Best Home Equity Loans of 2022
Best Home Equity Loans of 2022

A home equity loan allows you to tap the equity built up in your house to pay for renovations, college expenses and other large purchases, or to consolidate high-interest debt. For almost any need, a home equity loan may be a good choice. But before you borrow, learn more about home equity loans and compare home equity lenders to find the best match.

Our Methodology

U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.

To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For mortgage lenders, we take into account each company’s customer service ratings, interest rates, loan product availability, minimum down payment, minimum FICO score and online features.

The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.

To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.

Best for online mortgages with cash back rewards

Axos Bank, founded in 2000, is a digital financial services company based in San Diego. The full-service online bank offers everything from personal and business savings and checking accounts to auto and home loans.

Borrowers with an Axos Bank checking account can reduce or eliminate the lender fee and earn cash back by using the account to make monthly mortgage payments.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA, Home Equity Loans, HELOC, Refinancing
  • Minimum FICO credit score: Not disclosed
  • Minimum down payment: Not disclosed
  • Better Business Bureau rating: A+

Best Features

  • Earn 3% annualized cash back – 0.25% monthly – if you have an Axos Bank checking account and use it to pay your mortgage.

  • Reduce or eliminate the $995 lender fee with an Axos Bank checking account.

  • On-time closing is guaranteed for buyers of single-family homes.

  • Access mortgage loan consultants to discuss your home financing needs.

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Best for client relations

Headquartered in Charlotte, North Carolina, Truist Bank was formed in 2019 after SunTrust and BB&T banks merged. Truist Bank offers a variety of mortgage products, including refinancing and home equity lines of credit.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA, Jumbo, Construction-to-permanent, HELOC, Refinancing
  • Minimum FICO credit score: Not Disclosed
  • Minimum down payment: 3%
  • Better Business Bureau rating: A+

Best Features

  • The application process can be completed online.

  • Truist Bank offers a range of mortgage products.

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Best for low APR

New American Funding is a mortgage lender offering a variety of loan options to homebuyers and homeowners nationwide except for Hawaii. The company, founded in 2003 and based in Tustin, California, has originated $58 billion in mortgages to date.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA, USDA, Reverse Mortgage, HELOC, Cash-Out Refinancing, Refinancing
  • Minimum FICO credit score: 620
  • Minimum down payment: 3%
  • Better Business Bureau rating: A+

Best Features

  • Select from many mortgage types, including low- and no-down-payment loans.

  • Choose between fixed- and adjustable-rate mortgages.

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Best for low down payment

PNC Bank is one of the largest banks in the United States, serving more than 12 million customers in all 50 states. A full-service mortgage lender, PNC offers most mortgage loan product types.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA, Refinancing, Home Equity Loans
  • Minimum FICO credit score: 620
  • Minimum down payment: 3%
  • Better Business Bureau rating: A+

Best Features

  • PNC Bank offers multiple mortgage product lines.

  • Low down payment mortgages are available.

  • Its website offers an online homeownership cost tool.

See full profile

Best for product availability

Wells Fargo offers a variety of mortgage and home equity products in 36 states. The lender offers conventional, adjustable-rate, Federal Housing Administration, U.S. Department of Veterans Affairs, U.S. Department of Agriculture, jumbo and refinancing loans, as well as home equity lines of credit.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA Refinancing, Home Equity Loans
  • Minimum FICO credit score: Not disclosed
  • Minimum down payment: 3%
  • Better Business Bureau rating: NR

Best Features

  • Borrowers can choose from a variety of mortgage products.

  • Wells fargo offers specialized loans with additional loan options.

  • Borrowers can get prequalified and apply online.

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Best for low costs

Chase, one of the world’s largest banks, was founded in 1799 in New York and offers mortgage and refinance loans.

Before You Apply

  • Mortgage types offered: Conventional, FHA, VA, ARM, Jumbo, Cash-Out Refinancing, Refinancing
  • Minimum FICO credit score: Not disclosed
  • Minimum down payment: 5%
  • Better Business Bureau rating: B+

Best Features

  • Down payments as low as 3% are accepted.

  • Fixed- and adjustable-rate mortgages are available.

See full profile

Best for online application and approval

Homefinity launched in 2018 as the online lending division of Fairway Independent Mortgage. It offers a variety of mortgage products including conventional mortgages, Federal Housing Administration and Veterans Affairs mortgages, mortgages for physicians, and mortgage refinancing.

Before You Apply

  • Mortgage types: Conventional, ARM, FHA, VA, Refinancing, Home Equity Loans
  • Minimum FICO credit score: Not disclosed
  • Minimum down payment: 3%
  • Better Business Bureau rating: A+

Best Features

  • Easy online quote request.

  • Comprehensive app with mobile-specific features.

  • Loans tailored to physicians with high student loan debt are available.

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Best for online service

SoFi is an online lender founded in 2011 that offers fixed-rate mortgages. Refinance loans are also available, including cash-out refinance and student loan cash-out refinance, a program that allows you to consolidate and refinance your student loans and your mortgage.

Before You Apply

  • Mortgage types: Conventional, Refinancing, Home Equity Loans
  • Minimum FICO score: 620
  • Minimum down payment: 5%
  • Better Business Bureau rating: A+

Best Features

  • Down payments as low as 5%.

  • Prequalify and apply for your mortgage online.

  • Refinancing to consolidate your student loans and mortgage.

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Best for a lender credit and no lender fees

Pentagon Federal Credit Union, widely known as PenFed, offers borrowers access to many types of mortgages: conventional, adjustable rate, jumbo and Department of Veterans Affairs, plus refinancing loans and home equity lines of credit. The financial institution, which serves 2.5 million members, was established in 1935 and is based in McLean, Virginia.

Before You Apply

  • Mortgage types: Conventional, ARM, VA, Refinancing, HELOC
  • Minimum FICO credit score: 620
  • Minimum down payment: 0% for a VA loan
  • Better Business Bureau rating: A+

Best Features

  • Receive a lender credit of up to $2,500 upon closing.

  • Choose from a variety of loan types.

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Best for large loan amounts

Bank of America serves roughly 66 million customers in all 50 states. The lender offers conventional, Federal Housing Administration, Department of Veterans Affairs and jumbo loans as well as home equity lines of credit and mortgage refinancing.

Before You Apply

  • Mortgage types: Conventional, FHA, VA, ARM, HELOC, Refinancing
  • Minimum FICO credit score: 620
  • Minimum down payment: 5%
  • Better Business Bureau rating: A+

Best Features

  • Bank of America has a wide variety of mortgage products.

  • The lender offers annual percentage rate or closing cost discounts for qualifying Bank of America and Merrill Lynch clients.

  • Home equity lines of credit have no annual, application or cash advance fees or closing costs.

See full profile

A home equity loan, also known as a second mortgage, allows you to borrow against the equity in your home and uses your property to secure the loan. You get a lump sum, and the loan typically has a fixed interest rate and a repayment term of five to 30 years.

Equity is the market value of your home minus what you owe on your mortgage. Lenders may want you to keep your borrowing to 80% of your home’s equity at the most, according to the Federal Trade Commission. That means if you have $100,000 in equity, you may be able to borrow $80,000. But you can find lenders that let you borrow 85% of your home’s equity, or even more.

You may want to obtain a home equity loan from the same lender you used for your first mortgage. Your lender could offer more favorable terms because you have a relationship.

Here are some features of home equity loans that can make them a good idea:

  • You’ll pay a fixed interest rate. Whether interest rates rise or fall, your monthly payment on a home equity loan will remain the same.
  • You’ll pay lower interest rates than on personal loans or credit cards. That’s because your home acts as collateral for the loan.
  • Your interest payments may be tax deductible. If you “buy, build or substantially improve” the home that secures a mortgage loan, according to the IRS, you may qualify to deduct your interest payments.
  • You will receive one lump sum. This gives you flexibility to cover large expenses and repay over a fixed term in equal monthly installments. You can use the money for almost any purpose, such as renovating a kitchen or paying for a wedding.

Home equity loans aren’t without risks or drawbacks. These are the main ones:

  • You’ll pay interest on the entire loan amount, even if you are using the money incrementally. An example is during a home renovation.
  • You may have less flexibility compared with a home equity line of credit. That’s because you can draw from a HELOC as needed up to your credit limit, and a home equity loan is one lump sum.
  • You could pay higher interest rates than you would for a HELOC. That’s because your rate is fixed with a home equity loan, while the rate on a HELOC will fluctuate with market conditions.
  • You’ll have to juggle two mortgage payments. If you’re still paying your first mortgage, make sure you can afford the second mortgage payment on top of your other monthly expenses.
  • You risk foreclosure if you fall behind on payments, as with any loan secured by your home.

Even though a home equity loan or a HELOC can be a great way to borrow money, it may not be the right fit for everyone. Compare home equity loans to these alternatives:

  1. Cash-out refinancing. A cash-out refinance is when you take out a new home loan for more money than what you owe on your original loan and receive the difference in cash.
  2. Reverse mortgage. A reverse mortgage is a loan for homeowners 62 and older to convert home equity into cash that can supplement retirement income.
  3. Personal loan. A personal loan allows you to borrow money for just about anything and pay it back in fixed amounts.
  4. Debt consolidation loan. A debt consolidation loan combines several high-interest debts into a new loan that can streamline your payments and may reduce your interest charges.

The best home equity loan for you is one you can get approved for at the best rate with terms you can manage. Here are some factors to compare among home equity lenders:

Eligibility requirements. Research a lender’s minimum credit score and debt-to-income ratio criteria, and check whether you meet them. If you do, see if you can prequalify for a home equity loan to get a rate quote.

Loan limits. Decide how much you need to borrow. If you can’t get a big enough loan or you want to borrow less than the lender’s minimum loan amount, you will need to choose another lender.

Interest rates. Try to choose a home equity loan with the lowest possible rate.

Fees. Closing costs can amount to 2% to 5% of your loan, and you may have to pay other fees. Still, don’t let fees alone be the deciding factor. A lender that charges closing costs but a low rate may cost less in the long run than the opposite.

Once you’ve decided a home equity loan is the right choice for you, you can take the following steps to get through the application process:

  1. Make sure you meet minimum requirements. To get a home equity loan, you’ll generally need to have at least 15% to 20% equity in your home, according to the credit bureau Experian. Lenders also have minimum credit score requirements, and you’ll want a debt-to-income ratio no higher than 43%, Experian says.
  2. Gather important documents. When you apply for a home equity loan, you will need to provide personal and financial information. This may include W-2 tax forms and photo identification.
  3. Compare lenders. It’s a good idea to consider multiple financing options before making a decision. You’ll want to compare things like annual percentage rate, monthly payments and closing costs.
  4. Submit an application. Many lenders offer online applications. Check to see what options are available.
  5. Await a home appraisal. The lender will want to verify the value of the house you’re using as collateral, according to Rocket Mortgage.

Depending on your loan, you may owe a balloon payment at the end of the repayment period on a HELOC, or you may have to pay your entire balance at the end of the draw period, according to the Consumer Financial Protection Bureau. Make sure you ask about conditions for renewing or refinancing if necessary.

You will want to look at HELOCs and home equity loans and work with your lender to make the right choice. Both have pros and cons, including the risk of foreclosure if you fail to pay.

A home equity loan or HELOC can be worthwhile in certain situations, but homeowners should generally try to protect their equity. Home equity loans or HELOCs should not be used for purchases you otherwise couldn’t afford and don’t really need, or you end up putting your house on the line to take a vacation or buy a car.

These types of loans can be a good idea when you use them for improvements that increase your home’s value or in a true financial emergency.

A home equity loan or a HELOC can offer lower interest rates compared with credit cards and personal loans. You’ll need to be certain that you can make the payments, however.

HELOCs may be a bad idea if you can’t afford a rate increase or manage the upfront costs. Before you borrow, know how much your rate might adjust and figure out how much of an increase you can handle.

Think about your spending habits and whether a home equity loan or HELOC could help or hurt your finances. You may be better off keeping debt on your credit cards and not touching your home equity.

Home prices have gone up during the pandemic, so many homeowners have more equity available to them. Some lenders, such as Wells Fargo and Chase, stopped offering new HELOCs during the pandemic and have yet to reopen applications.

Best for small loan amounts

Discover is a major credit card issuer, but its financial products and services go beyond that. In addition to credit cards and banking, Discover offers home equity loans to qualified borrowers. These loans can be used for many purposes, including home improvement, debt consolidation, mortgage refinancing and other major expenses.

Lender Highlights

  • Mortgage types: Home Equity Loans, Refinancing
  • Minimum FICO credit score: 620
  • Maximum loan amount: Not disclosed
  • Better Business Bureau rating: A+

Best Features

  • With Discover’s home loans, there are no application or origination fees.

  • Multiple repayment term options are available with fixed monthly payments.

  • Discover offers a convenient digital application process.

See full profile

Best for product options

North American Savings Bank, or NASB, is a Missouri-based bank and lender founded in 1927 that offers home mortgages nationally. NASB provides a variety of mortgage options, including conventional, Federal Housing Administration and Department of Veterans Affairs loans, and products for borrowers who might otherwise have trouble getting a mortgage.

Before You Apply

  • Mortgage types: Conventional, ARM, VA, FHA, Refinancing,
  • Minimum FICO credit score: 620,
  • Minimum down payment: 3%
  • Better Business Bureau rating: A+

Best Features

  • The lender offers a variety of mortgage products.

  • There are loan programs that may be useful for self-employed borrowers and borrowers who may not meet typical loan requirements.

  • VA loans come with no lender fees.

See full profile

Best for online prequalification

Simmons Bank was founded in Arkansas in 1903 and can now be found across six states. It offers mortgage products such as conventional and jumbo loans, federal-government-backed loans and state-approved down payment assistance programs.

Before You Apply

  • Mortgage types : Conventional, ARM, FHA, VA, Jumbo, USDA, Construction, Balloon, Refinancing, HUD Section 184
  • Minimum FICO credit score: Not disclosed
  • Minimum down payment: 5%
  • Better Business Bureau rating: A+

Best Features

  • Simmons Bank offers U.S. Department of Agriculture, Veterans Affairs and Federal Housing Administration loans.

  • Rate lock protection is available.

  • Simmons Bank offers options for low-to-moderate borrowers.

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Best for digital closing

Guaranteed Rate, founded in 2000 and based in Chicago, offers mortgage options including conventional loans, Federal Housing Administration loans, jumbo loans and interest-only loans to customers in all 50 states and Washington, D.C. Borrowers can take advantage of specialized loan products and Guaranteed Rate’s online application, documentation and loan payment options.

Before You Apply:

  • Mortgage types: ARM, Conventional, FHA, VA, Jumbo, Interest Only, HELOC, Cash-Out Refinancing, Refinancing
  • Minimum FICO credit score: 620
  • Minimum down payment: 3%
  • Better Business Bureau rating: A-

Best Features

  • Gives homebuyers the opportunity to use a fully remote, zero-contact closing process.

  • Offers many types of mortgages.

See full profile

Best for short-term loans

U.S. Bank is a national bank based in Minneapolis that provides various banking products and services as well as a handful of mortgage options. The lender offers conventional loans, Federal Housing Administration loans, Department of Veterans Affairs loans, jumbo loans and more.

Before You Apply:

  • Mortgage types: Conventional, ARM, FHA, VA, Refinancing, Home Equity Loans
  • Minimum FICO credit score: 740
  • Minimum down payment: 5%
  • Better Business Bureau rating: A+

Best Features

  • Provides mortgage loans nationwide.

  • Allows you to apply online without first speaking with a loan officer.

  • Assists U.S. Bank customers with closing costs.

See full profile

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