8 Best Home Equity Loan & HELOC Rates for 2020
Homeowners with ample equity have a ready-made source of low-cost capital to finance significant expenses like home improvement or repair projects, debt consolidation, medical and long-term care expenses, and college tuition or loan payoff for which they lack the necessary liquidity.
Because the intrinsic value of the home secures it, a home equity loan or line of credit (HELOC) typically costs far less than unsecured alternatives, such as a personal loan or high-limit credit card. But rates do vary significantly — not just by lender but due to borrower-specific factors like credit score, income, and location. On a loan or line worth tens of thousands of dollars, it doesn’t take much of a rate drop — just a few tenths of a percentage point — to dramatically lower lifetime borrowing costs.
That’s why it’s so important to know which lenders tend to offer lower rates to borrowers like you. Home equity loan and HELOC rates fluctuate by the day, so keep your finger on the pulse until you choose a lender and lock in your rate.
Best Home Equity Loan & Line Rates
These home equity lenders consistently offer competitive rates on home equity loans, lines of credit, or both. When available, each listing includes the lender’s minimum annual percentage rate (APR) for each product type, minimum and maximum principal or line size, and any rate discounts offered.
- APR Range: Rates start as low as 2.49% APR with all available discounts, including autopay.
- Loan or Draw Range: The maximum any Figure client can borrow is $150,000.
- Discounts Available: 0.50% discount for autopay.
Figure is a nimble, tech-driven lender disrupting the rather staid world of home equity loans and lines. Though technically a HELOC, Figure’s primary product is a proprietary hybrid with characteristics of both home equity loans and HELOCs. You can borrow up to 95% of the home’s combined loan-to-value — 10% to 15% more than what most home equity lenders allow. The catch is that your actual draw is limited to 20% of the loan’s value, or $100,000 on a $500,000 loan, with a relatively low maximum of $150,000 borrowed.
Figure’s other big differentiator is its smooth, rapid application and underwriting. Whereas traditional lenders can dally for a month or two, Figure’s approval and funding process typically take less than a week. Terms range from 10 to 30 years.
Read our Figure review to learn more.
2. Discover Bank
- APR Range: 3.99% APR to 11.99% APR, depending on borrower creditworthiness and lien position. First lien loans are more affordable.
- Loan or Draw Range: $35,000 to $200,000.
- Discounts Available: Not specified.
One of the best online banks around, Discover is probably best known for its unsecured credit products, such as credit cards and personal loans. But its home equity loan division stands out for relatively low rates and friendly customer service. The biggest downside here is Discover’s low maximum loan size: just $200,000, which might not be enough firepower for homeowners with ample equity and big plans. Home equity loan terms range from 10 to 30 years.
Read our Discover Bank review to learn more.
3. Citizens Bank
- APR Range: Home equity rates start at the prime rate (currently 3.25% APR) on 10-year loans between $100,000 and $399,000 (which have the lowest rates of any Citizens Bank home equity loan). Interest on HELOC draws varies with underlying benchmarks, but the base rate is generally 50 basis points (0.50%) below the prime rate.
- Loan or Draw Range: $10,000 minimum. Maximums vary by borrower equity and creditworthiness, but home equity loans larger than $400,000 are available.
- Discounts Available: Not specified.
Citizens Bank is a big deal in the northeastern United States, where its 1,000-odd physical branches reside. But you don’t have to live within easy reach of a Citizens branch to take advantage of its low home equity rates. Citizens offers two home equity options: home equity loans with 10- to 20-year terms and HELOCs with 10-year draw periods. Citizens’ HELOCs have an interest-only option, which can significantly reduce payments early on.
4. BMO Harris Bank
- APR Range: As low as 3.50% APR for variable-rate HELOCs and under 4.80% for fixed-rate loans with all available discounts applied (including autopay). Maximums vary by loan size, borrower creditworthiness, and location, with larger loans generally more affordable.
- Loan or Draw Range: Home equity loans start at $5,000, and HELOCs start at $25,000. Maximums vary by location, borrower creditworthiness, and available equity. Both are available in amounts greater than $150,000.
- Discounts Available: All home equity products have an optional autopay discount of 0.50%.
BMO Harris Bank offers home equity loans and lines of credit at very competitive rates. Its unusually low minimums — just $5,000 for home equity loans — are ideal for borrowers looking to consolidate moderate amounts of debt or finance smaller home improvement projects without undue risk. The five-year home equity loan term, another rarity, speaks to borrowers eager to put their debts behind them. Terms on both loans and HELOCs range up to 20 years.
- APR Range: Rates range from about 4% APR to upward of 9% APR, depending on borrower creditworthiness, loan size, and location.
- Loan or Draw Range: Maximum loan sizes range up to $1 million.
- Discounts Available: BBVA periodically offers promotional rates for three to six months after closing; ask your banker for details. BBVA may also pay closing costs on HELOCs between $10,000 and $500,000.
BBVA has some of the best money market rates and CD rates of any United States-based bank, but apparently it’s determined to impress customers on the lending side too.
BBVA’s trade area covers most of the southwestern United States, including the two most populous states: California and Texas. All told, at least 100 million Americans live in an area served by BBVA — enough to justify mentioning the bank’s excellent home equity products. High loan limits (up to $1 million) and relatively low rates are both top selling points.
6. TD Bank
- APR Range: Rates vary by location, but HELOCs generally start around 3.75% APR (prime plus 0.50%) and loans start around 4.50% APR. Maximum rates vary.
- Loan or Draw Range: The minimum loan or line size is $25,000. There’s no minimum HELOC draw.
- Discounts Available: 0.25% rate discount on HELOCs with a qualifying TD Bank checking account.
TD Bank has several impressive bank account promotions for new deposit customers. Its home equity division is customer-friendly too, with low rates on loans and HELOCs and further discounts for checking customers. Terms range from five to 30 years, making it easy for borrowers to borrow and pay on time scales they’re comfortable with.
7. Bank of America
- APR Range: Rates start around 4.70% APR but can vary by region, line size, and borrower creditworthiness. Rates can be variable or fixed, depending on the borrower’s preference.
- Loan or Draw Range: Generally, $25,000 to $1 million.
- Discounts Available: Get a discount of 5 basis points (0.05%) for every $10,000 drawn on your HELOC, up to 75 basis points. Preferred Rewards clients enjoy rate discounts up to 37.5 basis points (0.375%), depending on tier. The autopay discount is 0.25%. Bank of America doesn’t charge closing costs on lines under $500,000.
Bank of America offers low-cost home equity lines to customers across the U.S. Though rates and terms vary by state, all borrowers qualify for a slew of attractive discounts, including up to 75 basis points off the initial rate for larger draws. The high borrowing maximum — $1 million — is a big plus for higher-asset borrowers. Draw periods typically last 10 years.
- APR Range: The minimum HELOC rate is 3.99%, and the minimum home equity loan rate is 6.59%. Rates vary by location and amount borrowed.
- Loan or Draw Range: Generally, up to $1 million for HELOCs and up to $300,000 for home equity loans. The best HELOC rates are reserved for draws of $25,000 or greater.
- Discounts Available: Not specified.
Despite its reputation for serving big corporations and super-wealthy individuals, Citibank has an active home equity division that’s quite accessible for everyday homeowners. HELOC draws start at just $10,000, plenty low to consolidate credit card debt or fund a home repair project. Meanwhile, the upper HELOC limit of $1 million is robust enough for smaller-scale landlords who own two- to four-unit properties in most markets.
Why Home Equity Loan & Line Rates Vary
Home equity loan and line of credit rates can vary widely by lender. They also vary — sometimes dramatically — based on borrower-specific factors, such as credit score, income, home value, mortgage balance, desired loan size, and geography.
If the results of your initial search for affordable home equity loan or line rates surprise you in either direction, these factors could be to blame. Improving those within your control could be your ticket to a more affordable home equity product.
- Credit Score. Your credit score directly impacts your home equity loan and line rates. The higher your score, the lower your rate, assuming all other factors remain constant.
- Debt-to-Income Ratio. Home equity lenders prefer borrowers with low debt-to-income ratios — total eligible debt divided by gross income. The ideal debt-to-income ratio is below 36%. Lenders tend to balk at ratios starting at about 43%, though exceptions exist.
- Desired Loan Size. The equity in your home limits the size of your home equity loan or line. Generally, the amount you borrow against the value of your home, including your first mortgage, can’t exceed 85% of the home’s appraised value.
- Home Value and Mortgage Balance. Since the amount you borrow against the value of your home usually can’t exceed 85%, the size of your home equity loan or line could be constrained as a result.
- Location. Home equity loan and line rates vary by state. While the difference between the most and least expensive states tends to be less than 50 basis points (0.5%), that’s enough to make a meaningful difference in borrowing costs.
Home equity loan and line rates can change daily in response to fluctuations in benchmark interest rates. While these daily moves tend not to be dramatic, they can make a big difference over periods of weeks or months.
That matters if you’re shopping for a home equity loan or line of credit in the hope of taking advantage of low interest rates. Pull the trigger too soon, and you miss out on further rate declines. Wait too long, and you can end up paying more than necessary for financing. And you won’t know for sure until it’s too late.
Are you shopping for a home equity loan or line of credit? What’s the best rate you’ve found so far?
Published at Wed, 09 Dec 2020 00:56:10 +0000