Best Home Equity Loans in 2021

[Fees, Terms and Requirements]

Your home is one of your biggest investments. Aside from giving you a place to stay, it’s an asset that improves its worth with time. Your home equity’s fixed rate may help you reduce your debt, improve your home, and possibly even pay less tax.

Want to know how?

Read on and find out. To make things even easier, we’ve reviewed the best home equity loans. We narrowed lenders down based on reputation, type, fees, terms, and eligibility requirements.

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7 Best Home Equity Loans in 2021

1. Discover

Specializing in simple, fixed-rate refinancing and equity loans has made Discover one of the top home equity loan options. They provide first-rate service, reasonable rates, and don’t overburden the consumer with costs. Discover provides homeowners with a good to excellent credit rating, competitive rates, and cost-effective financing. Full Review

  • High potential loan-to-value
  • Responsible lender
  • No fees
VISIT SITE

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Specializing in simple, fixed-rate refinancing and equity loans has made Discover one of the top home equity loan options. They provide first-rate service, reasonable rates, and don’t overburden the consumer with costs. Discover provides homeowners with a good to excellent credit rating, competitive rates, and cost-effective financing. Full Review

Eligibility Requirements

★★★★☆ 4/5

Max Loan Available

★★★★★ 5/5

Online Reputation

★★★★★ 5/5

Pricing

★★★★☆ 4/5

2. SunTrust

SunTrust is a well-established, responsible lender and one of the top 10 home equity loan companies. If it’s available in your state, you’ll get excellent service and fair rates. Best for borrowers with a fair to excellent credit score, the bank is invested in improving their client’s financial situation. SunTrust has a good reputation, according to the Consumer Financial Protection Bureau. Consumers with a less than stellar credit history may check the website for advice on turning their situation around. Full Review

  • Extensive resources and tools for clients
  • Fast application and closing within 10 days
  • Two types of interests - variable or fixed rate
VISIT SITE

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SunTrust is a well-established, responsible lender and one of the top 10 home equity loan companies. If it’s available in your state, you’ll get excellent service and fair rates. Best for borrowers with a fair to excellent credit score, the bank is invested in improving their client’s financial situation. SunTrust has a good reputation, according to the Consumer Financial Protection Bureau. Consumers with a less than stellar credit history may check the website for advice on turning their situation around. Full Review

Eligibility Requirements

★★★★☆ 4/5

Max Loan Available

★★★☆☆ 3/5

Online Reputation

★★★★★ 5/5

Pricing

★★★★☆ 4/5

3. Citizens Bank

Citizen Bank provides good, old-fashioned customer service with no prequalification required. Complete the form online or give them a call, and a consultant will guide you through the process. They offer favorable rates and carefully vet all applications. The advantage of completing the forms through a consultant is that they help you find the cheapest home equity loans. Full Review

  • Responsible lender
  • Will allow you to use your second home as collateral
  • No application or closing fees
VISIT SITE

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Citizen Bank provides good, old-fashioned customer service with no prequalification required. Complete the form online or give them a call, and a consultant will guide you through the process. They offer favorable rates and carefully vet all applications. The advantage of completing the forms through a consultant is that they help you find the cheapest home equity loans. Full Review

Eligibility Requirements

★★★★★ 5/5

Max Loan Available

★★★★☆ 4/5

Online Reputation

★★★★☆ 4/5

Pricing

★★★★★ 5/5

4. BB&T

BB&T provides an innovative range of products and the best home equity loan deals. Their recent merger with SunTrust gives them the backing of one of America’s best lenders while allowing them to continue offering their range. Full Review

  • No closing cost and prepayment penalty options available on some products
  • Good track record
  • Can pre-qualify online
VISIT SITE

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BB&T provides an innovative range of products and the best home equity loan deals. Their recent merger with SunTrust gives them the backing of one of America’s best lenders while allowing them to continue offering their range. Full Review

Eligibility Requirements

★★★★★ 5/5

Max Loan Available

★★★★☆ 4/5

Online Reputation

★★★★☆ 4/5

Pricing

★★★★★ 5/5

5. PenFed Credit Union

PenFed Credit Union provides the best home equity loans for investment properties. You may use your home, second home, or investment property as collateral. They’ve taken their policy of providing the best personal loan interest rates to heart here too. The rates are reasonable, and the company’s stringent qualifying criteria make them a responsible lender. Membership is available nationally, and it’s very simple to join. Full Review

  • Generous loan to value ratio of between 70% and 90%
  • Loans of up to $500,000
  • Favorable interest rates
VISIT SITE

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PenFed Credit Union provides the best home equity loans for investment properties. You may use your home, second home, or investment property as collateral. They’ve taken their policy of providing the best personal loan interest rates to heart here too. The rates are reasonable, and the company’s stringent qualifying criteria make them a responsible lender. Membership is available nationally, and it’s very simple to join. Full Review

Eligibility Requirements

★★★★★ 5/5

Max Loan Available

★★★★☆ 4/5

Online Reputation

★★★★★ 5/5

Pricing

★★★★★ 5/5

6. Citibank

Citibank is a multinational company that provides a streamlined application process. They provide several finance products in addition to equity loans. The interest they charge is competitive, but the low introductory rate sets these products as the best home equity loans for debt consolidation. Full Review

  • Combined loan-to-value (CLTV) ratio of up to 80%
  • Loans of between $10,000 and $1 million
  • Not as strict as other lenders.
VISIT SITE

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Citibank is a multinational company that provides a streamlined application process. They provide several finance products in addition to equity loans. The interest they charge is competitive, but the low introductory rate sets these products as the best home equity loans for debt consolidation. Full Review

Eligibility Requirements

★★★☆☆ 3/5

Max Loan Available

★★★★★ 5/5

Online Reputation

★★★★☆ 4/5

Pricing

★★★★★ 5/5

7. PNC Bank

PNC has the staying power to provide a wide range of products at highly competitive rates. There is no application cost and a flat annual fee for having a HELOC facility, making it a cost-effective product. The application process is simple, and processing times are faster than the industry average. Full Review

  • Variable rates, products, and repayment terms
  • Competitive rates
  • Low fees
VISIT SITE

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PNC has the staying power to provide a wide range of products at highly competitive rates. There is no application cost and a flat annual fee for having a HELOC facility, making it a cost-effective product. The application process is simple, and processing times are faster than the industry average. Full Review

Eligibility Requirements

★★★★☆ 4/5

Max Loan Available

★★★★★ 5/5

Online Reputation

★★★★☆ 4/5

Pricing

★★★★★ 5/5

How We Created This List – Our Methodology

Methodology

  • Eligibility Requirements

How easy it is to qualify with the lender. What is the minimum credit score? Are there any salary requirements? Do restrictions apply?

  • Types of Lenders

What products they specialize in. We looked at lenders that mainly specialized in HELOC or standard home equity.

  • Fees and Repayment Terms

The total APR payable and what additional costs might come into play. Is there an application or closing costs? Is there a penalty for paying the loan early? What repayment terms does the company offer?

  • Credibility and Online Reputation

The company’s reputation. We stuck to firms that have a sterling track record and a reputation for treating their clients fairly.

Detailed Reviews

Discover
Discover

The Best Option for Paying off Debt

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  • Only has a standard home equity loan, no home-equity line of credit
  • Low APR range
  • Responsible lender
  • High potential loan-to-value
  • No fees
  • No physical branches
  • Minimum loan amount high

Discover was initially part of the Sears Group but struck out on its own in 2007. The firm is one of the best second mortgage lenders in America. Loans are available across the whole of the continental United States except for Maryland and Iowa.

Discover keeps things simple by providing mortgage refinancing and standard home equity loans only. They offer fixed-rate mortgages of between $35,000 and $200,000, repayable over ten to thirty years.

The firm runs its operations online to keep its overheads down. They pass the savings on to their clients through reasonable APRs and zero costs.

Notable features include:

  • Some top home equity loans.
  • The simple online application process.
  • Access to funds for renovations, paying multiple debts, or any purpose you prefer.
  • Will lend between 80% and 90% of the home’s equity.
  • No early payment penalties after the first 36 months.
  • Interest payments on loans for home improvements may be tax-deductible.
  • Favorable interest rates.
  • One of America’s top lenders.

There are few restrictions to what you may do with the funds you free up. That said, the company is a strict lender. For equity loans of $150,000 or more, they’ll only consider applicants with a credit score of 700 or over.

APR Fixed at between 3.9% and 11.99%
TERM 10 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE 620
SunTrust
SunTrust

The Most Customer-Centric Lender

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  • The bank covers the closing costs
  • Extensive resources and tools for clients
  • Fast application and closing within 10 days
  • Not available in every state
  • Charges withdrawal fees on some HELOCs
  • Two types of interests - variable or fixed rate

Founded in 1891, SunTrust is one of America’s largest financial institutions. It’s a proactive bank that focuses on educating customers about how to improve their financial wellbeing. The firm provides educational resources that help clients make the most of their money and borrow responsibly.

SunTrust only provides home equity lines of credit. HELOCs are a revolving credit facility, so they’re best for more disciplined borrowers. They can be an excellent interest savings tool.

SunTrust charges up to a maximum of 18% APR, depending on which state you’re in. You may set up a facility of up to $50,000. They’re strict about their qualifying criteria – in addition to a credit rating of 660, your debt to income ratio must be below 35%. Those with a lower debt to income ratio and higher credit rating receive the best equity loan rates.

The bank pays the full closing costs as long as you don’t close the loan before three years.

SunTrust and BB&T have recently merged but continue with their individual product ranges for the foreseeable future.

APR 5.25% – 18% fixed or variable
TERM 10 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE 660
Citizens Bank
Citizens Bank

The Best Fixed Home Equity Loan Rates

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  • Rates and lending limits vary depending on circumstances
  • Will allow you to use your second home as collateral
  • Limited availability (only operates in 22 states)
  • No guaranteed home equity loan for bad credit
  • Rates often better than the market average
  • Responsible lender.
  • No application or closing fees
  • No online application options

Citizens Bank provides the lowest interest home equity loans and HELOCs for clients with an excellent credit score. The bank is best for those who prefer the personal touch over online convenience. They have a simple online form allowing you to put in your details, but you must complete the application with a consultant’s help.

The bank keeps things simple with closed-end loans and fixed-rate products. There are no application costs or closing fees payable.

Loan terms vary between 10 and 30 years. The bank doesn’t publish its maximum APR, but the minimum rate is 6.25%, which is about average. Interest is fixed for the loan term, allowing you to set a fixed installment to repay.

As with most home equity loan lenders, if you select automatic withdraw options, you get a further 0.25% off your interest rate.

Choose between a lump sum payout or revolving credit facility. You may claim the interest on any amount drawn to pay for renovations as a tax deduction.

APR From 6.25% to 6.5% fixed
TERM 10 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE Not published
BB&T
BB&T

The Best Option for Small Loans

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  • Loans start at $5,000
  • Good track record
  • Can pre-qualify online
  • No unemployment protection
  • Prepayment penalty on HELOCs
  • No variable option on equity loans
  • No closing cost and prepayment penalty options available on some products

BB&T provides home equity loans and HELOCs. This digital lender is best for those with a fair to excellent credit rating who require flexible options.

Standard equity loans are available with fixed-rate interest only. With HELOCs, you may choose between a fixed or variable rate. The company doesn’t publish its APR but says that you may check with a branch for “historically low” rates.

With BB&T top-rated home equity loans you:

  • Get your money in one lump sum.
  • Receive a fixed monthly repayment.
  • Pay some capital down monthly.
  • Have a fixed interest rate and installment.
  • No prepayment costs.

With BB&T HELOCs, you:

  • Pay a lower interest rate than on a credit card.
  • Can withdraw money as you need it.
  • Have a revolving credit facility based on the appraised value of the property.
  • May opt to repay the interest only or 1.5% of the outstanding balance.
  • Best no closing cost home equity loan.

The interest in both types may be tax-deductible if you use the money for renovations. There are no restrictions on using the money.

APR Not published – fixed or variable
TERM 10 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE 620
PenFed Credit Union
PenFed Credit Union

The Best Lender for Those With an Investment Property

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  • Allows you to borrow against non-owner occupied homes
  • Generous loan to value ratio of between 70% and 90%
  • Loans of up to $500,000
  • Favorable interest rates
  • Only offers HELOCs
  • Little information on qualifying criteria
  • Minimum loan amount $25,000

PenFed is another of the best-established providers. They’re one of the best options for low-interest rates. They’re a good option for those who need lines of credit instead of drawing down one big lump sum.

You’ll be able to draw down for 10 years. After that, you’ll pay off the balance over a 20-year term.

You may opt for a fixed or variable rate with APRs starting at a low 3.75%. PenFed pays the closing costs assuming you don’t close your loan within 3 years.

Unlike other firms, PenFed checks eligibility using all forms of income. They’ll look at sources such as disability grants to determine affordability. They’ll also allow HELOCs for a house you own but don’t live in and consider bad credit home equity loans.

APR Starts at 3.75% – fixed or variable
TERM 10 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE 620
Citibank
Citibank

Best Home Equity Lender Reviews

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  • Lower interest rate if you allow automatic deductions from a Citibank account
  • Combined loan-to-value (CLTV) ratio of up to 80%
  • Loans of between $10,000 and $1 million
  • Not as strict as other lenders
  • You can only borrow against your primary residence
  • Only available on completed properties
  • You may only hold a maximum of two loans at once

Citibank began in 1812 and is now a global powerhouse in the financial industry. It provides some of the best home equity loans with limits of up to $1 million. Citibank is best for those with a fair-to-excellent credit rating and a reasonable personal asset base.

The rates are typically capped at 8.79% and are competitive. Clients availing themselves of new facilities may also qualify for an introductory rate lower than prime for the first 6 months. Talk about smart financial decisions.

The firm offers equity loans in one lump sum payout for between $25,000 and $300,000 with fixed interest-only payments.

The HELOC facility is more flexible, providing financing of between $10,000 and $1 million. Clients may withdraw funds as necessary. The rates are variable. HELOCs fall into two categories:

  • Interest only: Not the easiest home equity loans to qualify for.
  • Principle + interest: A less stringent application process.
APR 4.09% to 8.79% fixed or variable
TERM 5 to 30 years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE Not published
PNC Bank
PNC Bank

The Best Lender for Short-Term Loans

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  • Take off an autopay discount of 0.25% if you pay your installment automatically
  • Variable rates, products, and repayment terms
  • Competitive rates
  • Low fees
  • Credit score and debt to income requirements not published
  • Terms vary according to state
  • Only available in 37 states at present

PNC is over 150 years old and has branches in almost every state. It offers three products:

  • Home Equity Loan: One lump-sum payout and a fixed rate for the life of the loan.
  • HELOC: Pay the interest only for the 7-year drawdown period, pay off the principal and interest, and extend the drawdown period by 3 years. You’ll pay the remainder over 30-year repayment terms.
  • Home Equity Rapid Refinance: Refinance your current mortgage for a higher amount and receive the money in cash. Your interest is also fixed with this product.

The bank doesn’t charge any application fees and will, in some cases, waive the assessment fees. They also keep the closing costs to a minimum.

PNC will offer a maximum loan to the value of 84.9% and APRs starting at 3.39%. They don’t advertise what they cap the rates at, nor do they give specifics on how lenders qualify. There are no guaranteed home equity loans, but lenders with a good credit history and low income-to-debt ratio should obtain the loan they want.

APR Starts at 3.39% – fixed and variable
TERM 5 to 40 Years
MIN. DOWN PAYMENT N/A
MIN. CREDIT SCORE Not published

How To Choose A Home Equity Loan Lender – Guide

You’ll be paying off your loan over at least 5 to 10 years, so it’s crucial to find the correct lender. Use these tips to choose the best equity loans in 2021.

How Much is the Property Realistically Worth?

Look at similar homes in the surrounding area to get a good indication of market value. Focus on homes sold recently and consider the housing market’s current state before you apply for a preapproval. This is a good exercise when you’re borrowing to renovate your home and will stop you from overcapitalizing your property.

Every neighborhood has a ceiling price. This is the cost of the best homes. No matter what improvements you make, you’ll never get far above this figure. Say, for example, that your home is valued at $300,000 and you spend $100,000 on renovations.

If similar houses in the area sell for $300,000, buyers are likely to think your home is expensive. They won’t offer what it’s worth.

When the company evaluates your application for the best home equity installment loans, they’ll work on the area’s average market price.

What is the Loan For?

If it’s for emergency expenses, you need the money quickly. It’s wise to look for banks that offer expedited closing. Closing typically takes 30 to 60 days, but some banks complete it in 10.

Application Fees and Closing Costs

Whether the bank picks up the costs is an integral part of the equation. Many firms offer low fees to entice clients to join up. Just be aware that they also usually make it a condition that you do not move your loan for three years. If you do, you’ll usually have to pay those fees.

What is the Annual percentage rate (APR)?

The APR is more important than the base interest rate. Firms may lower their base rates to tempt clients and make up the money through administrative fees. The APR tells you what interest and fees you’ll pay over the term of the loan.

What Is Your Credit Score?

Head over to the websites of the major credit bureaus and take a look at your credit report. They issue one free report a year.

Where does your score fall on this scale?

  • 800 – 850: Exceptional, and you can expect banks to fight to have you as a client.
  • 740 – 799: Very good and you can expect to get a great rate.
  • 670 – 739: With a good FICO score, you’ll get a better rate than most.
  • 580 – 669: Fair, and you’ll get the best home equity loan average credit rate. If you fall under 620, you won’t qualify with many of the lenders we reviewed, so work on improving that score.
  • 300 – 579: With a low credit rating, you’ll battle to get financing at all. Companies that will lend to you will charge for the privilege.

The bureaus base your score on these factors, listed in the order of importance:

  • Payment History: This section is heavily weighted toward the last six months. If you’ve paid your monthly installments erratically, pay your accounts on time for the next six months and then apply.
  • Amount Owed: The more you owe overall, the higher the risk should you go bankrupt. Try to bring your account balances down to improve here.
  • Length of Credit History: The longer your history, the more information the bureau has to assess creditworthiness.
  • Types of Credit You Use: It’s normal to have a car loan, home loan, and credit card. The more revolving facilities you have, however, the worse it looks on your report. Someone with five credit cards can potentially get themselves into more trouble than someone with one loan.
  • Recent Inquiries: There is a soft and hard credit check. Firms usually perform the former when prequalifying you and the latter when processing the application. Many recent hard checks might convey the idea that you’ve been applying for credit all over the place.

What Term Suits You?

To keep the payments affordable, consider taking the loan over the maximum term. Then, whenever you have extra money, pay it into your home equity loan.

How Home Equity Loans Work

A home equity loan allows you to borrow against any excess value in your home. This may be due to an appreciation in value or because you’ve paid off a substantial portion of your loan. You may have to register a second mortgage if the appreciated property value is larger than that of your current one.

Home Equity Loan vs Mortgage

  • Mortgages typically finance the purchase of a property. They secure the land and building. If you don’t already own a property, you’ll apply for a mortgage, and the funds must be used for purchasing or renovating it.
  • A home equity loan stands against existing property. You may use the money for anything that you like as long as there’s underlying value in the home.

How to Apply

  • First, work out your income threshold or debt to income ratio. Your mortgage installment shouldn’t exceed 35% of your monthly income to get the best home equity loan rates.
  • Ascertain the market value of your property. Deduct the balance of your mortgage from the property value to determine the equity in your property.
  • Most institutions don’t allow you to borrow more than 80% to 90% of your home’s current market value. To be safe, work with 80% of the market value.
  • Check online for a mortgage calculator and work out the monthly installments. Can you afford the repayments as your salary stands now? What if the interest rate goes up in a few months?
  • If you can afford the repayments, apply online. We’ve linked our top picks to make them easier for you to find.
  • The firm will assess your credit history, affordability, and the value of the property. They may ask for personal identification, pay stubs, and sometimes tax documents.
  • If all is in order, you’ll sign the documents. Even at this stage, you may still change your mind. You have 8 days to cancel the deal once you’ve signed.
  • If you go ahead, the firm will proceed with registering the change. It may take as long as 60 days to close and get your money out.
  • Your property acts as collateral for the loan. If you don’t repay it, the firm will foreclose. You may go to arbitration to try and fight the matter, but the odds are in the bank’s favor.

Types of Home Equity Loans

Standard Equity Loans

These are the most similar to a second mortgage. The best home equity installment loans are typically fixed interest. You’ll pay the same amount monthly for your loan until it’s repaid. Your interest won’t change as the prime rate does. It’s an excellent option to lock in the rate when the federal interest rates are low.

This type is a good option for someone with a sizeable once-off expense like college loans.

HELOC

HELOC loans are more complex. They’re a revolving credit facility that allows you to draw the money as you require it. If you are doing ongoing renovations and want to better manage your interest, this type might work better. If you’re disciplined, it allows you to manage your interest more effectively.

The downside is that the credit requirements are more involved, and there’s always the temptation to max out your loan. You may draw whatever you’ve paid in, so it’s easy to overspend. The drawdown period typically lasts 10 years, and then the loan reverts to a standard mortgage.

Cash-out Refinance

With this option, the loan amount includes any previous mortgages, so you only have one installment. You’ll get cash out to use as you like. Many people choose this option for debt consolidation.

Personal Loans

In comparing personal loans vs home equity loans, the winner usually depends on the amount you require. A personal loan is paid off over a shorter term, so the APR is generally higher. The equity loan is typically paid off over 10 to 30 years.

The question of unsecured or secured lending also counts here. Your house serves as collateral, so the lending institution’s risk is lower with a home equity loan. You receive a lower rate due to this fact.

Which is Better – Home Equity Loan vs HELOC?

It’s that same annoying answer – it depends on how you manage them. With a standard home equity loan, you get your money upfront. That means paying interest from day one on the full amount. Score one to HELOC because you only start to pay interest when you draw down.

Another thing about HELOC is that you can manage your interest smartly. For example, you could pay your salary into the HELOC, leave it there for a few days, and then draw as necessary. In those few days, you reduce the balance substantially and so save on interest. Let’s make a comparison.

Let’s say you have a $300,000 loan and pay an APR of 5%:

  • With a home equity loan: The interest in the first month is $1,232.87.
  • With the HELOC: You draw $250,000 in the first month, so you pay $1,027.39. Additionally, assuming your salary is $5,000, paying it into the loan saves you around $0.68 in interest a day. It doesn’t sound like a lot, but that saves $244 over a 30-year term without paying extra.

The Best Equity Loans in 2021 at a Glance

  • Discover: The best option for paying off debt.
  • SunTrust: The most customer-centric lender.
  • Citizen: The best fixed home equity loan rates.
  • BB&T: The best option for small loans.
  • PenFed Credit Union: The best lender for those with an investment property.
  • CitiBank: Best home equity lender reviews.
  • PNC Bank: The best lender for short-term loans.

Wrap Up

The main advantages of a home equity loan are that they’re secured and provide better interest rates than your typical credit product. A HELOC loan is a revolving facility, much like a credit card, for a fraction of the cost. We’ve gathered quite a few great options for getting a home equity loan. Take a look and see if any of them meet your needs and whether you qualify for any of the best home equity loans.

FAQ

What bank has the best home equity loan?

Discover is definitely one of the options at the top of our list, but it depends on what you need. With home equity loans, the best interest rates can vary quite a bit, so shop around. It may be worthwhile to arrange a personalized financial planning session to help you narrow down your choices.

Is home equity loan interest tax-deductible in 2021?

Only if you use the money to buy, improve, or build a home. If you take out a loan of $50,000 and spend $30,000 on renovations and $20,000 to pay private student loans, you may deduct the interest for $30,000.

How do you calculate a home equity loan?

Subtract your current mortgage amount from the market value of your property. The excess is the equity you’ve built in your home.

What are the disadvantages of a home equity loan?

You’re taking on debt. Even with the best home equity loan comparison. If you cannot afford to pay the installments, you could lose your home. The other danger is that you’re paying over a far longer term if you transfer other debt to the mortgage. Pay only the minimum to niche lenders, and you’ll pay more interest overall.

Can home equity loans hurt your credit?

The best home equity loans shouldn’t do much damage unless you’re already over-indebted. Any debt that you take on has the potential to hurt your credit. The amounts that we’re talking about here are substantial, so yes, it affects the amount owed and your credit rating.