If you’ve been dreaming of a new kitchen or are struggling to make payments on multiple high-interest credit cards, a home equity loan could be the solution to your problems. This type of loan allows homeowners to tap into a prime resource: your home’s equity.
If you’re unfamiliar with what home equity is, here’s the gist: it’s your home’s total value minus the amount you’ve already paid on the mortgage. In other words, it’s the portion of your house that you truly own.
Let’s say your home is worth $250,000 and you’ve paid $150,000 on your mortgage. Your home equity is $100,000, and you can borrow against that equity if you need to. It works similarly to a personal loan — you’ll but your home is the collateral.
Before applying for a home equity loan, let’s take a look at what each lender offers so you can find the best home equity loans and the best home equity loan rates for your needs.
The Best Home Equity Loans for 2019
- Figure Home Equity Line
- U.S. Bank
- PenFed Federal Credit Union
|Bank||Loan Options||Loan Amounts||APR|
|Figure||HELOC||$15,000 to $150,000||4.99% to 13.74%|
|U.S. Bank||Home equity loan||Up to $750,000||Starting at 4.89% to 5.24%|
|BB&T||HELOC||Varies||Varies by region|
|PenFed Credit Union||Home equity loan||$10,000 to $400,000||Starting at 5.25%|
|Citibank||HELOC||Up to $500,000||Varies by region|
|PNC||HELOC||Varies by region||Varies by region|
|SunTrust||HELOC||$10,000 to $500,000||Intro rate starting at 3.49%, 4.75%-6.22% after promo period|
Best Home Equity Loans for 2019 – Reviews
When shopping around for the best home equity loans, you’ll want to consider more than just home equity loan interest rates. Make sure you take into account a lender’s reputation for customer service, how quickly they can fund a loan, as well as any other factors that will impact your borrowing experience.
#1: Figure Home Equity Line
Figure.com only offers home equity lines of credit, but their online approval process can’t be beat. It takes just five minutes to apply and they can fund within five days.
Average APRs range from 4.99% to 13.74%, and they offer the widest range of terms of any lender on this list. Finder offers 5-, 10-, 15- or 30-year terms.
Be aware, though, that Figure.com does charge origination fees of up to 4.99% of your loan’s value, but they limit the extra charges to this one fee. You can borrow an amount between $15,000 to $150,000, and will need a minimum credit score of 600. Finder will lend up to 95% of the combined loan-to-value.
The flexibility and options offered by Finder easily top the other lenders on this list. Most larger banks expect you to borrow more money and have a higher credit score.
- Competitive interest rates
- Easy and simple online application process.
- First all-digital loan experience with funding in as little as 5 days
- No hidden costs, just a one-time origination fee
#2: U.S. Bank
U.S. Bank is a great option for a nationwide lender and is likely to appeal to borrowers who are looking for low fees. Customers who have a checking account with U.S. Bank won’t have to pay an annual fee on their home equity loan, and U.S. Bank doesn’t charge any closing costs on their home equity loans.
U.S. Bank is currently offering a rate of 4.89% for 10-year terms and 5.24% APR for 15-year terms. The minimum amount they’ll lend on a home equity loan is $50,000, or up to 70% of the home’s loan-to-value. They also prefer to work with borrowers who have excellent credit, which is higher than a 730 FICO score, per U.S. Bank’s website.
For these reasons, U.S. Bank won’t be the best choice for every borrower, but if you fit the parameters U.S. Bank is looking for, you may be able to save some cash between the low rates and lack of closing fees this bank offers.
- Competitive interest rates
- Solid customer service scores
- Borrow for up to 30 years
- No application fee or closing costs
BB&T ranked third in the nation for customer satisfaction with their home equity loan provider in a J.D. Power and Associates survey. One of the perks of applying for a home equity loan with BB&T, other than their high ranking, is that this bank will pay the appraisal fee, something other banks may not be willing to do. Another perk is that when you pay off the loan, BB&T won’t charge prepayment penalties. They also promise competitive rates, though they don’t disclose them on their website. To find out your rate, you must complete an online application or call and speak to a representative.
While BB&T lends nationally, this bank doesn’t have a branch presence in every state. Their 1,800 branches are scattered throughout the country, with a strong presence in the South. Borrowers who prefer talking to a banker in person should check to see if there’s a BB&T branch in their city before applying.
- BB&T will pay the appraisal fee
- High ranking for customer satisfaction
- No prepayment penalties
With Citibank, you have two options for the length of your home equity loan: a 10-year term and another for a 30-year term. The interest rates between the two vary slightly, with the 10-year product currently at 6.59% APR and the 30-year product at 6.79% APR, which is higher than other options on this list. You’ll save money on your rate if you have a checking account with them, though.
But while Citibank may not have the lowest home equity loan rates, this bank will let borrowers take a little more equity out of their home, with 80% being the maximum LTV ratio. There’s another upside, too. Unlike some of the other banks on this list, Citi is a nationwide bank, so it should be accessible to you wherever you are in the country.
- Nationwide provider
- Allows borrowers to take out more equity on their home
PNC is a regional lender that primarily serves Pennsylvania and the surrounding states, and while they rank fourth in the nation for home equity lender customer satisfaction, you can’t even enter PNC’s website without entering your zip code. This bank accepts applications online, by telephone or by visiting a branch.
PNC will lend up to 89.9% of your home’s value, and terms can be from five to 30 years. This ban doesn’t charge a prepayment penalty if you’re paying off the loan more than 36 months after securing it.
PNC does charge some fees, though, for home equity loans. These include recording and satisfaction fees and a property search fee in some states. If you have an existing account with them or open a new checking account, they’ll reduce your interest rate by 0.25%, which is a perk. As with BB&T, PNC doesn’t disclose their rates online, and you must complete an application to find out what they’ll offer.
- No prepayment penalties after 36 months
- Rate reduction offered for customers with existing relationships
- Lends up to 89.9% of the home’s value
PenFed is a federal credit union that offers a nice selection of home equity loans. Their home equity loan terms are calculated in months, and they offer 60-month, 120-month, 180-month, and 240-month terms, and you can borrow up to $400,000 from this lender.
PenFed breaks their home equity loans into two brackets. The first bracket is for borrowers who want to take out up to 80% of their home’s loan-to-value, and the second is for those who want to borrow between 80.01% to 85% of their home’s equity.
Interest rates for the first bracket currently range from 5.25% to 6.50% APR. Rates for the second bracket fall between 6.09% to 7.34% APR.
- Competitive interest rates as low as 5.25% APR
- PenFed may pay all or most of your closing costs
- Borrow up to $400,000
- Loan repayment timelines up to 240 months
SunTrust ranks highly with J.D Power and Associates for their flexible equity loan offerings. This bank is currently offering a deal on their home equity lines of credit with an introductory rate of 3.49% for 12 months, and between 4.75% to 6.22% APR after the 12-month promotional period. Existing customers will receive a 0.25% rate reduction.
There are other perks to using SunTrust, too. If you keep the account open for three years, you won’t pay closing costs or fees, and if you take out a home equity line of credit with SunTrust, you have the option to convert all or part of your outstanding balance to a fixed-rate loan.
SunTrust also offers home improvement loans, which are similar to a home equity loan in that they turn your home’s equity into cash, but there are restrictions upon how you use that cash.
- Low introductory rate
- No closing costs or fees if the account is open for three years
- Existing customers receive rate reductions
LoanDepot is an online lender, not a brick and mortar bank, but the upside of that is that they’ll return a loan approval decision within minutes, and they don’t require a home appraisal to complete your loan. You can also borrow up to 90% of your home’s value.
LoanDepot doesn’t make their rates for home equity loans available without an application, but they have an excellent reputation, with an A- Better Business Bureau rating and overall positive reviews on Bankrate.
- Easy application
- No appraisal required
- Up to 90% of home value
What is a Home Equity Loan?
When you are paying off your home, the difference between what you owe on the house and its total value represents your home’s equity.
When a lender approves a home equity loan, they are lending on this equity, turning that amount into cash in your pocket. Typically, banks will lend up to 80% of your home’s value, as they prefer to leave some equity in your home.
Home equity loans are mostly fixed-rate term products. Funds are disbursed just once in a lump-sum payment, and you cannot borrow against the loan again. This type of loan can have a term of 5- to 15-years, and during that time, your payments will be fixed, meaning you’ll owe the same amount on your loan each month.
Some homeowners prefer the predictability of a home equity loan, whereas others prefer the flexibility of a home equity line of credit, which we’re discussing below.
What is a Home Equity Line of Credit?
As with a home equity loan, a home equity line of credit is extended to you by a lender based upon your home’s equity. Unlike a home equity loan, the funds aren’t disbursed in a lump sum. Instead, a home equity line of credit or HELOC functions similarly to a credit card, in that you’ll be offered a line of credit that you can draw against as you need to.
The line remains open with a set maximum limit, and you can borrow against it at any time. You’ll only owe interest and principal payments on the money you borrow from the line, though some lenders charge an annual fee to keep the HELOC open. A line can be repaid and drawn against multiple times.
The downside to a HELOC is that payments are unpredictable and can fluctuate because you can draw varying amounts depending on your needs. It’s also more common for a HELOC to have a variable interest rate, which means you’re subject to variability in your payments from the fluctuating amounts you borrow and the fluctuating interest rate.
When Should I Get a Home Equity Loan, or a HELOC?
While each product draws upon your home’s equity, the two products serve different needs. Home equity loans work well for large home improvement projects, such as a kitchen or bath remodel. Once the project has been completed, you won’t need access to more capital, so you only need the one-time loan to get things done. Home equity loans also work well for debt consolidation, as the lump sum you receive will allow you to pay off high-interest debt and consolidate it into one lower-interest payment.
Home equity lines of credit, on the other hand, can help homeowners who are struggling with cash flow management. For example, your child’s full-year tuition payment comes due in September and you don’t have all of it, you can borrow against your home equity line of credit and then pay the HELOC off throughout the year.
The Bottom Line
The best way to use your home equity is personal. It will depend on how you intend to use the funds and your individual circumstances, such as your credit score. While you should, of course, look for the best rates, your needs, the loan term and the amount you can borrow should also factor into your decision-making process.