Best HELOC Lenders of 2023
A HELOC lets you tap your home's equity. Compare our selections for best HELOC lenders.
Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.
A home equity line of credit, or HELOC, is a second mortgage that lets you convert some of your equity in your home back into debt in exchange for cash. Borrowers often use HELOCs to finance home improvement projects, educational expenses or debt consolidation.
The interest rate on a HELOC tends to be lower than rates on credit cards and personal loans. Lenders use your loan-to-value ratio, or LTV, to decide if you have enough equity for a HELOC.
NerdWallet has chosen some of the best HELOC lenders to help you find the one that's right for you.
Best HELOC Lenders
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Bethpage Federal Credit Union: NMLS#449104 Top 3 most visited 🏆 Learn moreat Bethpage Federal Credit Unionat Bethpage Federal Credit Union | National | 85% | 670 | Top 3 most visited 🏆 Learn moreat Bethpage Federal Credit Unionat Bethpage Federal Credit Union | |
National | 89% | 660 | |||
National | 85% | 620 | |||
National | 80% | 680 | |||
Regional | 89.90 | 620 | |||
National | 85% | 660 | |||
National | 85% | 640 |
Bethpage Federal Credit Union: NMLS#449104
National
85%
670
- Offers a fixed-rate option.
- No closing costs.
- Offers a fixed introductory rate.
- Minimum draw required for best rate.
Truist: NMLS#399803
National
660
89%
- Offers a fixed-rate option.
- Highly transparent about APR ranges.
- Annual fee of $50.
- Limited info online about how borrowers can access their HELOC.
Guaranteed Rate: NMLS#2611
National
620
85%
- CLTV borrowing limit over 80%.
- The initial balance and any additional draws have a fixed interest rate.
- Offers paths for rate discounts.
- No information about annual fees.
- Full amount (minus origination fee) must be drawn at closing.
- Customizable sample rates available online.
- Available for second homes in most states.
- Offers a rate discount for autopay from a PNC checking account.
- Not available in all states.
- Charges an annual fee.
TD Bank: NMLS#399800
Regional
89.90
620
- Publishes a sample HELOC rate online.
- Offers a fixed-rate payment option.
- Available for second homes and investment properties.
- $50 annual fee, waived for lines of credit below $50,000.
- Available only in states on the East Coast.
- Early termination fee charged if the line is closed within two years.
Bank of America: NMLS#399802
National
85%
660
- Charges no closing costs or annual fees.
- Publishes sample HELOC rates online.
- Offers rate discount for auto pay from an account with the lender.
- There is an early termination fee if the account is closed within the first three years.
Figure: NMLS#1717824
85%
640
National
- Specializes in HELOCs.
- The initial balance and any additional draws have a fixed interest rate.
- Closing may be available in just five days.
- Short draw period of two to five years.
- Requires a $20,000 minimum initial draw.
- Must draw full loan balance at closing.
Flagstar: NMLS#417490
National
80%
680
- Offers a wide range of loan types and products, including FHA, VA and USDA.
- Borrowers can apply and track loan status online.
- Offers customized online rate quotes with monthly payment estimates, including mortgage insurance, when applicable.
- Home equity loans are geographically limited.
- Origination fees are on the high side compared with other lenders, according to the latest federal data.
State Employees' Credit Union: NMLS#430055
Regional
90%
540
- Long draw period of 15 years.
- Introductory offer is below the prime rate.
- Credit union membership is limited by restrictive requirements.
- Long draw period of 20 years.
- High CLTV of 95%.
- No origination or annual fee.
- Minimum draw of $10,000.
- The only payback term length available is 20 years.
- No rate discounts available.
How a HELOC works
A HELOC works similarly to a credit card: you’re able to borrow up to a certain limit as needed, rather than taking out a lump sum all at once. Unlike a credit card, however, you shouldn’t use a HELOC to pay for everyday expenses. Just like with your first mortgage, you could lose your home to foreclosure if you aren’t able to make payments. Because of this risk, it’s best to use your equity to reinvest in your home with projects that will increase its value.
The lender uses your home’s value to set the HELOC limit, and they’ll let you borrow a percentage of what you own. You may borrow during a draw period that lasts for several years (usually 10) and pay interest only on the balance. After the draw period ends, you may no longer take money out, and you pay the principal plus interest.
To obtain the best HELOC rates, make sure you comparison shop, preferably among at least three lenders. By shopping around, you're likely to find the combination of features and interest rate that make the best home equity line of credit for your needs. The best rates are also typically reserved for borrowers with excellent credit scores and low amounts of existing debt.
Pros and cons of HELOCs
A HELOC's main advantage is that it offers flexibility. During the draw period, the minimum monthly payment usually covers just the interest on the balance, and you aren’t required to pay principal.
A HELOC can have a variable interest rate, which means it can go up or down over time. When the interest rate rises, the minimum monthly payment may increase, too. Less commonly, some lenders offer a fixed-rate HELOC option, meaning that you can lock in some or all of the loan balance at a specific APR.
There are two major disadvantages to a HELOC: The interest rate can rise, and you can get in over your head if you're not careful. You may end up borrowing so much that you can't comfortably afford the principal and interest during the repayment period.Defaulting on a HELOC could put your home at risk of foreclosure.
Alternatives to HELOCs
A HELOC is not your only option for tapping your home's equity. If you know exactly how much you need to borrow, you may consider a home equity loan, which you receive as a lump sum and pay back at a fixed rate.
While this has less flexibility than a HELOC, payments are predictable.
» MORE: Best home equity loan lenders
If you need to borrow more money than you'd qualify for with a HELOC or home equity loan, a cash-out refinance may be the right choice for you. This replaces your original mortgage with a larger one, and you receive the difference between the value of the loan and the amount you currently owe in cash. If rates have risen since you closed on your mortgage, this is unlikely to be your best option.
Finally, if you cannot qualify for a HELOC but absolutely need cash flow, a shared appreciation agreement may be worth exploring. This transaction allows you to sell off a stake in your future equity earnings to a company in exchange for an advance on some of your current equity. This type of agreement is typically for homeowners with a lot of equity but little cash reserves, and most consumers are better served by a HELOC if they can get one. You risk losing out on equity profits by mortgaging the future value of your home, so think carefully before choosing this option.
More from NerdWallet
Last updated on December 1, 2023
Methodology
The star ratings on this page reflect each lender's performance in NerdWallet’s HELOC category. For inclusion in this roundup, lenders must offer HELOCs and achieve a star rating of 4.5 or above in the HELOC rubric from NerdWallet. We scored the category and chose lenders for this page using the following methodology:
NerdWallet reviewed more than 50 mortgage lenders, including the majority of the largest U.S. mortgage lenders by annual loan volume (measured among lenders with at least a 1% market share), lenders with significant online search volume and those that specialize in serving various audiences across the country.
All reviewed mortgage lenders that offer HELOCs were evaluated based on (1) maximum CLTV, (2) whether they offer a fixed-rate option, (3) annual fees, (4) origination fees, (5) transaction fees, (6) termination fees, (7) inactivity fees (8) initial draw requirements, (9) prepayment penalties, (10) rate discounts, (11) ease of application, (12) interest rate transparency, (13) fee transparency, (14) maximum CLTV transparency, (15) maximum APR transparency, (16) draw and repayment period transparency and (17) transparency on how borrowers access their funds. The highest scoring lenders appear on this page.
NerdWallet's Best HELOC Lenders of 2023
- Bethpage Federal Credit Union: Best for fixed-rate option
- Truist: Best for range of repayment terms
- Guaranteed Rate: Best for fixed-rate option
- PNC: Best for fixed-rate option
- TD Bank: Best for no minimum draw
- Bank of America: Best for rate transparency
- Figure: Best for fast closing
- Flagstar: Best for existing Flagstar customers
- State Employees' Credit Union: Best for high borrowing limit
- Navy Federal: Best for high borrowing limit
Frequently asked questions
- What credit score do you need for a HELOC?
Lender requirements vary, but typically you'll need a credit score of 620 or higher. Taking out a HELOC will probably reduce your credit score temporarily when it appears on your credit report.
- Is a HELOC tax-deductible?
The interest you pay each year on a HELOC is tax-deductible up to a limit as long as the borrowed money is used to buy, build or substantially improve your home, according to the IRS.
