Home equity loans give homeowners the ability to tap into the equity built up in their house to secure some extra cash. The best home equity loans offer low rates and easy acceptance because your house acts as collateral in case you can’t or won’t pay, thereby making the risk to the bank much lower.
When determining the best home equity loan rate options available for you, it’s important to look at the current home equity loan rates, differentiating factors and any special introductory rates or discounts offered.
|Bank||Best Rate||Minimum Loan||Maximum Loan|
|Bank of America||3.24% introductory||$25,000||$1,000,000|
|U.S. Bank||4.89% – 5.24%||$50,000||$750,000|
|Citi Bank||6.59% – 8.54%||$25,000||$300,000|
|BBVA Compass||4.04% – 9.09%||$10,000||>$500,000|
|Fifth Third Bank||3.49% introductory||$10,000||$500,000|
What is a Home Equity Loan?
A home equity loan is a unique financial instrument that gives you access to cash through the equity you’ve built up in your home, which is the difference in the value of your home and what you still owe on your mortgage is your equity. Banks will allow you to borrow up to a certain percentage of your home equity through a lump-sum loan, which is paid back to the bank over time.
Home Equity Loans vs HELOCs
Home equity loans and home equity lines of credit (HELOCs) sound similar but are actually quite different. With a HELOC, you’re given a line of credit with a specific limit that you can draw from several times during the draw period before you’re required to start paying back the principal and can no longer borrow from it. It operates much like a credit card, but it is backed by your home and your equity. Home equity loans, on the other hand, are doled out in one lump sum and you’ll likely have to make fixed payments from the start of the loan.
With HELOCs, you’ll go through a draw period where you will make very small interest-only payments and can continue to dip into the credit line as you need it. Once the draw period is over, you’ll begin making full payments to pay off the loan. Draw periods can last upwards of 10 years. Some banks, like Bank of America, will even give you a higher discount on your rate if you take out a certain amount of your line of credit.
Home Equity Loans vs Personal Loans
A personal loan is a different type of bank loan that is backed by some other form of collateral or is unsecured, meaning that it’s not backed by anything but your good credit. These loans are much riskier to the bank because they don’t have the backing of your home for collateral, which means rates will be considerably higher depending on the option that you choose.
The 8 Best Home Equity Loans
- Bank of America – Best for large loans
An industry leader in personal banking, Bank of America doesn’t offer home equity loans, but offers competitive rates on home equity lines of credit and the ability for borrowers to take out larger loan amounts up to $1,000,000. Additionally, those securing a home equity line of credit through Bank of America can receive monthly rate discounts by setting up automatic monthly payments or being a preferred banking client. Becoming a preferred banking client requires you to hold certain sized accounts with the bank.
- U.S. Bank — Best for borrowers in California
Offering quality service for over 50 years, U.S. bank has some of the best home equity loans for borrowers with great credit. In order to qualify for the rates mentioned, borrowers will need to have a checking or savings account through U.S. Bank and a FICO score of 730 or higher. Rates on 15-year loans for those meeting these criteria are 5.24%, while rates on 10-year loans drop to 4.89%. The maximum loan size for customers is $750,000 unless you live in California, where you can borrow up to $1 million.
- Navy Federal — Best for military and higher CLTV
Serving those in the armed forces and their families, Navy Federal offers some of the best home equity loans available as fixed-rate loans or interest only loans. With interest only loans, you’re able to borrow up to 80% of your combined loan-to-value ratio (CTLV). Fixed loans, though, they’ll vary from 70% of CTLV up to 100% of CTLV. Navy Federal is one of the few banks on this list, allowing customers to borrow up to 100% of the home’s equity.
- Discover — Best for rates
While you most likely know this company for their credit cards, Discover also offers home equity loans at extremely competitive rates. Not only can you get rates below 4%, but you’ll also be able to secure a loan with no application fees, no origination fees, and no cash required at closing.
- CitiBank — Best for flexibility
Customers of CitiBank have plenty of options when it comes to getting a home equity loan from the bank. Repayment periods range anywhere from five to 30 years, and rate discount options are available for customers holding certain types of accounts at CitiBank. Rates are somewhat higher than the other lenders, but the security and trusted name of CitiBank, along with the flexibility, still make the company a viable option.
- BBVA Compass — Best for lump-sum funding
A smaller regional bank primarily operating in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas, BBVA Compass offers home equity loan interest rates much better than the industry average. Rates will vary depending on where you live, but BBVA Compass will pay your loan in a lump sum and may cover the closing costs for your loan if you meet the company’s criteria.
- Fifth Third Bank — Best for introductory rates
While Fifth Third Bank does not have the lowest introductory interest rate, nor does it offer home equity loans, but it does offer HELOCS, and it still earns the accolade for the best intro rate because of the rate your home equity line of credit transitions to after the introductory period is over. Available rates will vary somewhat significantly depending on the state you live in, so do check the company’s rate sheet specifically for that information.
- TD Bank — Best for 10-year loans
TD Bank offers home equity loans in 5, 10, 15, 20, and 30-year increments. Rates vary based on the size of the loan as well as the selected term. While rates typically go higher as you move into longer-term loans, TD Bank’s 10, 15, and 20-year loans carry lower rates than the shorter 5-year option. If you’re looking for a home equity loan with a term longer than 5 years, TD Bank could be a good fit.
The Final Word
Regardless of what you plan to use the money for, determining the best home equity loan for your situation is key. While current home equity loan rates should be at the forefront of your decision-making process, it’s important to get a well-rounded picture of what each bank offers to know if it’s the right fit for you. Ensuring you’re able to borrow enough money and meet all approval qualifications — and that the payback schedule works for you — are all essential to a great borrowing experience.