Compare Home Equity Loan Lenders – Unlock Your Equity
A home equity loan is a good source of money for major projects and one-time expenses because it’s a lump-sum equity draw. It lets you borrow money using your home as collateral. You'll get a lump-sum payment and repay the loan with fixed-rate interest over a predetermined term. Explore our selected home equity and cash-out refi lenders.
Compare Home Equity Loan Lenders – Unlock Your Equity
NMLS#3030
Rocket Mortgage, LLC
Rocket Mortgage, LLC
National / regional
National
Max LTV
90%
Min. credit score
680
Pros, Cons, and Our View
- Availability:
- Unavailable in TX
Pros
- Offers a higher than typical borrowing limit.
- Home equity loans are available for second homes.
- Easy access to customer support.
Cons
- Appraisal may be required.
- Does not post sample home equity loan rates online.
NMLS#613839
Farmers Bank of Kansas City
Farmers Bank of Kansas City
National / regional
National
Max LTV
100%
Min. credit score
600
Pros, Cons, and Our View
- Availability:
- Unavailable in MD, TX, AK, and HI
Pros
- Offers a maximum HELOC loan amount of $1M, and a CLTV up to 100%.
- HELOCs are available on investment properties and second homes.
- Hosts an exceptional online tool for customized sample HELOC rate quotes, making comparison shopping easy.
Cons
- Charges an origination fee of $795, though discounts are available to qualifying Farmers Bank customers.
- Requires a large initial draw up to 75% of your line amount.
NMLS#401052
BMO
BMO
National / regional
National
Max LTV
75%
Min. credit score
620
Pros, Cons, and Our View
- Availability:
- Unavailable in NY and TX
Pros
- Offers 5-, 10-, 15- and 20-year terms.
- Displays interest rates, including APR, for home equity loans.
- Borrowers can apply for and track loans online.
Cons
- May charge a penalty for early repayment.
- Doesn’t offer home equity loans for investment properties or second homes.
About home equity loans
Home equity loans typically have a fixed interest rate, meaning the payment is the same each month; that makes them easier to factor into your budget. But remember: That home equity loan payment will be in addition to your usual mortgage payment.
Since it’s a lump-sum equity draw, a home equity loan is a good source of money for major projects and one-time expenses.
Home equity loans pros and cons
Pro: A fixed interest rate.
Pro: Monthly payments won't change and are for a set period.
Con: Tapping all the equity in your home in one fell swoop can work against you if property values in your area decline.
What is the difference between a home equity loan and a home equity line of credit (HELOC)?
HELOCs and home equity loans are similar in that you’re borrowing against your home equity. But a loan typically gives you a sum of money all at once, while a HELOC is similar to a credit card: You have a certain amount of money available to borrow and pay back, but you can take what you need as you need it. You’ll pay interest only on the amount you draw.
HELOCs often begin with a lower interest rate than home equity loans but the rate is adjustable, or variable, which means it rises or falls according to the movements of a benchmark. That means your monthly payment can rise or fall, too.
Which is better: HELOC or home equity loan?
Before deciding whether to apply for a HELOC or a home equity loan, consider how much money you really need and how you plan to use it. Factor in interest rates, fees, monthly payments and tax advantages as you weigh your options.
Using the equity in your home before selling can be a powerful financial benefit. But remember, you're using your home as collateral. One risk to avoid, whether you choose a home equity line of credit or a loan: Resist funding short-term needs with what may eventually amount to a long-term loan.
Methodology
NerdWallet's star ratings for mortgage lenders are awarded based on our evaluation of the products and services each lender offers to consumers who are actively shopping for the best mortgage. The five key areas we evaluated include the variety of loan types and products offered, online conveniences, online mortgage rate information, and the rate spread and origination fee lenders reported in the latest available Home Mortgage Disclosure Act data. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.
To recap our selections...
NerdWallet's Compare Home Equity Loan Lenders – Unlock Your Equity
- Rocket Mortgage, LLC
- Farmers Bank of Kansas City
- BMO
Frequently asked questions
How does a home equity loan work?
As you make monthly mortgage payments, you’re building equity in your home. You’re growing the share of your home that you actually own, and once you have enough equity (typically at least 15-20%), you can borrow against it and spend the cash as you wish.
You’ll receive it all at once in the form of a loan, which is why a home equity loan can be a popular choice for borrowers who know exactly how much they’ll need to accomplish their goals. Shopping around to multiple lenders can help ensure that you get the best rate, which is determined by your debt-to-income ratio, credit score and the amount of equity that you’re borrowing, among other factors.
How do you get a good home equity loan rate?
Your credit score is a major factor influencing your interest rate. You're more likely to be approved for a home equity loan with a credit score of 700 or higher. The lowest rates tend to go to borrowers with credit scores of 740 or higher.
Interest rates also vary by loan term.
Mortgages with longer terms tend to have higher interest rates. That's the case with home equity loans, too. In NerdWallet's survey of home equity loans, the average rate on loans with 15-year terms is usually higher than on loans with 10-year terms, which usually have higher rates than loans with five-year terms. This isn't an ironclad rule, though. Sometimes, some lenders charge lower rates for loans with longer terms. That's why it pays to shop around for a home equity loan.
Some lenders will give a discount on a home equity loan's interest rate if you have another account with the bank.
Is it worth getting a home equity loan?
If you need a large amount of cash, a home equity loan will likely get you a lower interest rate than a comparable personal loan. But if you need to borrow $10,000 or less, a personal loan, or even a credit card, could do the job — and you won't be using your home as collateral.