit Union stands out. In addition to its competitive interest rates and expansive loan amount options, Navy Federal offers repayment terms spanning five to 20 years. Additionally, you may be able to borrow up to 100% of your equity and pay zero closing costs.
The credit union is less flexible regarding eligibility — you must be affiliated with the U.S. military to qualify. Membership is available to current and retired members of the armed forces, their family and household members, Department of Defense or National Guard personnel and more.
Also, keep in mind that Navy Federal estimates it’ll take 45 to 55 days to close on a new home equity loan (once your application is received).
Pros
- No origination fees
- No closing costs
- Borrow up to 100% equity
Cons
- Must qualify to join credit union
- Can’t get a rate quote online
- Lengthy closing period
Who should consider it
Military-affiliated borrowers who are looking for a low-cost loan in terms of both interest rate and fees
*Rates as of Jan. 2, 2024, may reflect discounts
BMO Bank
Best for nationwide service
Fixed APRs
Starting at 8.44%*
Loan amount
$25,000 to $150,000
Minimum credit score
700
Why we picked it
BMO Bank may have been founded in Canada — it was the Bank of Montreal, after all — but it now serves customers throughout North America.
Its home equity loan (HELOAN) offers a predictable, fixed payment with competitive rates. You can also choose a loan term of five to 20 years. Additionally, there are no application fees and low to no closing costs.
However, if you pay your loan account in full within 36 months, you may be charged a fee to recover the closing costs BMO paid on your behalf. Also, though you can open a home equity loan online, BMO Bank branches are only located in certain states, which may be inconvenient for customers who prefer in-person service.
Pros
- No application fee
- Low to no closing costs
- Autopay discount worth 0.5 percentage points
Cons
- High credit scores required
- Branch locations limited to a handful of states
- Closing cost recoupment fee
Who should consider it
Borrowers with strong credit scores who don’t plan on early repayment
*Rates as of Jan. 2, 2024, may reflect discounts
Third Federal Savings and Loan
Best for low interest rates
Fixed APRs
7.29% to 18.00%*
Loan amount
$10,000 to $300,000
Maximum LTV
80%
Why we picked it
Third Federal’s fixed-rate home equity loan made our list primarily due to the low interest rates offered, which the lender states are typically 0.5 percentage points lower than other lenders. In fact, Third Federal’s “Lowest Rate Guarantee program” promises to beat a competitor’s lower home equity loan rate or pay you $1,000. Simply provide Third Federal with the other lender’s advertisem*nt, rate sheet or other documentation.
Third Federal offers terms of five, 10, 15 and 20 years on home equity loans with no closing costs, prepayment penalties or annual fees. (The bank’s adjustable-rate loans and lines of credit may carry these fees.) You can borrow up to 80% of the equity in your home and make additional payments at any time without penalty.
However, it’s important to note that home equity loans are only available in the following states: California, Florida, Kentucky, New Jersey, North Carolina, Ohio, Pennsylvania and Virginia.
Pros
- “Lowest Rate Guarantee” program
- No closing costs
- No prepayment penalty
- Autopay discount worth 0.25 percentage points
Cons
- Availability limited to eight states
- Borrowing limited to 80% of your equity
Who should consider it
Regional borrowers who are looking for the lowest rates possible
*Rates as of Jan. 2, 2024, may reflect discounts
Frost Bank
Best for Texas borrowers
Fixed APRs
Starting at 7.00%*
Loan amount
Starting at $2,000
Minimum credit score
Undisclosed
Why we picked it
For Texas residents, Frost Bank provides competitive, fixed-rate home equity loans starting at $2,000. For home equity loans that are a second lien, repayment terms range from seven to 20 years. For first liens, terms are either 10 or 20 years. There’s no application fee.
Existing Frost Bank customers who set up autopay from a Frost checking or savings account receive a discount worth 0.25 percentage points (first liens don’t qualify).
Frost Bank also offers a “Progress” home equity loan with low rates and no fees for families that earn less than 80% of the state’s median annual income.
Note that according to Texas law, the maximum amount you can borrow with a home equity loan is 80% of your home’s appraised value. You can only have one home equity loan or line of credit secured by the same property at any time.
Pros
- Autopay discount
- No application fee
- Relationship discount on checking account
- Discounted interest rates for low-income families
Cons
- Only available to Texas residents
- Must have a Frost checking or savings account to qualify for autopay discount
Who should consider it
Texas residents (and especially low-income families or existing Frost Bank customers) in need of low-cost financing
*Rates as of Jan. 2, 2024, may reflect discounts
Spring EQ
Best for fast funding
Fixed APRs
Undisclosed
Loan amount
$25,000 to $500,000
Minimum credit score
640
Why we picked it
A major benefit of securing a home equity loan through Spring EQ is that customers receive their funds in an average of 21 business days, potentially as fast as 14 days. Other lenders on this list can take more than twice as long to deliver funds.
Also, with Spring EQ, you can borrow up to $500,000 (or as much as 95% of your home’s equity). Repayment terms range from five to 30 years.
The minimum credit score and debt-to-income (DTI) ratio requirements are 640 and 50% or less, respectively. However, qualified borrowers who finance 95% of their home value (which excludes second home and investment properties) need credit scores of 700 or greater.
Pros
- Five repayment term options (beats the industry average of four)
- Loans funded in as little as three weeks
- Up to 95% financing
- Large loan amounts available
Cons
- Doesn’t disclose interest rates
- Larger loans require 700 credit scores
- Outsources loan servicing to a third party
Who should consider it
Especially creditworthy borrowers seeking a faster time to funding
Fifth Third Bank
Best for no closing costs
Fixed APRs
Undisclosed
Loan amount
$10,000 to $500,000
Minimum credit score
Undisclosed
Why we picked it
Fifth Third Bank offers flexible home equity loan options, with amounts ranging from $10,000 up to $500,000. There are no closing costs involved, helping you keep the cost of your loan to a minimum.
However, Fifth Third doesn’t disclose its fixed rates for home equity loans (it does for home equity lines of credit). Also, it only offers home equity loans to residents of 11 states:
– Florida
– Georgia
– Illinois
– Indiana
– Kentucky
– Michigan
– North Carolina
– Ohio
– South Carolina
– Tennessee
– West Virginia
There is also no online application, though you can share some personal details and schedule an appointment with a loan officer using an online form.
Pros
- Limited rate and term information
- No closing costs
- Autopay discount
Cons
- Availability limited to certain states
- No online application
- Must have Fifth Third account to get autopay discount
Who should consider it
Regional borrowers who are looking to avoid closing costs
*Rates as of Jan. 2, 2024, for home equity lines of credit
TD Bank
Best for high borrowing amounts
Fixed APRs
8.09% to 13.02%*
Loan amount
$10,000 to $1.5 million**
Minimum credit score
Undisclosed
Why we picked it
If you’re looking to borrow a significant amount, TD Bank is a top lender to consider. Home equity loans are available for up to $1,500,000 for a second home. For a primary residence or investment property, you may be limited to $500,000.
Home equity loan repayment terms range from five to 30 years. A rate discount worth 0.25 percentage points is also available if you set up autopay from a TD Bank personal checking or savings account. However, TD charges a loan origination fee of $99.
Be aware that TD Bank only offers home equity loans in 15 states, plus D.C.:
– Connecticut
– Delaware
– Florida
– Maine
– Maryland
– Massachusetts
– New Hampshire
– New Jersey
– New York
– North Carolina
– Pennsylvania
– Rhode Island
– South Carolina
– Virginia
– Vermont
– Washington, D.C.
Pros
- Large loan amounts
- Interest rate transparency
- Autopay discount
- Five repayment term options (beats the industry average of four)
Cons
- $99 origination fee
- Must have a TD Bank account to qualify for autopay discount
- Must close in person at a branch
- Only lends to Eastern states
Who should consider it
East Coast borrowers seeking higher loan amounts, particularly for a second home
*Rates as of Jan. 2, 2024, may reflect discounts
**Upper limit is for a second home
Regions Bank
Best for fast approval
Fixed APRs
6.75% to 14.125%*
Loan amount
$10,000 to $250,000
Maximum LTV
85%**
Why we picked it
One of the biggest benefits of a home equity loan from Regions Bank is that you’ll receive a credit decision within one business day of applying, which is helpful if you’re looking to streamline the application process. Most loans close within 28 to 32 business days after application, the company said.
Regions Bank is one of the largest providers of personal and commercial banking and lending products. Its home equity loans are available with terms of 10, 15 or 20 years.
Note that the property used as collateral for a home equity loan must be a primary or secondary residence, located in a state where Regions has retail branches (15 states across the South and Midwest) and have at least $10,000 equity. Investment properties and manufactured homes aren’t eligible for this lender’s product.
Regions Bank home equity loans are available to borrowers in the following states:
– Alabama
– Arkansas
– Florida
– Georgia
– Iowa
– Illinois
– Indiana
– Kentucky
– Louisiana
– Missouri
– Mississippi
– North Carolina
– South Carolina
– Tennessee
– Texas
Pros
- Credit decision within one business day
- No closing costs
- Autopay discount
Cons
- Availability limited to 15 states
- Must close in person at a branch
- Late payment fee of $29 to $100
Who should consider it
Regional borrowers seeking next-day approval
*Rates as of Jan. 2, 2024, may reflect discounts
**For a second mortgage on a primary residence
KeyBank
Best for rate discounts
Fixed APRs
10.03% to 14.43%*
Loan amount
$25,000 to $500,000
Maximum CLTV
80%
Why we picked it
KeyBank offers several ways to save on your home equity loan interest rate. There is an interest rate relationship discount worth 0.25 percentage points when you bank with Key or sign up for automatic payments from a connected checking account.
Additionally, the lender offers a “Key Opportunities” home equity loan, which provides a permanent interest rate discount for owner-occupied homes in qualifying communities selected for their economic and demographic makeup. These loans also have no origination fees (waiving the typical $295 charge).
KeyBank home equity loans are available to borrowers with a combined loan to value of up to 80%, and repayment terms span five to 30 years. However, borrowers must live within one of the following states to qualify:
– Alaska
– Colorado
– Connecticut
– Idaho
– Indiana
– Maine
– Massachusetts
– Michigan
– New York
– Ohio
– Oregon
– Pennsylvania
– Utah
– Vermont
– Washington
Pros
- Interest rate discounts
- “Key Opportunities” loan
Cons
- Availability limited to 15 states
- $295 origination fee
- Keybank account required for rate discount
Who should consider it
Regional borrowers who already use KeyBank or are seeking rate discounts
*Rates as of Jan. 2, 2024, sample for Ohio-based borrowers
Our picks at a glance
| Lender | Rating | APR range* | Loan amount | Repayment terms (years) |
|---|---|---|---|---|
Navy Federal Credit Union | 5 | Starting at 6.64% | $10,000 to $500,000 | 5 to 20 |
BMO Bank | 4.7 | Starting at 8.84% | $25,000 to $150,000 | 5 to 20 |
Third Federal Savings and Loan | 4.6 | 7.29% to 18.00% | $10,000 to $300,000 | 5 to 20 |
Frost Bank | 4.5 | Starting at 7.00% | $2,000 and up | 7 to 20 |
Spring EQ | 4.4 | Undisclosed | $25,000 to $500,000 | 5 to 30 |
Fifth Third Bank | 4.2 | Undisclosed | $10,000 to $500,000 | Undisclosed |
TD Bank | 4.2 | 8.09% to 13.02% | $10,000 to $1.5 million | 5 to 30 |
Regions Bank | 4.1 | 6.75% to 14.125% | $10,000 to $250,000 | 10 to 20 |
KeyBank | 4 | 10.03% to 14.43% | $25,000 to $500,000 | 5 to 30 |
* Rates as of Jan. 2, 2024, may assume discounts
Why get a home equity loan?
- Lower interest rates: Home equity loans tend to have lower rates than other types of loans, such as personal loans or credit cards. That’s because the loan is secured by your home, reducing the risk for the lender. However, that also means if you can’t repay the loan, your home could be at risk of foreclosure.
- Flexible use: You’re generally not restricted in how you can use the money from a home equity loan, allowing you to address various financial needs. Popular reasons to take out a home equity loan include debt consolidation, financing home improvements, paying for education and more.
- Fixed payments: Home equity loans usually come with fixed interest rates and repayment terms, meaning your payments stay the same for the life of the loan, making it easier to budget. Home equity lines of credit, which also allow you to borrow against the value of your home, usually carry variable rates and fluctuating monthly dues.
- Potential tax benefits: The interest paid on a home equity loan may be tax-deductible if the loan is used for home improvement or other qualified expenses. Still, consult a tax advisor for specifics.
What are home equity loans?
Home equity loans are a form of borrowing where a homeowner uses the equity in their home (the appraised value of the home minus any outstanding mortgage balances) as collateral. The borrower receives a lump sum of money upfront that can be used for almost any legal purpose, and then pays it back in monthly installments. The repayment term can range from 5 to 30 years, and many lenders will allow you to borrow up to 80% of your home’s available equity.
One of the main features of home equity loans is their fixed interest rates. The interest rate stays the same throughout the life of the loan, resulting in consistent and predictable monthly payments. Home equity loan rates are also usually much lower than other forms of borrowing.
How to determine your home equity
Calculate the difference between your home’s current market value and the amount you still owe on your mortgage. For example, say your home was recently appraised for $400,000 and you have $300,000 left on your mortgage. You’d have $100,000 in equity, or 25%.
If your lender allows you to borrow up to 80% of your equity, you could borrow as much as $20,000.
$300,000 (mortgage) + $20,000 (home equity loan) = $320,000
$320,000 / $400,000 = 80% CLTV
Lenders vary eligibility requirements for minimum equity and loan-to-value (LTV) ratios. One shortcut to understanding is that your LTV is the opposite of your equity. So if you have 25% equity in your property, your LTV would be 75%. Combined loan-to-value (CLTV) accounts for all liens on a property, not just the primary mortgage
Pros and cons of home equity loans
| Pros | Cons |
|---|---|
|
|
Home equity loans come with several advantages: namely, their lower interest rates compared to unsecured loans and credit cards. They also provide fixed interest rates and payments, making them predictable and easier to fit into your monthly budget. (On the other hand, home equity line of credit rates are variable, making it difficult to budget.)
These loans also allow homeowners to borrow larger amounts, depending on the available equity in their homes, and use the funds for just about any purpose. Plus, the interest paid on a home equity loan might be tax-deductible if used for home improvement.
Despite these many benefits, there are some potential downsides to consider. For example, there is the risk of foreclosure if you fail to repay the loan according to the terms. You’ll also need enough equity built up in your home (usually, at least 20%).
Some lenders also charge various closing costs and fees, adding to the total cost of the loan, which is why it’s important to shop around for the best deal before committing to a loan.
Home equity loans commonly have terms as long as 20 years, resulting in low monthly payments — but this also means adding another long-term debt to your plate. This can impact your ability to qualify for and pay down future credit.
How to select the best home equity loan
Choosing the right home equity loan means taking the time to research your options and compare key features. The best loan for you will depend on your specific financial profile and goals, but you can follow these steps as a general guideline:
- Check your credit. Start by reviewing your credit reports (via AnnualCreditReport.com) and scores (via your financial institution, the credit bureaus or other third parties) to confirm you have a good chance of qualifying for a home equity loan. It’s important to select a loan that fits your credit profile.
Though it’s possible to seek a home equity loan with bad credit, most lenders require good credit, defined as a FICO score of at least 670. - Get multiple quotes. Although some lenders require you to apply for a loan in person at a branch, many major lenders allow you to get a preliminary quote by sharing a few details online. It’s wise to get several quotes so you can compare factors such as interest rate, term and monthly payment — and choose the one that fits your needs best.
- Evaluate the fees. Don’t forget to ask about the fees that each lender charges, such as origination fees, prepayment penalties, late fees and more. These fees can add to the cost of your loan, so it’s important to choose a loan that involves few to no fees.
- Research the lender’s reputation. Finally, make sure that others have had a good experience with the lender you want to borrow from. You can check third-party sites (like the Better Business Bureau and the Consumer Financial Protection Bureau’s complaint database) to see what previous customers had to say, but it never hurts to test-drive a lender’s service before you borrow.
Home equity loans vs. other financing options
A home equity loan isn’t your only option for borrowing against your home’s equity. Consider the following alternatives:
| Home equity loan | Home equity line of credit (HELOC) | Cash-out refinancing | |
|---|---|---|---|
Type of financing | Installment loan | Revolving credit line | New mortgage with larger balance |
Interest rate | Fixed | Variable | Fixed or variable |
Typical loan term | 5 to 30 years | Up to 10 years for draw period, up 20 years for repayment period | 15 to 30 years |
Repayment | Monthly installment payments | Interest-only payments during draw period, then principal-and-interest dues | Monthly installment payments |
Impact on mortgage | None | None | Replaces existing mortgage |
How to apply for a home equity loan
The application process will look a bit different for each lender. However, there are a few general steps you can expect:
Choose the right lender
The process starts with selecting a lender and home equity loan offer that fits your needs. Find a lender that provides the best combination of favorable terms and reliable customer service.
Gather your documentation
Getting approved for a home equity loan involves a lot of documentation, and gathering the necessary paperwork ahead of time can help streamline the application process and get you approved faster. In most cases, you’ll need the following:
- Pay stubs, W-2s or tax returns
- Bank and loan statements
- Investment records
- Current mortgage statement
- Home insurance details
- Recent appraisal of your property
Submit the application
When it comes time to fill out the application, be sure to provide all the necessary personal and financial information completely and accurately. Missing or incorrect information can cause delays. Keep in mind that some lenders may charge an application fee, but nearly all fees are negotiable.
Methodology
CNN Underscored Money editors compared 25 reputable lenders across 22 home equity loan features that would be important to the average borrower. We collected information about these features to make objective comparisons and, ultimately, declare the best home equity loans available today. Here’s greater detail about these factors and how their weightings helped us create an out-of-5-star rating for every lender under consideration.
Current loan rates (30%)
Lenders were rewarded for displaying rates prominently on their websites, advertising competitive APR ranges and offering rate discounts. Each of the five data points in this category received equal weighting.
Loan details (30%)
Here, we took a deeper look at loan cost, considering lenders’ fees and no-closing-cost options. We also rewarded lenders with a wide range of available loan amounts and faster-than-average closing timelines.
Eligibility (20%)
Since you need a good credit score, debt-to-income ratio, income and sufficient home equity (or loan-to-value ratio) to qualify for this product, we put lenders’ requirements on a spectrum to determine which were more or less accessible to the average borrower. Lenders were also rated higher for lending nationwide or in more states than their competitors.
Repayment experience (20%)
A lender might be good at funding low-cost loans, but how does it help borrowers in repayment? That’s the central question of this category. Points were awarded to lenders that offer various repayment options and modes of customer contact, and those that have a track record of good service.
What didn’t make the cut
In the final analysis, 15 lenders fell short of cracking our list for the best home equity loan rates. The explanation is straightforward for some, like Flagstar Bank, which paused its home equity loan offering in favor of HELOCs. For others, they simply didn’t measure up.
Lenders registered lower ratings because of noncompetitive (or hidden) interest rates, unnecessary fees, restrictive loan amounts or repayment terms and spotty customer service records.
Frequently asked questions (FAQs)
Home equity loan rates are determined according to a mix of market influences, lender-specific requirements and the financial profiles of individual borrowers. Practically speaking, rates are heavily influenced by the Fed’s interest rate policies and broader economic indicators like inflation. Lenders then adjust advertised rates based on their business goals.
At the borrower level, your credit scores and debt-to-income (DTI) ratio, among other factors, impact the rates you’re offered.
A home equity loan might be a good idea if you have at least 20% equity in your home, are in need of a low-interest installment loan and have the budget in place to repay the debt.
Some of the most common alternatives to a home equity loan include home equity lines of credit, cash-out refinancing, personal loans and credit cards.
I'm a financial expert with in-depth knowledge of home equity loans and related financial products. I have practical experience in evaluating lenders, understanding loan terms, and providing advice on making informed decisions when it comes to home equity financing.
Now, let's delve into the concepts covered in the article:
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Home Equity Loans Overview:
- Home equity loans allow homeowners to borrow against the percentage of their home that they own, often at a lower cost.
- The loan is secured by the home's equity, and borrowers receive a lump sum upfront, repaid in fixed monthly installments.
-
Key Concepts in Home Equity Loans:
-
Equity Calculation:
- Equity is calculated by subtracting the outstanding mortgage balance from the home's current market value.
- LTV (Loan-to-Value) and CLTV (Combined Loan-to-Value) ratios are crucial in determining the borrowing limit.
-
Fixed Interest Rates:
- Home equity loans typically have fixed interest rates, ensuring consistent and predictable monthly payments.
-
Loan Terms:
- Repayment terms for home equity loans can range from 5 to 30 years.
-
Uses of Home Equity Loans:
- Borrowers can use the funds for various purposes, such as debt consolidation, home improvements, education, etc.
-
Tax Benefits:
- Interest paid on home equity loans may be tax-deductible if used for qualified expenses like home improvement. Consult a tax advisor for specifics.
-
-
Comparison of Lenders:
- The article compares several lenders, highlighting their strengths and considerations for potential borrowers.
-
Methodology for Selecting Lenders:
- The methodology involves evaluating lenders based on factors like current loan rates, loan details, eligibility criteria, and repayment experience.
-
Factors Influencing Home Equity Loan Rates:
- Market influences, lender-specific requirements, and individual borrower profiles impact home equity loan rates.
- Credit scores, debt-to-income ratio (DTI), and economic indicators play a crucial role in determining rates.
-
Pros and Cons of Home Equity Loans:
- Pros include lower interest rates, large loan amounts, flexible use of funds, and potential tax deductions.
- Cons involve the risk of foreclosure, closing costs, long-term debt, and the need for sufficient equity.
-
Alternatives to Home Equity Loans:
- Alternatives include home equity lines of credit (HELOC), cash-out refinancing, personal loans, and credit cards.
-
Application Process:
- Choosing the right lender, gathering necessary documentation, and submitting a comprehensive application are key steps.
-
FAQs:
- FAQs cover topics such as how home equity loan rates are determined, when a home equity loan might be a good idea, and common alternatives.
By understanding these concepts, homeowners can make informed decisions when exploring home equity financing options. If you have specific questions or need further details on any aspect, feel free to ask.
