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The Best Home Equity Lenders in 2021
The Best Home Equity Lenders in 2021
June 06, 2021 / Nadav Shemer
The Best Home Equity Lenders in 2021
June 06, 2021 / Nadav Shemer
Own your own home? In need of cash to pay for a renovation, medical expenses, college tuition, or some other major expense? You may be able to use a home equity loan or home equity line of credit (HELOC) to tap into your equity to access funds.
Because the borrower’s home is used as collateral, a home equity loan usually has lower rates and more flexible qualifying requirements than other alternatives such as personal loans. The repayment terms often last for up to 15-30 years, giving you plenty of time to pay off the debt.
Here’s everything you need to know about home equity loans and HELOCs, including our list of the top 3 home equity lenders in 2021.
Top 3 Lenders for Home Equity Loans
#1
View Rates
Loan types: Home equity loan
Max LTV: 90%
Apply: Online, phone
Pros
  • Home equity loan specialist
  • No origination or application fees
  • Apply online in less than 5 minutes
Cons
  • No physical branches
  • Not licensed in Iowa or Maryland
Discover Bank, a subsidiary of Discover Financial Services, specializes in two types of mortgage products: home equity loans and mortgage refinancing. Discover’s home equity loans program has been steadily growing since its launch, enabling home owners to access funds at interest rates as low as 4.15% with their home as collateral.
Loan amounts for home equity loans range from $35,000 to $250,000, while repayment terms range from 10-30 years. Loans can be used for virtually any purpose, including home improvement, debt consolidation, paying off student loans, or funding a major expense. Maximum combined loan to value ratio is 90%, meaning your home equity cannot fall below 10% of your home’s current appraised value. Best of all, there are no application, origination, or appraisal fees, reducing the total closing costs to a minimum.
#2
View Rates
Loan types: HELOC
Max LTV: 95%
Apply: Online
Pros
  • Final approval in minutes
  • Very low interest rates
  • No ongoing fees
Cons
  • Origination fee
  • Only available in 41 states (with more to come)
Figure is a blockchain-powered fintech company offering home equity lines of credit (HELOCs) and mortgage refinancing. Through blockchain, the same technology that powers cryptocurrencies like Bitcoin and Ethereum, Figure is able to approve and close your new loan almost immediately. With HELOCs, the funds arrive in your account within 5 days – much quicker than with a traditional lender.
Figure offers HELOCs ranging from $15,000 to $250,000 with a one-time origination fee worth up to 4.99% of the initial draw amount and rates as low as 2.49% APR. The minimum credit score is 620 (except in Oklahoma, where it’s 720 for some reason). Maximum combined loan-to-value (CLTV) ranges from 70% to 95%, depending on your FICO score and other factors. Loans must be repaid within 5, 10, or 30 years. There are no ongoing fees, appraisal fees, late fees, or pre-payment penalties.
#3
View Rates
Loan types: Home equity loan, HELOC
Max LTV: 100%
Apply: Online
Pros
  • Easy way to compare loan offers
  • Only vetted lenders
  • No impact on your credit score
Cons
  • Not a direct lender
  • Offers are not final
LendingTree is an online lending marketplace that allows borrowers to shop and compare offers from providers of home equity loans and other lending products. All you need to do is provide basic information yourself as well as preferences such as loan amount and repayment term. Within seconds, LendingTree will show you competing offers from its lender network. The service is free to use and won’t affect your credit score.
If you’re looking to save time searching for a home equity loan, home equity line of credit, or other home equity product, then LendingTree’s online comparison tool lets you quickly compare offers from vetted home equity lenders. Just answer “Home Equity” to the question of “Which type of home loan are you interested in?” and follow the prompts to see the best offers from LendingTree’s network of home equity lenders.
What is a Home Equity Loan?
A home equity loan is a fixed-rate loan in which the borrower uses their home equity as collateral. The loan creates a lien against the borrower’s home and reduces the borrower’s home equity. As the borrower makes payments, their home equity increases again. A home equity loan term can range from 5-30 years although most lenders allow 5-15 years.
A home equity line of credit, or HELOC, is an alternative home equity product. Like a home equity loan, a HELOC uses the borrower’s home equity as collateral. But in contrast to a home equity loan, a HELOC is an open-end revolving line of credit with an adjustable interest rate. With a HELOC, the borrower may draw funds at any time, up to the approved credit limit. The borrower only pays principal and interest on the funds drawn, in addition to certain closing fees at the start of the loan.
How to Apply for a Home Equity Loan
The basic requirement of a home equity loan is that you own your home. Most lenders permit a combined loan-to-value (CLTV) ratio of up to 90%, meaning your home equity cannot go below 10% of your home’s current appraised value. However, some credit unions allow 100% CLTV. Generally, home equity loans can only be taken on owner-occupied properties, although in some cases it may be possible to use a rental or investment property as collateral.
Applying for a home equity loan or HELOC is quite similar to applying for a regular mortgage. It typically involves:
  • A credit check, although your score may have a lesser impact on your lender’s decision than it would for a regular mortgage or an unsecured loan;
  • A home appraisal, to help the lender calculate your current home equity and potential loan-to-value ratio; and
  • Assessment of financial documentation, in order to calculate your debts and income.
Closing costs for home equity loans and home equity loans can reach up to 2-5% of the loan amount. Many home equity lenders are open to negotiating the closing costs, so always shop around before making a decision.
Bottom Line
Home equity loans offer many benefits compared to alternative products. The average interest rate on a home equity loan in 2021 is 3-5%, substantially lower than the average personal loan rate of 10-20%. Although cash-out refinances are available at slightly lower rates, home equity loans usually have lower closing costs – making them the best option for tapping into your home equity for modest loan amounts. Home equity loans come in many shapes and sizes, so always compare a few lenders before making a final decision.
By Nadav Shemer
Nadav Shemer specializes in business, tech, and energy, with a background in financial journalism, hi-tech and startups. Nadav writes for bestonlinemortgageloan.com. He enjoys writing about the latest innovations in financial services and products.
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