Home equity loans are second mortgages that use a percentage of the equity you’ve built up in your current home to give you access to a lump sum of funds you can borrow to finance large home renovation projects, pay off bills or a number of other uses. The loan is secured by your home, meaning have to use your home as collateral in case you don’t borrow it back. Given that the loan is secured, you’re more likely to get a lower interest rate on a home equity loan than other loan products, but this makes it risky to borrow if you’re unsure you can pay it back according to the loan terms.
Still, while somewhat risky, this borrowing tool is a great way for many homeowners to gain access to a large lump sum of cash quickly, and at a much more affordable rate than you’ll get with other loans or credit cards. If you’re considering a home equity loan, it’s important to take the time to find the best home equity loan rates before moving forward in the borrowing process.
The 8 best home equity loan rates of 2020
- Citi — Best for HELOCs
- U.S. Bank — Best for borrowers with good credit scores
- Discover — Best for low interest rates
- TD Bank — Best for borrowers who need large loans
- PNC — Best for borrowers who need small loans
- BBVA — Best for low closing costs
- DCU — Best for pre-payment on loans
- Northwest Bank — Best for borrowing larger percentages of equity
|APR||Additional Rate Discounts||Loan Amount|
|Citi||6.59% – 8.79%||Varies||Varies|
|U.S. Bank||As low as 4.99%||Varies||Up to $750,000|
|Discover||3.99% – 11.99%||None||$35,000 – $200,000|
|TD Bank||4.09% – 9.76%||0.25%||Up to $1,500,000|
|PNC||Varies||0.25%||Starting at $1,000|
|BBVA||4.04% – 9.09%||None||Varies|
|DCU||As low as 3.49%||None||Up to $50,000|
|Northwest Bank||Varies||None||Up to $500,000|
The 8 best home equity loan rates of 2020
Citi — Best for HELOCS
Citi, a bank that’s been around since the early 1800s, offers many options for homeowners looking to gain access to more funds. The bank offers fixed rate home equity loans with APRs as low as 6.59%, and additional rate discounts are available, so if you’re applying with Citi you should inquire about them during the application process.
Citi also offers home equity lines of credit, or HELOCs, for borrowers looking to have access to funds that act like a revolving line of credit rather than a lump sum loan. If you haven’t fully decided on a home equity loan or a HELOC, Citi makes both options available for easy comparison.
U.S. Bank — Best for good credit scores
U.S. Bank offers home equity loans for 2020 at very competitive rates, which start as low as 4.99%. The bank also offers some no closing cost options for qualified applicants to help sweeten the deal. Still, while U.S. Bank has some great options for home equity loans, you’ll have to have great credit in return to qualify. U.S. Bank requires a minimum 730 FICO score — which is in the good/very good/excellent range — for loan approval, and you also must have a personal checking or savings account with the bank to qualify.
Discover — Best for low rates
While Discover’s credit cards have been the most notable offerings over the years, this lender also offers very competitive home equity loan rates. Customers can secure financing up to $200,000 at rates as low as 3.99% APR (as of March 2020), which is far better than many of the other available options from other lenders. Remember, the actual rate you receive will be contingent on your creditworthiness, loan terms and how much money you borrow, along with the other requirements this lender has in place.
TD Bank — Best for large loans
The TD Bank website does an incredible job laying out your lowest possible rates broken down by location, term length and the size of your loan. For those looking for a larger loan to purchase a second home, the bank offers options up to $1.5 million, but only on second homes. The maximum loan amount for those utilizing the money for other purposes will vary based on your financial situation and the other loan requirements and parameters in place by TD Bank.
PNC Bank — Best for small loans
While many lenders won’t work with borrowers who want small loans, PNC has home equity loans starting as low as $1,000, which is significantly lower than a lot of other banks offer for this type of product.
Regardless of the size of the loan you choose through PNC, this lender makes your funds available on the fourth business day after you sign your documents. Additionally, the bank has several flexible repayment options you can choose from, with term lengths up to 30 years.
BBVA — Best for closing costs
BBVA offers home equity loans for residents living or looking to buy in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. This lender offers some of the lowest possible home equity loan rates available, so potential borrowers with access to BBVA should reach out to the lender for more information. BBVA also mentions that borrowers taking out between $10,000 and $500,000 may qualify for bank-paid closing costs if they meet the list of criteria, but you’ll have to talk to BBVA to find out what those criteria are and whether you qualify.
Digital Federal Credit Union — Best for prepayment
Not only does Digital Federal Credit Union, or DCU, offer some of the best rates for 2020 — as low as 3.49% APR — but it doesn’t charge borrowers any penalties or fees for early payment on their loans. If you’ve got plans to try and pay off your loan early to save on interest payments, you may want to consider securing your home equity loan through DCU. Keep in mind though, that DCU is a credit union, so you’ll have to join in order to take advantage of the rates it offers. There are a number of ways to join, though, including becoming a member of the organizations DCU supports.
Northwest Bank — Best for borrowing larger percentages of equity
While many banks and credit unions will only let you borrow up to around 70% or 80% of your home’s equity or value, Northwest bank lets qualified applicants borrow up to 95% of their home’s value. Tie this in with minimal closing costs — which generally range from $60 to $500 — and extensive flexibility on repayment, and you have a viable home equity loan option. Be aware that Northwest Bank is not available everywhere in the U.S., however. You’ll have to live in one of the areas it serves to qualify.
What is a home equity loan rate?
Homeowners who choose to take out a second mortgage using the equity they’ve built up in their home as leverage are taking out what is known as a home equity loan. The interest rate that you’re charged on that loan — which is part of how the lender makes money — is your home equity loan rate. Typically, that rate will be higher than the interest on your first mortgage, but will be lower than what you might see using credit cards or other lending products.
How should I choose the right home equity loan rate?
Choosing the right rate for your home equity loan should involve an extensive shopping around process. While you’re not able to dictate the loan rate offered to you by a lender, you are able to choose which lender you go with. Different lenders will be willing to offer you a loan at different rates based on your creditworthiness, credit score, desired loan terms and overall financial picture. Take the time to check with multiple lenders to see who can provide you the best rate possible.
Make sure not to get tunnel vision from the interest rate you’ll receive. Choose a loan that has favorable terms, is offered through a company you trust and has the right monthly amount for repayments to fit your financial goals.
The bottom line
Home equity loans are a great way for homeowners to get access to large sums of cash at favorable rates. Borrowing against the equity in your home is a substantial financial move, so it’s imperative that you take the time to find the best home equity loan rate possible with the most favorable loan terms for your needs.