Best Home Equity Loan Lenders Of March 2024 (2024)

As with any major purchase or loan, you may not get the best deal if you don’t shop around. Applying for home equity loans with multiple lenders could help you get a lower rate or lower fees. It could also expand the amount of equity you’re able to borrow.

For every application you submit, the lender will give you an official loan estimate with an interest rate and an itemized breakdown of costs. Getting at least three loan estimates gives you the opportunity to choose the best of several offers. You may even be able to use the best estimate to negotiate a better deal with another lender. Plus, you’ll get a sense of how fast and responsive each lender is.

In addition, you’ll want to compare annual percentage rates (APRs), which more accurately represent the total cost of the loan, as well as customer reviews of the lender. When evaluating home equity lenders, consider what type of loan experience you want (online or in-person), how much equity each lender requires you to have and what fees and commissions they charge.

Forbes Advisor reviewed 12 home equity loan lenders that do business both online and in person throughout the United States. The lenders we reviewed represent some of the largest home equity loan lenders by volume, which include banks, credit unions and online lenders.

Our scoring methodology included capturing more than 10 data points, which covered interest rates, lender fees, discounts, accessibility and borrower requirements.

The best home equity loan lenders excelled in areas that are historically important for this group, including speed, low lender fees and low home equity interest rates.

The following is the weighting assigned to each category:

• Loan costs: 30%
• Speed: 20%
• Credit requirements: 20%
• Loan types offered: 20%
• Access and availability: 10%

Specific characteristics taken into consideration within each category include APR, average interest rate, origination fees, minimum credit score requirements, discounts and customer service availability.

We also offered bonus points up to 5% of the score when a lender considers alternative credit data.

To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Reviews Mortgage Lenders.

A home equity loan is a type of financing that uses your equity as collateral. The lender decides how much you can borrow based on the amount of equity you have in your home. Most lenders won’t lend you the full amount of your equity, as this increases their risk.

If you’re approved, the lender will create a second mortgage and cut you a check for the full loan amount. You can then use this lump sum how you wish and will repay it in equal installments with interest over time. This can be a good option if you know exactly how much you need to borrow.

Home equity loans allow you to access the equity you have in your home, which is the difference between your home’s value and what you owe on any outstanding debts against the property. Interest rates on home equity loans are usually fixed, which means your payments won’t ever change.

Like with any mortgage product, your home acts as collateral for the loan. This means you risk foreclosure if you can’t keep up with your payments.

To calculate your home equity, subtract your current mortgage balance from your home’s appraisal value. For example:

$350,000 home value – $250,000 loan balance = $100,000 home equity

You can quickly estimate your borrowing potential with our home equity loan calculator.

Closing costs can range from 2% to 5% of the loan amount. However, home equity lenders commonly waive these fees.

While home equity closing costs can be similar to a home purchase loan or refinance, the total fee amount is generally lower since you’re financing a smaller balance. So, you can pay less overall with home equity loans versus a cash-out refinance that charges closing costs on the existing mortgage amount plus the borrowed equity.

Typical expenses include an appraisal fee and origination fee. Other fees could include document preparation, credit report inquiries and title searches.

Eligibility requirements for a home equity loan vary from lender to lender. However, all lenders look for responsible, low-risk individuals.

These are generally the benchmarks that most lenders expect borrowers to meet:

• 620 credit score (some lenders may require a minimum of 680)
• Proof of stable and sustainable income from the past two years
• At least 80% equity in your property
• Debt-to-income (DTI) ratio no higher than 43%
• Excellent financial history
• Proof of homeowners insurance

How Long Does It Take To Get a Home Equity Loan?

How long it takes to close on a home equity loan depends on several factors. But generally, the more organized you are, the faster you will be able to close. So make sure you have all the documents your lender requires before applying.

Unfortunately, most of the other factors, such as the timing of the home appraisal and underwriting process, are less in your control. If your financial situation is clear cut, the underwriting phase has a better chance of moving along quickly. But if you need to have an attorney at closing, you will be dependent on that person’s availability, which could slow things down.

In a best case, you could close on your home equity loan in a couple of weeks. However, it is not uncommon for this process to take up to two months.

Pros of Home Equity Loans

• Tap into your home’s equity. A home equity loan allows you to access built-up equity in your property and turn it into cash.
• Use for almost any expense. You can use the funds from a home equity loan to cover almost anything you’d like, such as education expenses, renovations, medical bills and more.
• Fixed rates. Home equity loans usually come with fixed rates, which means your payments will stay the same throughout the life of the loan.

Cons of Home Equity Loans

• Acts as a second mortgage. If you take out a home equity loan and haven’t paid off your first mortgage yet, you’ll have to make payments on both loans at the same time.
• Can’t reborrow against the loan. If you end up needing more money than you expected, you’ll have to get another loan.
• Risk of foreclosure. If you can’t keep up with your home equity loan payments, you risk losing your house.

Consider these factors when surveying the best lenders for home equity loans:

• Interest rate. Seek out the lowest interest rate for your desired loan amount and repayment term by comparing quotes from several lenders. This will help reduce your loan’s overall cost.
• Fees. Choosing a lender with low or no closing costs can reduce your upfront expenses and minimize your total borrowing costs.
• Customer service. Consider working with a lender that offers you the best customer service, which includes answering any questions you might have comprehensively and in a timely manner.

If you want to take out a home equity loan, follow these steps:

1. Check your credit. When you apply for a home equity loan, the lender will review your credit to determine if you qualify and what interest rate you’ll get—so it’s a good idea to check your credit beforehand to see where you stand. You’ll usually need a credit score of at least 620. While there are also lenders that accept lower scores than this, you will likely end up with a higher interest rate, and you might need to demonstrate a higher amount of income and greater amount of equity to get approved.
2. Compare lenders and pick an option. Shop around and compare as many lenders as possible to find a loan that suits your needs. You might start by reaching out to your current lender, but be sure to consider other lenders, too, such as the ones we’ve listed above. Keep in mind, though, that fewer lenders offer home equity loans compared to HELOCs. Afterward, pick the option that works best for you.
3. Fill out the application. Once you’ve chosen a lender, you’ll need to fill out a full application and provide any required documentation, such as tax returns or pay stubs.
4. Get your funds. If you’re approved, the lender will have you sign for the loan so the funds can be released to you. You can generally expect the process from applying to closing on the loan to take anywhere from two weeks to two months.

While HELOCs and home equity loans both allow you to tap into your home equity, the right one for you will depend on your individual circ*mstances and financial goals.

With a HELOC, you’ll have access to a revolving credit line that you can repeatedly draw on and pay off. This provides more flexibility, which might be a plus if you have multiple expenses to cover. However, a HELOC will typically have a variable interest rate, which means your rate could fluctuate in the future.

A home equity loan, on the other hand, is paid out as a lump sum that you can use how you wish. This type of loan will generally come with a fixed interest rate, which means you’ll pay back what you borrowed in equal installments. This could be a good choice if you know how much you need to borrow and prefer a more structured loan compared to a HELOC.

Remember that both HELOCs and home equity loans are second mortgages, which means you’ll be making payments on two loans at once. If you’d prefer to tap into your home’s equity without making two sets of payments, you might consider a cash-out refinance to replace your first mortgage instead.

There are a few ways you can access the equity in your home without selling it.

Cash-Out Refinance

A cash-out refinance replaces your original mortgage with a new, larger one. The new loan pays off your old loan and covers your new closing costs. The remaining cash gets transferred to your bank account.

This option can make sense when you don’t like your existing mortgage—perhaps because the interest rate is too high or it’s an Federal Housing Administration (FHA) loan with permanent mortgage insurance premiums. If you can qualify for a cash-out refinance loan with a good rate, the closing costs might be worth it. If not, a home equity loan could be a better choice.

Home Co-Investing

Home co-investing, also called equity sharing or shared appreciation, allows you to sell a portion of your interest in your home to an investor and receive cash that you can use however you want. That investor could be an individual, but more likely, it’ll be a company that either invests itself or connects you with investors. Examples include Unison, Point, Hometap, HomePace, EquiFi and Unlock.

Since it’s not a loan, you don’t have to pay the money back. When you sell your home, the investor gets its money back, adjusted up or down by a share of the change in your home’s value. Depending on the investor, you’ll typically have up to 10 years, 30 years or a lifetime to exit the agreement. Exiting means selling your home, refinancing it or tapping your savings to repay the investor based on your home’s value at that time.

Home Equity Line of Credit

A home equity line of credit (HELOC) can be a good option for construction, home renovations or other expenses that you’ll pay over time. Similar to a credit card, a HELOC lets you borrow as much or as little of your available credit as you want; you don’t have to borrow a lump sum all at once. And HELOC closing costs can be minimal as long as you don’t close your line of credit within 36 months of opening it.

Many HELOCs also let you make interest-only payments during your first several years of borrowing, which is called the draw period. Once the draw period ends and the repayment period begins, which can be as long as 20 years, you’ll repay both the interest and principal. Unlike a home equity loan, the interest rate is variable, which means your monthly payments can change..

• Is A Home Equity Loan A Good Idea?
• Best Ways To Tap Your Home Equity
• Interest-Only HELOC Ultimate Guide
• What Is A Home Equity Line Of Credit?
• Ways To Get The Best HELOC Rates