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Updated: Nov 7, 2022, 10:56am Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. If you’re looking for a lump sum of money to help renovate your home, consolidate debt for a lower interest rate or cover another major expense, then a home equity loan might be a good option, depending on how much equity you have in your home. Equity is the difference between your home’s value and what you still owe on your mortgage. Tapping your equity through a home equity loan is just one way to access it, and unlike some types of loans, it will allow you to get the full amount upfront. But to make sure it’s worth the cost to finance, it’s important to first calculate how much you will pay in interest. Forbes Advisor compiled a list of the best home equity loan lenders primarily based on their starting interest rate, noting those that excel in various areas. We also graded them based on credit access and speed to close as well as whether they offer low fees or discount promotions. The interest rates are reflected as annual percentage rates (APRs) as of September 14, 2022. We also considered each lender’s combined loan-to-value (CLTV) ratio requirement, which is calculated by dividing the sum of all the loans on the property by its current value. Most lenders require owners to retain a CLTV ratio of 80% or less, but some are willing to go higher. Show Summary
Best Home Equity Loan RatesFEATURED PARTNER OFFER Best For Lowest Starting RateOld National BankAPRs starting at3.99% for initial 12 months; 5.24% thereafter CLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting at3.99% for initial 12 months; 5.24% thereafter CLTVMinimum credit scoreWhy We Picked It Old National’s teaser rate blows away the competition, and the rate that follows the intro rate is also much lower than the average among the lenders reviewed. You can borrow up to 89% of the CLTV ratio on your property. Right now, however, Old National’s home equity loans are only available in Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota and Wisconsin. Pros & Cons
Extra Details Loan Terms Not Available Nationwide How to Apply FEATURED PARTNER OFFER Best For Home Equity Loan Rate OverallTD BankAPRs starting atCLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting atCLTVMinimum credit scoreWhy We Picked It TD Bank has among the lowest interest rates that are not just an initial teaser rate—it’s for the life of the loan. The 4.49% starting APR is specifically for its 10-year home equity loan. However, you’ll need a high credit score to qualify for that lowest rate. Additionally,TD’s home equity loans aren’t available in all states. Pros & Cons
Extra Details Loan Terms Not Available Nationwide How to Apply FEATURED PARTNER OFFER Best for Highest Home Equity Borrowing LimitNavy Federal Credit UnionAPRs starting atCLTVMinimum credit scoreAPRs starting atCLTVMinimum credit scoreWhy We Picked It Navy Federal Credit Union’s starting rate is below the national average. You must be a credit union member to qualify for a home equity loan, which means you must be an active member of the armed forces, a veteran, an employee of the Department of Defense or a family member of someone in one of those categories. The credit union also allows you to borrow up to 100% of your CLTV for a first and second home, which is higher than most competitors. Pros & Cons
Extra Details Loan Terms Available Nationwide How to Apply FEATURED PARTNER OFFER Best For Low Borrowers With Credit ScoresDiscoverAPRs starting atCLTVMinimum credit score
APRs starting atCLTVMinimum credit scoreWhy We Picked It Discover makes its home equity loans available to borrowers with the lowest credit scores among the national lenders surveyed. The interest rate is slightly higher than some competitors, however. Pros & Cons
Extra Details Loan Terms Not Available Nationwide How to Apply FEATURED PARTNER OFFER Best For Real-time Rate EstimatesU.S. BankAPRs starting atCLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting atCLTVMinimum credit scoreWhy We Picked It U.S. Bank’s starting APR is lower than the national average. The bank also allows you to get a “loan estimate” in real time, which would include the estimated interest rate, monthly payment and total closing costs. Other details—such as the minimum credit score required and average time to close a loan—are not readily available, and the bank did not respond to requests for information. Pros & Cons
Extra Details Loan Terms Available Nationwide How to Apply FEATURED PARTNER OFFER Best For Loan AmountsBMO HarrisAPRs starting atCLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting atCLTVMinimum credit scoreWhy We Picked It BMO’s home equity loans have a higher APR than the national average, but the bank offers a slightly speedier timeline with about 30 days to close. BMO also has a slightly higher CLTV and offers loans as small as $5,000, all of which might put it in the sweet spot for some borrowers. Pros & Cons
Extra Details Loan Terms Available Nationwide How to Apply FEATURED PARTNER OFFER Best Mid-Tier Home Equity Loan ProductFifth Third BankAPRs starting atCLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting atCLTVMinimum credit scoreWhy We Picked It Fifth Third Bank offers among the most customer-friendly home equity loans with the ability to tap more of your home’s equity and a lower credit score requirement than most competitors. As of September 27, the lender had a starting rate of 6.74% for a good-quality borrower, according to a bank representative. This places Fifth Third’s rates in the middle of its peers. Pros & Cons
Extra Details Loan Terms Not Available Nationwide How to Apply FEATURED PARTNER OFFER Fastest Closing TimeConnexus Credit UnionAPRs starting atCLTVMinimum credit scoreCompare Rates Compare rates from participating lenders in your area via Bankrate.com APRs starting atCLTVMinimum credit scoreWhy We Picked It Connexus has the fastest closing timelines among the lenders we surveyed, with about 25 days to close. It also has a lower required credit score and a higher CLTV than some lenders. Pros & Cons
Extra Details Loan Terms Not Available Nationwide How to Apply Summary: Best Home Equity Loan RatesMethodologyWe reviewed a dozen home equity loan lenders for customers across the nation. Lenders that do not display their interest rates online or decline to respond to emails or calls from reporters are not eligible for the list. We scored lenders primarily on the basis of their interest rates but also included additional information that’s important to borrowers, such as time to close and amount you can borrow as well as offered discounts or promotional rates. The score is weighted among the following loan and lender features:
Bonus points: Lenders who offer some kind of discount (usually for a banking relationship) are eligible for five bonus points. Frequently Asked Questions (FAQs)What is a home equity loan?Home equity loans allow homeowners to borrow against the equity in their homes. Equity is the difference between your home’s value minus what you owe on your mortgage. Home equity loans are popular among borrowers who want to use the funds to cover large expenses, such as home improvement projects or high-interest debt consolidation. How do I calculate how much equity is in my home?A rough rule of thumb is that the amount of equity you have in your home is the home’s value minus any outstanding loans on the property, like your mortgage. You can use our home equity loan calculator for a more precise calculation. How does a home equity loan differ from a home equity line of credit (HELOC)?Home equity loans and HELOCs are both technically second mortgages on your home. A home equity loan allows you to get a lump sum of money all at once and then repay it over time, while a line of credit gives you access to a revolving credit line that you can tap into, repay and tap again over a period of years. Home equity loans are often a better option if you know the amount you need already—say for a child’s education or a home construction project. That’s because when you get the money all at once, you repay it according to a fixed interest rate. In contrast, a home equity line of credit offers a lot more flexibility and the ability to take some or all of the money over time—but you pay for that flexibility by agreeing to a variable interest rate that could rise, in some cases substantially, over the life of the credit line. How do I calculate my combined loan-to-value ratio?Your CLTV ratio is the sum of anything you owe on the house—say a mortgage and a home equity loan—divided by the value of the property. Most lenders prefer you to borrow no more than 80% of your CLTV, but some will go up to 90%. 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.
Andrea Riquier is a New York-based writer covering mortgages and the housing market for Forbes Advisor. She was previously at Dow Jones MarketWatch, on the housing market and financial markets beats. Before that, she covered macro and central banks for Investor's Business Daily, and municipal bonds for Debtwire.
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What is the average interest rate on an equity line of credit?The current average interest rate for a HELOC is 7.3%, according to Bankrate, CNET's sister site. Anything below the average rate is typically considered a good rate for HELOCs.
Do home equity loans have higher interest rates?Home equity loan rates are generally higher because second mortgages are only paid back after primary mortgages have been. As a second mortgage lender, there's a higher risk that the sale price will be too low for the lender to recoup their costs.
Does a home equity loan have a lower interest rate?One of the benefits of home equity loans is that they typically have lower interest rates than personal loans or credit cards. Right now, borrowers with excellent credit and sufficient equity can secure home equity loans with interest rates as low as 5% to 6%, according to Bankrate.
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