The best home equity loan rate provider is — Rocket Mortgage for its combination of great rates and flexible qualifications like 10% home equity.
If inflation, unexpected emergencies, or other bills are piling up, and you need to access cash fast, a home-equity loan is one possible solution. While tapping into home equity comes with risks, it can also be a low-cost, easily accessible solution for homeowners.
Home equity loans allow you to access the equity you've built in your home to cover immediate needs. Read on to learn everything you need to know about home equity loans and how to find the best home equity loan rates.
1. Best Online Lender: Rocket Mortgage
- Best For:Online MortgagesVIEW PROS & CONS:securely through Rocket Mortgage's website
Rocket Mortgage is one of the largest online lenders known for its educational resources and good rates. Resources are also available in Spanish, and mortgage rates are regularly updated on the company’s website to help you keep up with changing prices.
Rocket Mortgage's home equity lines of credit (HELOCs) and home equity loans can give you fast cash when you need it and include a fast online application process. To qualify for a home-equity loan from Rocket Mortgage, you’ll need a credit score of at least 680 points or better. However, the lender does make exceptions for borrowers with a lower credit score who have a co-signer.
With Rocket Mortgage, you must also have at least 10% equity in your property, which is lower than many other home equity loan providers that might require up to 20% equity in your home to qualify. You can qualify for a loan with a debt-to-income ratio as high as 45%, which is about average when compared to other home equity loan options.
Loans are available for primary and secondary residences. You cannot have a missed or late mortgage payment in the last 12 months to qualify.
Why We Love It: Rocket Mortgage offers simple online quotes and a fast online application process. It also has a rate lock program, which allows certain loan types to have rates locked for up to 90 days, giving you time to compare rates.
2. Best for Traditional Refinancing: CrossCountry Mortgage
- Best For:Self-employed BorrowersVIEW PROS & CONS:securely through CrossCountry Mortgage's website
Available in: CA, CO, CT, DC, FL, GA, IL, MD, MA, MI, NH, NJ, NY, NC, OH, PA, RI, SC, TN, TX, VA, WA
CrossCountry Mortgage is a large lender with mortgage offerings in all 50 states. In addition to participating in many first-time homebuyer programs, CrossCountry Mortgage has excellent educational resources on its website.
On the downside, you cannot get an online quote. You’ll have to speak with a loan officer. However, they have good customer service, a Better Business Bureau Rating of A+, and can give you a fast quote after you take a few minutes to speak with the loan officer. You'll usually need an appraisal for a home-equity loan from CrossCountry Mortgage.
Why We Love It: CrossCountry Mortgage's traditional application process lets you speak with a loan officer and then get requalified. You'll gain all the benefits of a home-equity loan, including the flexibility to use funds for what you need.
3. Best for Rate Comparison: Credible Mortgage
Please see Credible’s State and License Disclosures.
Ready to start shopping for the best home equity loan? Credible Mortgage is not a specific lender but offers access to a wide range of home equity loan products from various lenders, including major banks, credit unions, and online lenders.
This extensive network allows you to compare rates, fees, and loan terms, increasing your chances of finding a great deal.
Even more usefully, Credible Mortgage provides detailed information on each lender's requirements, eligibility criteria, and application processes, so you can focus on lenders where you can comfortably meet their criteria.
The platform also offers educational resources, such as guides and calculators, to help you make informed decisions about home equity loans.
Why We Love It: Credible Mortgage has a user-friendly interface and transparent pricing model, making it easy to navigate, search, and compare rates and fees of various home equity options.
4. Best for No Closing Costs: Discover
Discover is known for its credit card reward programs, but the company also offers home equity loans at competitive rates. Discover can be a choice worth considering for your home equity loan if you’re looking for a lender with low upfront fees. Unlike some competitors, Discover’s home equity loans require $0 in cash at closing, and you also won’t need to worry about appraisal, application, or origination fees.
APRs on Discover home equity loans vary by credit score and qualification requirements. You will need a credit score of at least 620 points and a DTI ratio of no more than 43%.
Discover loans are available with balances as low as $35,000 and as high as $300,000. However, you must already have at least 10% equity in your property to begin. Terms vary between 10 and 30 years.
Why We Love It: Discover's $0 closing costs and fixed rate loans from $35K to $300K make it a fantastic option for borrowers low on cash. This simple online application makes it easy to compare rates.
5. Best for Flexible Solutions: U.S. Bank
U.S. Bank is one of the largest and longest-standing banks in the country, with thousands of branches spread across 27 states. You can apply for a home-equity loan or HELOC in person or easily compare offers online.
U.S. Bank offers home equity loans and HELOCs with terms of five to 30 years. As of July 2024, annual percentage rates (APRs) for basic home equity loans start at around 9.85%. U.S. Bank does not provide information on the maximum debt-to-income ratio (DTI) you can have and still qualify for financing, but you cannot borrow more than 80% of the home value.
U.S. Bank does offer a loan calculator that allows you to see current interest rates for different credit scores.
While you can start an application in person when you meet with a representative, you can also apply for a loan completely online using U.S. Bank’s streamlined virtual application process.
Why We Love It: U.S. Bank's home equity loan products give you a flexible financing solution, with the option to apply in-person or online. You could get a 0.50% rate reduction as an existing U.S. bank
Home Equity Loan Average Interest Rates
| Loan Type | Today’s Average |
| 5-year fixed home equity loan | 8.38% |
| 10-year fixed home equity loan | 8.74% |
| 15-year fixed home equity loan | 8.77% |
| 20-year fixed home equity loan | 8.77% |
How to Find the Best Home Equity Loan Rate
To find the best home equity loan rate, consider your qualifications, including:
- Understand your financial situation: Check your monthly income, total debt, and DTI. If they're weak, consider a co-signer.
- Check your credit score: Check your credit score and credit history, and see if you can raise your credit score before applying.
- Determine your home equity: Look at neighborhood comps to understand your home's current value and how much equity you've built up in the home.
- Get quotes from multiple lenders: Get at least three quotes to ensure you're getting the most favorable terms. Or, use a site that allows you to easily compare many offers, like Benzinga's marketplace.
- Check for fees and closing costs: Fees and closing costs add to the final APR. Be sure to compare total costs before choosing a lender.
How Does a Home-Equity Loan Work?
You can apply for a home-equity loan online, in person at banks or credit unions, or by speaking to a loan officer over the phone. They will ask for basic information like your income, debt, and outstanding mortgage principal balance and verify financial information, including your credit score. Lenders will require an appraisal for the home equity loan, except for USDA FHA or VA streamlined refinance loans.
How to Calculate Your Home Equity
To calculate home equity, look at your outstanding mortgage balance against the mortgage principal. You should also consider if your home's appraised value has increased significantly, which will affect your current equity in the home.
What Can You Use a Home-Equity Loan For?
One of the great advantages of a home-equity loan is that you can use it for nearly anything. You can use a home equity loan for:
- Remodeling
- Buying another house
- Performing major repairs
- Paying for emergency medical expenses
- Paying for car repairs
- New Furniture
- Investments
- Retirement expenses
- Vacations, weddings, or other major expenses
- Consolidate credit card debt with lower interest rates
- Nearly anything else you want, except gambling.
Pros and Cons of Home Equity Loans
There are pros and cons to a home-equity loan, including:
Pros
- Access funds when you need them
- Lower interest rates than other unsecured loan or credit options
- Easy to apply and qualify for, as long as you have the necessary equity in the home (minimum 20% for most lenders)
Cons
- It will take longer to pay off your home
- Taking out home equity can put you in additional financial risk of losing your home
- You'll still need to qualify for the
- Closing costs such as a home appraisal can add to the total costs of the loan
Alternatives to a home-equity loan
Here are several alternatives to a home-equity loan you can consider, including:
- Cash-out refinancing: With a cash-out refinance vs. a home-equity loan, you'll get a new mortgage and take out cash from your home equity. Find some of the best cash-out refinancing lenders here.
- Home equity line of credit (HELOC): A HELOC works more like a revolving line of credit in which there is a draw and repayment period. While a home-equity loan is a lump-sum payment, usually with a fixed interest rate, you can access equity with a HELOC as needed, usually with a variable interest rate.
- Reverse mortgage: If you're over 65 and need to access equity in your home, a reverse mortgage allows you to take out cash without obligation to repay it until you move out of the home. You can find the best reverse mortgage lenders here.
Should You Take Out a home-equity loan?
Home equity loans are crucial in providing financial assistance to homeowners who need extra cash. A home-equity loan can secure more competitive interest rates and terms than other loan options. You'll want to build your credit score, check your DTI, and understand your current home equity to get the best rates. Regardless of your qualifications, remember to compare lenders' total rates and fees to find the best available offer!
Frequently Asked Questions
What factors affect home equity loan rates?
Mortgage rates, including home equity loans, are determined by your credit score, income, debt-to-income ratio, total debt, and the equity you’ve built in the home.
Can I negotiate for better home equity loan rates?
Yes, you can try to negotiate better home equity loan rates. Usually, it is easier to compare offers from multiple lenders to understand the best available rates.
How often do home equity loan rates change?
Home equity loan rates are tied to standard interest rates, so they can vary weekly. However, if you secure a fixed rate, your rate won’t change once you close.
About Alison Plaut
Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.