Standout HELOC Lenders of 2023

A HELOC works like a credit card: You’re able to borrow up to a certain limit, repay some or all of what you took out, then do it again as needed. The lender uses your home’s value to set the HELOC limit, and you may borrow during a draw period that lasts for several years 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. By shopping around, you're likely to find the best combination of features and an interest rate for your needs.

A HELOC requires you to provide similar documentation to a mortgage: at minimum, proof of income and assets and a list of monthly debt payments, plus a credit check.

After underwriting, you'll close on the credit line, similar to closing on the purchase mortgage.
A HELOC may require an application fee, title search, appraisal, and attorney’s fees. You may be given the option of paying discount points to reduce the interest rate.

The lender may require an appraisal to determine the amount of your credit line, which you may need to pay for upfront. Sometimes, the lender may pay for the appraisal and waive the fee if you keep the account open for a specified number of years.

HELOCs are indexed to the Wall Street Journal prime rate, which is the base interest rate on corporate loans by large banks. The prime rate, in turn, moves up and down in sync with changes to the federal funds rate, which is set by the Federal Reserve.
The rate on a HELOC is based on a margin above (or below) the prime rate. For example, a bank might give you a HELOC at a rate of prime plus 1%. The "plus 1%" is the margin, and your interest rate is the margin added to the prime rate.
Let's say the prime rate is 4.75% and your margin is +1%. When you add them, you get 5.75%, and that's the rate on your HELOC. In this case, if the prime rate went up a quarter of a percentage point, to 5%, then your HELOC's rate would rise the same amount, to 6%.
Margins vary, based on factors such as credit score, the loan-to-value ratio, whether you have another account with the bank you get a HELOC from, and the lender's eagerness to underwrite HELOCs. That's why it's important to shop around — each lender might quote you a different interest rate.

A HELOC can have a variable interest rate, meaning it can go up or down over time. When the interest rate rises, the minimum monthly payment may increase. 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.
A HELOC's main advantage is flexibility. During the draw period, the minimum monthly payment covers just the interest on the balance, so you don't have to pay principal if you don't want to.

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.

HELOCs typically have lower interest rates than credit cards. But defaulting on a HELOC could put your home at risk of foreclosure.

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.
Many lenders will let you carve out a portion of what you owe on your HELOC and convert it to a fixed rate. You’ll still have the balance of your line of credit to draw from at a variable rate.

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.

With a cash-out refinance, you're getting a new home loan for more than you currently owe on your house. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash, which you can spend on home improvements, debt consolidation or other financial needs. However, you'll now be repaying a larger loan with different terms, so it's important to weigh the pros and cons before committing to a cash-out refi.

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.
» MORE: 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.
» MORE: Cash-out refinance
See below for our picks for Cashout Refinance lenders.