Best Home Equity Loan Lenders 2022 Show
FEATURED PARTNER OFFER PNC Bank Preapproval timeMortgage ratesLower than the national average Days to closeAverage closing time is 45 days Preapproval timeMortgage ratesLower than the national average Days to closeAverage closing time is 45 days Why We Picked It PNC Bank operates in all 50 states and provides a wide range of mortgage products, including specialty loans for low- and moderate-income borrowers. PNC also offers an innovative online experience called Home Insight, which provides a deep dive into the homebuying process, enabling customers to determine the mortgage payment they can afford and start shopping for homes with real-time rate quotes and loan products. It also allows customers who have applied for a loan to follow along with the approval process and upload supporting documents. In addition, the customer can invite real estate agents into the process to monitor progress. Home Insight combines a home affordability analysis, a monthly payment estimator that accounts for insurance and taxes and the ability to search for available home listings. It also connects unique budgets, real-time rates and loan products with a real estate listings search to help prospective home buyers better understand how much house they can afford. PNC also offers a full digital pre-approval application, where borrowers may apply online and receive approval in a matter of minutes. Available in All 50 States PNC has branches for borrowers more comfortable with a brick-and-mortar experience in the following states: Alabama, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wisconsin. How to Apply Borrowers can apply online or in person at a bank location. Customer support by phone is available Monday through Thursday from 8 a.m. to 9 p.m. ET, Friday from 8 a.m. to 5 p.m. ET and Saturday from 9 a.m. to 2 p.m. ET. Speed Preapproval takes between 20 to 30 minutes. The average closing time is 45 days, which is about the industry average. In some cases, closing can be as short as 30 days. Credit Requirements Loan Types Offered Pros & Cons
FEATURED PARTNER OFFER Bank of AmericaPreapproval timePreapproval letter takes 10 days to receive Mortgage ratesLower than the national average Days to close
Preapproval timePreapproval letter takes 10 days to receive Mortgage ratesLower than the national average Days to closeWhy We Picked It Bank of America is a big bank lender that offers mortgage and refinance loan products, along with full banking services. There are more than 5,000 branch locations in the U.S., in addition to its online mortgage options, which includes the Bank of America Digital Mortgage Experience. This provides customers with online applications, electronic signatures for documents and online rate locks. Borrowers also can connect with a lending specialist online. Bank of America offers lower-than-average mortgage rates and the convenience of applying in-person or online. Their Affordable Loan Solution mortgage requires a low down payment of just 3% and no private mortgage insurance, which can save budget-minded borrowers hundreds of dollars per month. For existing customers, there are several discounts available, including a $600 closing-costs discount. Available in All 50 States There are no geographic restrictions for getting a Bank of America home mortgage. How to Apply Borrowers can apply online or in person. Bank of America operates in all 50 states. Borrowers can schedule an appointment online. Customer support via phone is available Monday through Friday, 8 a.m. to 10 p.m. ET and Saturday 8 a.m. to 6:30 p.m. ET. Speed Bank of America’s mortgage preapproval time takes 10 days, which is a lengthy amount of time compared to other lenders. A long preapproval time is a disadvantage in a competitive seller’s market, where buyers are bidding against several other people and need to be ready with financing in order to make an offer. The lender’s average closing time is between 30 to 45 days, which is about the industry average. Credit Requirements Bank of America requires a minimum credit score of 620. The lender considers alternative credit data, such as rent and utility payments, when reviewing mortgage applications. Alternative credit data takes into account payments you make that are not traditionally included in credit reports. This can help borrowers who might not have a long credit history or had a prior bankruptcy show a good track record with on-time payments in areas that are not usually counted in traditional credit data. Loan Types Offered Bank of America offers fixed- and adjustable-rate conventional and jumbo mortgages (ARMs), FHA loans and the Affordable Solution Mortgage, which requires just 3% down and no private mortgage insurance. The lender doesn’t offer USDA loans. Pros & Cons
FEATURED PARTNER OFFER LoanDepotPreapproval timeMortgage ratesWithin 1 to 3 basis points above or below the national average Days to closePreapproval timeMortgage ratesWithin 1 to 3 basis points above or below the national average Days to closeWhy We Picked It LoanDepot is one of the largest non-bank mortgage lenders in the U.S., with more than 150 branches across the country and a robust online presence. Its loan products include conventional mortgages, government-backed loans and refinances. Customers who use the lender’s Mello Smartloan online technology can expect to reduce their closing time by 17 days by reducing paperwork and digitally connecting and verifying assets, income and debt. Additionally, Mello Smartloan can digitally conduct title clearance, which is often one of the more time-intensive steps of the underwriting process. Another benefit of this technology is that it also determines whether some borrowers can waive the appraisal requirement, which can shave time and a few hundred dollars off the cost of your mortgage. Available in All 50 States Borrowers can apply online or in the more than 150 branch locations in the U.S. LoanDepot currently has origination centers in Arizona, Tennessee and two in California and is currently licensed in 50 states. How to Apply LoanDepot customers can apply online for a mortgage. Once they submit their application, a loan officer will call them to go through the next steps, which include submitting income documentation and personal identification. Customer service hours are fairly flexible on weekdays, from 8 a.m. to 10 p.m. ET Monday through Friday and Saturday from 11 a.m. to 3 p.m. ET. Speed LoanDepot’s mortgage preapproval time takes about 20 minutes for borrowers who are not required to supply additional information. Borrowers who use their Mello Smartloan technology, which is said to cut down on the amount of paperwork applicants are required to submit and— in some cases—even eliminates the need for a home appraisal, can shorten the closing process by up to 17 days. Credit Requirements LoanDepot requires a minimum credit score of 620 for conventional and VA home loans, which is the average requirement for most lenders. For FHA mortgages, the credit requirement is less stringent, dipping to a 580 minimum. Finally, jumbo borrowers must have a minimum 700 credit score. Loan Types Offered LoanDepot offers fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, jumbo loans, VA loansand 203(k) loans. LoanDepot does not offer USDA loans. Pros & Cons
Summary: Best Home Equity Loan LendersTips for Comparing Home Equity LoansThere are a few ways you can access the equity in your home without selling it:
There are key differences between these three loan types, so it’s important to understand what they are so you can choose the loan that best fits your financial needs. Borrowing against your equity can be set up as a loan (home equity loan)—where you receive one lump sum and repay it with interest over time—or a line of credit (home equity line of credit, or HELOC) that you can access over a certain period of time. A home equity loan is a good option if you know how much you need to borrow, if, for example, you’re consolidating debt. A HELOC is a good option for uses like construction or home renovations, as these costs can change over time. The HELOC allows you to use as much or as little of the credit as you want and you can continue to borrow as you pay down the principal. Both of these options require you to get a second mortgage on your house. If you’re still paying off your primary mortgage, then this new mortgage would be in the second position. This means it’s second in line to being paid back when you sell your house or if your home were to go into foreclosure. For this reason, home equity loans and HELOCs are often harder to qualify for than cash-out refinancing. A cash-out refinance replaces your original mortgage with a new, bigger one. Since you’re borrowing money against the equity, that amount is rolled into your new mortgage. So you would pay your principal balance and your equity loan amount in one payment. Lenders loosen credit requirements on cash-out refinances because they’re in the first position—or first in line—to get paid back, which is optimal. Like a mortgage to purchase a home, equity borrowing involves shopping for interest rates. MethodologyForbes Advisor reviewed 12 mortgage lenders that do business both online and in person throughout the United States. The lenders we reviewed represent some of the largest mortgage 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:
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. What Is a Home Equity Loan?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. How do home equity loans work?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. Average Home Equity Loan RatesThe average home equity loan rate was 1.01% as of Sept. 20, according to Bankrate.com. However the rate can range from 6.45% to 8.16% depending on the lender, the house securing the loan and your personal financial profile. How to Get a Home Equity LoanIf you want to take out a home equity loan, follow these steps:
HELOCs vs. Home Equity LoansWhile HELOCs and home equity loans both allow you to tap into your home equity, the right one for you will depend on your individual circumstances 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. Advantages of Home Equity Loans
Downsides to Home Equity Loans
Related: Best Home Equity Loan Rates Frequently Asked Questions (FAQs)What is home equity?Home equity is the difference between what you owe on your mortgage and the current appraised value. If your house was appraised at $300,000 and you owe $100,000, you have $200,000 in equity. If you haven’t had your home appraised since you renovated it or property values have gone up in your area, it might be worthwhile to get an appraisal before you apply for equity financing. If your home has increased in value, you’ll have more equity to draw from and potentially a better chance of getting approved for a loan. What is a home equity line of credit?A home equity line of credit or HELOC is a loan that uses your home’s equity as collateral, but instead of issuing the loan in a lump sum, the lender would extend a line of credit based on your equity. In that way, HELOCs are similar to credit cards. Like a credit card, you have a certain spending limit and when you reach that threshold your credit stops. The period when you can spend money through your HELOC is called the draw period. After the draw period ends, you can longer access the credit, and you enter your repayment period. HELOC draw periods are usually between five and 10 years. How much can you borrow?Lenders differ in how much they will lend as a percentage of the total equity. Part of how much you qualify for also depends on your credit profile. Some lenders will loan up to 85% or even more of a borrower’s equity if you have an excellent credit score and a strong financial profile. Is home equity loan interest tax deductible?Possibly. You might be able to deduct the interest you pay on a home equity loan if you use the proceeds to “buy, build or substantially improve the home,” according to the IRS. It’s a good idea to check the specifics with a tax professional to see if this option is available to you. Can you refinance a home equity loan?Yes, you can refinance a home equity loan, either by paying off the loan with a new home equity loan or HELOC or by rolling the balance into a larger first mortgage. You might opt to refinance if you can qualify for a lower interest rate, want to pay off the loan faster or can take advantage of other more favorable terms. Keep in mind that just like when you first get a home equity loan, you’ll pay closing costs to refinance the loan—so be sure to take this into account when deciding if refinancing is worth it. Can you use a home equity loan for anything?Yes, you can use the proceeds of a home equity loan to cover pretty much any expense. However, some uses might make more financial sense than others. For example, if you want to pay for higher education, it could be a better idea to look into targeted student loan products that don’t require using your home as collateral. Also remember that you’ll pay closing costs on a home equity loan, so you’ll want to borrow enough to make these additional fees worth it. See: How Much HELOC Money Can I Get? What is the three-day cancellation rule?The three-day cancellation rule is a term for the right of rescission—a consumer protection provided by the federal Truth in Lending Act. Under this law, you have three business days to walk away from a home equity loan after you’ve signed for it for any reason and without penalty. If you decide to cancel your loan, you must inform the lender in writing by mail or delivery before midnight on the third business day. For more information, visit the Federal Trade Commission website. Next Up in Home EquityInformation provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results. Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners. What are the disadvantages of a home equity line of credit?Variable interest rates could increase in the future.. There may be minimum withdrawal requirements.. There is a set draw period.. Possible fees and closing costs.. You risk losing your house if you default.. The application process for a HELOC is longer and more complicated than that of a personal loan or credit card.. What is the monthly payment on a 50000 HELOC?For example, on a $50,000 HELOC with a 5% interest rate, the payment during the draw period is $208. Whereas, during the repayment period the monthly payment can jump to $330 if it is over 20 years.
Can you have a zero balance on a HELOC?It's possible to have an open line of credit with a zero balance. The HELOC offers you access to a specified amount of money, but you do not have to use any of it. At any time, you can pay off any remaining balance owed against your HELOC.
Is home equity loan same as equity line of credit?A home equity loan allows you to borrow a lump sum of money against your home's existing equity. A HELOC also leverages a home's equity but allows homeowners to apply for an open line of credit. You then can borrow up to a fixed amount on an as-needed basis.
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No cost home equity line of credit
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