Best home equity loans for 2024

Are you looking to make improvements to your home but need more cash? Borrowing money against the equity in your home can cost less than taking out a personal loan or using a credit card.

Homeownership can be expensive when things go wrong. A leaky roof or flooded basement can cost thousands to repair, even with home insurance. With a home equity loan, you can fix problems, move ahead with a new remodel, or fund other projects like paying off high-interest card debt or your kid’s college tuition.

Our top recommendations

Rocket Mortgage: Best for customer service

Rocket Mortgage excels in customer service and is especially useful for those who want a totally online experience. You can work with a loan officer over the phone, however, if you want to.

With competitive interest rates and fixed monthly payments, homeowners can pursue home improvement projects or pay off high-interest credit card debt. Rocket Mortgage does charge fees for loan origination that may be higher than other lenders on this list.

Discover: Best for low fees

Finding enough cash to tackle home improvement projects or pay off debt is a problem facing many homeowners. PNC Bank allows borrowers to close in 45 days, and using their online tool, borrowers can see what their payments are and how long it will take to pay back the loan.

PNC does not offer home equity loans — its loans are lines of credit with a draw period and a payback period — but the ability to convert some or all of your loan from a variable-rate line of credit to a fix-rate loan that amortizes over up to 30 years gives this offering some of the same benefits as a traditional home equity loan.

Bank of America: Best for discounts for existing customers

Bank of America tops our list for the best loan options for existing customers. Borrowers can receive a rate deduction for automatic payments and will only need 3% down, on certain fixed and adjustable mortgages.

Similarly to PNC bank, Bank of America doesn’t offer a home equity loan as such, its offering is a line of credit that can be converted into a fixed-rate loan.

New American Funding: Best for low APR

Borrowing money is expensive, so a low APR is one way to cut costs on those home improvement projects. New American Funding specializes in working with minority borrowers and offers flexible repayment options on fixed and variable interest-rate loans.

New American Funding said through a representative that it offers both home equity loans and lines of credit in all 50 states. The website isn't crystal clear on how to apply for a home equity loan instead of a HELOC, though the "Let's Get Started" page does show home equity loans.

Navy Federal Credit Union: Best for low-interest VA loans

For military members and their families, there’s no better option than Navy Federal Credit Union. The company does not require private mortgage insurance on qualifying loans, which can save borrowers thousands of dollars. Plus, with a starting interest rate of 6.64%, homeowners can expect lower payments over the length of the loan.

Unfortunately, if you’re currently or formerly military personnel, a Department of Defense employee or eligible immediate family member, you can’t join the credit union and will not be able to apply for Navy Federal Credit Union home equity loan.

Regions Bank: Best for flexible repayment terms

We like Regions Bank because they offer flexible payment terms in increments of 10, 15 and 20 years. The company offers rates starting at 6.75%, and borrowers can save money by paying little to zero closing costs. You can get loans from $10,000 to $250,000 depending on your collateral.

Located generally in the southeast, prospective borrowers must own property in a state with a Regions Bank. This is a limitation for homeowners who are not in the 15 states served by Regions Bank.

PenFed Credit Union: Best for credit union members

For borrowers who like to go the credit union route for their banking needs, PenFed Credit Union is an excellent choice. It offers home equity lines of credit starting at 8.625% that borrowers can use for home improvements or to pay off high-interest credit card debt.

PenFed’s standout program is its HELOC Express that allows borrowers to close in as little as 15 days. There are more fees than you are charged with other HELOCs, however; the $99 dollar annual fee is a good example.

Truist: Best for Fixed-Rate HELOC

If you’re looking for affordable interest rates with fixed payments on a home equity line of credit, Truist Bank is a good option. With no annual fee for most states and your appraisal fee covered, borrowers will save money and can select terms from five to 20 years.

While Truist doesn’t charge an annual fee in many states, it does charge a $50 annual fee in AL, Arkansas, California, Florida, Georgia, Indiana, Kentucky, New Jersey and Ohio.

US Bank: Best for borrowers with good credit

If you’re a mortgage holder who makes their payments on time and has a good credit score, then a home equity loan from US Bank will probably get you the best rate. And unlike some of the other lenders on our list, US Bank offers both true home equity loans and home equity lines of credit.

With a full line of financial products and interest rate discounts with automatic deductions, US Bank is an affordable option for borrowers.

How we chose the best home equity loan providers

For this review, we looked at financial institutions with significant online search volume and those specializing in serving various audiences nationwide. Our evaluation of the financial institutions under review used data including the range of APR listed, the maximum LTV ratio, all fees and closing costs, the ease of application and rate transparency. We also looked at publicly available feedback on customer experience and satisfaction to produce our recommendations.

Choosing the best home equity loan provider: Where to begin

Choosing the right home equity loan provider for your needs could be the difference in a successful home renovation or months of paying on high-interest credit cards. You’ll want to identify the project you want to tackle and get an overall idea of exactly how much cash you’re going to need.

You’ll want to consider these factors when choosing the best financial institution for your home equity loan needs:

• Fees: Look for the lowest fees and closing costs, and be sure to ask about repayment terms that work best for you.
• Interest rate: Comparison shopping is the best way to find the lowest rate.
• Customer service: Whether you’re looking for a totally online experience or prefer a brick-and-mortar location, you’ll want to have your questions answered correctly and in a friendly manner.

How does a home equity loan work?

A home equity loan works by allowing you to access the cash value you own in your property. It’s the difference between your home’s appraisal and how much money you still owe on the mortgage.

While there are many upsides to a home equity loan, as with a traditional mortgage, if you fall behind on the payments, your financial institution can start the foreclosure process and you could lose your home.

Pros and cons of taking a home equity loan

Closing costs for home equity loans

As with any financial transaction, your institution may charge certain fees. For a home equity loan, the typical rate is commonly between 2% to 5% of the loan amount, but many companies will waive these fees.

If your financial institution does charge closing costs, the fee tends to be smaller than on a traditional mortgage because the amount borrowed is often lower. One fee that usually occurs with every home equity loan is an appraisal fee, which can cost over $500, depending on your location.

Home equity loan requirements

To apply for a home equity loan, you’ll need to have the following requirements:

• A credit score of at least 620 (preferably, 680 or higher for better interest rates).
• Proof of homeowners insurance.
• A history of on-time mortgage payments, if applicable.
• Proof of income for the last two years.
• Debt-to-income ratio of no larger than 43%.
• Own at least 20% equity in your home.
• Own a qualifying primary residence or second home.

Home equity loan requirements vary by financial institution, so be sure to do your due diligence to find a home equity loan that works best for your financial needs.

Alternatives to a home equity loan

If a home equity loan isn’t the best option for you, there are other alternatives to get the cash you need.

• HELOC: A home equity line of credit (HELOC) is a revolving line of credit that uses your home as collateral for a specific term. It is used on an as-needed basis and is readily accessible for large purchases without the time constraints seen in a typical home equity home loan.
• Personal loan: A personal loan usually has higher interest rates but allows you to pay it back over a specific term.
• Cash-out refinance mortgage: A cash-out refinance is when you take out a new loan on your home for more than what you owe and receive the difference in cash.

These options typically require equity in your home, but requirements and fees will vary by financial institution.

Frequently asked questions (FAQs)

What is LTV?

The loan-to-value ratio is a number used by financial institutions to compare a mortgage amount to the appraised value of a property.

Is a home equity loan a second mortgage?

A home equity loan is a second mortgage. It allows borrowers to borrow against the equity in their homes and use it for improvements or other purposes. As with a mortgage, if the borrower fails to repay the loan, the financial institution can begin the foreclosure process.

How soon can you pull equity out of your home?

Most financial institutions allow you to pull equity out of your home after six to 12 months. Although the time limit varies by financial institution, other factors like your credit score, loan-to-value ratio and how much equity you have is also important.

Can you refinance a home equity loan?

As with a traditional home loan, it is possible to refinance a home equity loan. If interest rates decrease and your credit score improves, it may be possible to find a lower rate, but you’ll still have to pay loan fees, which may be higher than any overall savings.

Do home equity loans require an appraisal?

Not all financial institutions require a home appraisal. For those who do not require an appraisal, their approval decision is based on your credit standing and credit score, meaning you could be denied if your credit score is low. Non-appraisal home equity loans also have higher interest rates.

Are home equity loans tax deductible?

Only the interest on a home equity loan is tax-deductible. According to the IRS, if the money is used to “build, buy, or improve the residence," the interest paid may be deductible up to current IRS limits.