You can get a home equity loan from a bank, credit union, mortgage company, or online lender, although some lenders have ceased offering this product due to the financial climate as of this writing. Learn who still offers home equity loans, how to shop around, and ways to prepare and apply for a home equity loan.
Who Offers Home Equity Loans?
Home equity lenders include banks, credit unions, mortgage companies, and online lenders. Some specialize in providing home equity loans to borrowers with less-than-ideal credit. Not all financial institutions offer home equity loans, however. Some offer only home equity lines of credit (HELOCs), and others have discontinued their home equity lending altogether, including some of the biggest names in financial services:
Bank of AmericaCapital One (discontinued all home loans)Chase BankCiti (temporary halted fixed-rate home equity loans as of March 2021)PNC BankTruistWells Fargo
Many banks have stepped away from the home equity market, citing economic uncertainty. Home equity loans are often considered risky because in a foreclosure, the lender that made the primary mortgage is the first in line to get paid. Nonetheless, a number of financial institutions will still vie for your home equity loan business, presenting varied offerings in loan amounts, repayment term length (10 through 30 years, for instance), and interest rates.
How To Compare Home Equity Loans
It’s important to shop around for a home equity loan to find the best terms for you. Here’s how to get started:
Inquire about interest rates: This ranks as the most important aspect of comparing home equity loans. Specifically, ask about the annual percentage rate (APR), which includes the interest rate you’ll be charged along with fees and other lending expenses.Visit with a lender you’re already doing business with: They may be open to giving you a discount on the interest rate or fees if you’re a loyal customer.Seek referrals: Ask friends and relatives what lender they use and what their experiences were like.Look into prepayment penalties: Some lenders assess a prepayment fee if you pay off a home equity loan before the end of the payoff period.Negotiate with at least two lenders: When lenders are competing for your business, they might be willing to lower the interest rate, reduce fees, and offer other incentives.Check your credit: Get copies of your credit reports and examine your credit scores to help determine your financial health. Lenders will closely review this information during your loan application process.
Home Equity Loan Rates
When you’re shopping for a home equity loan, one of the key pieces of information you’ll want to find out is the APR. This rate depends on factors such as your income, your credit history, and the value of your home. The range for APRs offered by home equity lenders varies widely. On average, the interest rate for a home equity loan is typically higher than the average rate for a traditional mortgage but lower than that of a HELOC, personal loan, or credit card. Since APRs for home equity loans fluctuate frequently, your best bet is to keep an eye on interest rates by regularly checking websites of banks, credit unions, mortgage companies, or online lenders you’re considering.
How To Apply for a Home Equity Loan
Once you’ve settled on a home equity lender, it’s time to get ready for the application process. Here are six steps to take when preparing to submit your application: Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
