Top Home Equity Loan Lenders
What is a Home Equity Loan?
A home equity loan is a loan that allows homeowners to borrow money using the equity in their home as collateral. The loan amount is based on the difference between the current value of the home and the amount owed on mortgages or liens. Homeowners typically use home equity loans for big expenses like home renovations or big expenses.
You may have heard of home equity loans referred to under a different name, such as:
- Home equity installment loan
- Second mortgage
- Equity loan
These all mean the same thing: obtaining a loan against the equity (ownership) you’ve accumulated in your property.
How to Get the Best Home Equity Loan in 6 Steps

How Does it Work?
In this loan structure, the borrower’s home equity is used as collateral for the lender. Securing a loan against home equity helps protect the lender since the home can be sold if the loan cannot be repaid. This structure also means lenders often provide more favorable rates than other types of loans.
Borrowers build equity in one of two ways:
- When paying down their mortgage.
- When their home’s value increases. Of course, the opposite is also true. If your house value falls, your equity will be negatively impacted.
Like a traditional mortgage, a home equity loan will have a repayment schedule dictating recurring payments. Also, like a conventional mortgage, these repayments will be composed of principal and interest.
How is The Loan Amount Calculated?
Lenders will typically determine loan amounts based on several criteria. Usually, the better the borrower's financial position, the higher the loan amount and the more favorable the rate they will obtain.
In addition to considering a borrower’s credit score and payment history, lenders will usually determine a loan amount in part based on a combined loan-to-value (CLTV) ratio.
The metric represents the ratio of all secured loans on a property relative to the property’s entire value. Lenders typically lend to borrowers with CLTV ratios of no more than 80%.
In other words, lenders usually limit the loan to 80% of the property value.
For example, a $100,000 property with a CLTV ratio of 80% would imply the loan size is $80,000 (80% of $100k).
SEE: Home Equity Loan Calculator
How to Choose a Home Equity Lender
There are several elements to consider when deciding on a lender, including:
- What size of home equity loans does the lender offer?
- Will you be eligible for a loan with this lender?
- What terms are offered?
- What is the current interest rate range (APR range)?
- What is the quality of customer service?
- How have other borrowers reviewed the lender?
Borrowers will need to assess a myriad of factors when choosing a lender. For most borrowers, a low-interest rate will be one of the main drivers of their decision. For others, quality customer service is essential and may trump another lender with a slightly lower rate.
Ultimately, the appropriate lender will depend on the factors important to the borrower.
What is a Good Home Equity Loan Interest Rate?
Average Interest Rates for Home Equity Loans (as of August 23, 2023):
- General Home Equity Loan: The average rate stands at 8.59%, with figures spanning from 7.97% to 9.91%.
- 10-Year Fixed Home Equity Loan: The average rate is 8.72%, fluctuating between 7.81% and 9.83%.
- 15-Year Fixed Home Equity Loan: The rate averages at 8.70%, with a spectrum from 7.93% to 10.68%.
Top Home Equity Loan Rates
Lender |
Loan Amount |
Loan Term |
APR Range |
Best For |
Discover |
$35,000 – $300,000 |
10 to 30 years |
7.49% - 13.99% |
Low Rates |
U.S Bank |
$15,000 – $750,000 |
Up to 30 years |
Starting at 7.95% |
Low fees at a national bank |
KeyBank |
$25,000-$250,000 |
1 to 30 years |
8.03% - 12.93% |
Homeowners with limited equity |
Spring EQ |
Up to $500,000 |
Not specified |
Not specified |
Fast funding |
Flagstar Bank |
$10,000 – $1,000,000 |
10 to 20 years |
Starting at 7.99% |
Flexible loan terms |
BMO Harris Bank |
$25,000 – $150,000 |
5 to 20 years |
starting at 7.39% |
Different Loan Options |
Frost |
Starting at $2,000 |
7 to 20 years |
5.34% - 5.64% |
Low fees at a regional bank |
Connexus Credit Union |
Starting at $5,000 |
5 to 20 years |
Starting at 7.96% |
Branch network |
Regions Bank |
$10,000 – $250,000 |
7 to 20 years |
Starting at 6.38% |
Customer experience |
Average Home Equity Loan Rates by Market
Market Average |
Rate Average |
Rate Range |
Boston |
7.27% |
5.00% - 8.48% |
Chicago |
9.04% |
8.01% - 10.86% |
Detroit |
9.60% |
7.20% - 10.80% |
New York Metro |
8.50% |
8.49% - 8.50% |
Philadelphia |
7.55% |
5.49% - 8.49% |
Market Total |
8.00% |
5.05% - 10.88% |
How to Get a Home Equity Loan
Obtaining a home equity loan can be broken down into four simple steps:
- Perform a credit check
Before applying for a home equity loan, consider checking your credit score to confirm if you’re likely to qualify. This step will also help determine the interest rate you might expect to receive. Typically, lenders require credit scores of 620 and up.
- Shop around
Compare available options before deciding on a lender to ensure you can find the institution that can best fulfill your needs.
- Complete the application
Lenders require several documents to be completed and provided, like pay stubs and tax returns.
- Obtain your loan
Once the loan is approved and signed, the lender will release the funds to you. This stage can range from two weeks to upwards of two months.
Home Equity Loan Requirements
The requirements for eligibility can vary widely between lenders. Still, by and large, the following criteria can typically be expected:
- Homeownership: Only homeowners can apply for a home equity loan. You must have an ownership stake in the property and be listed on the title.
- Sufficient equity: You need to have built up enough equity in your home to qualify for a home equity loan. Typically, lenders require a minimum of 20% equity. An equity of at least 20% also means an LTV ratio of at least 80%.
- Good credit: Lenders will consider your credit score when determining your eligibility for a home equity loan. Generally, a credit score of 620 or higher is required to qualify.
- Stable income: You must have a stable income and be able to demonstrate your ability to repay the loan. Lenders will require proof of income, such as pay stubs, W-2s, or tax returns.
- Low debt-to-income ratio: Your debt-to-income ratio (DTI) is the amount of debt you have relative to your income. Lenders typically prefer a DTI of 43% or lower.
- Property value: The value of your property is a factor in determining your eligibility for a home equity loan. Lenders will typically require an appraisal to determine the current value of your home.
- Clear title: Lenders will perform a title search to ensure that there are no outstanding liens or other issues with the property that could affect their security interest.
Home Equity Loan Uses
People take home equity loans for a variety of reasons, including:
- Home improvements: Homeowners often use home equity loans to finance home improvements, such as remodeling a kitchen or adding a new room to their home.
- Debt consolidation: Home equity loans can be used to consolidate high-interest debt, such as credit card debt, into one lower-interest loan, making it easier to manage monthly payments.
- Education expenses: Some homeowners use home equity loans to pay for college tuition, either for themselves or for their children.
- Medical expenses: Home equity loans can help cover medical expenses, such as unexpected medical bills or costly procedures.
- Starting a business: Home equity loans can be used to finance a new business venture or to expand an existing business.
- Emergency expenses: Homeowners may take out a home equity loan to cover unexpected expenses, such as emergency home repairs or damage caused by a natural disaster.
In general, a home equity loan can be a good option for borrowers who need a large sum of money and have built up equity in their homes. However, it's important to carefully consider the risks and benefits of a home equity loan before applying, as failure to repay the loan could result in foreclosure on your home.