Best Home Equity Loan Lenders

The best home equity loan lenders give you the option to borrow an amount that puts your combined LTV ratio at 80% or more, work with borrowers with a variety of credit scores and have quick closing times, along with repayment terms of up to 30 years.

A home equity loan is a secondary mortgage product that taps into your home's equity. This product is ideal for homeowners whose home values have appreciated but who don't want to refinance their existing mortgage to pull cash out of their homes.

Home equity loan funds are disbursed in a lump sum. For the duration of the loan, you'll make monthly payments according to a predetermined repayment schedule. In most cases, a home equity loan has a fixed interest rate.

Home equity loans, which are second mortgages, give homeowners access to their home equity, which is the difference between the home's value and the mortgage balance. For example, if your home is worth $300,000 and you owe $220,000, you have $80,000 of equity in your home.

Depending on the lender, you may be able to access some or all of your home equity with a home equity loan. Each lender has a maximum LTV ratio that defines how much a borrower may receive. If a lender has a 90% combined LTV cap, the combined balance of their primary mortgage and home equity loan cannot exceed 90% of the home's value. For a home worth $300,000, the combined maximum is $270,000.

To get approved for a home equity loan, you must meet certain requirements.

• Credit score: Lenders may require that borrowers have a minimum credit score to qualify for a home equity loan.
• Ability to repay: Lenders review income and debt obligations to determine if you can reasonably add the loan payment to your monthly expenses. The lower your debt-to-income (DTI) ratio is, the higher your chances of approval.
• Combined LTV ratio: The combined balance of your primary mortgage and your home equity loan cannot exceed a certain percentage of your home's value. Most lenders allow a max combined LTV ratio of 80% to 90%.

Additionally, your lender may charge fees for your loan. Some lenders may waive these fees, so keep that in mind when you're comparing loan options. Some of the most common fees that lenders charge include the following:

• Application fee
• Origination fee
• Credit report fee
• Home appraisal fee
• Document fee
• Title search

Some lenders offer discounts on your interest rate if you set up automatic monthly payments. Additionally, lenders may offer relationship-based pricing to lower your interest rate or fees.

Compare the best home equity loan lenders to find loan options with the most attractive rates and terms. Once you've found your lender, apply for your loan in person, over the phone or online. Application details vary by lender, but in general, lenders request your personal information, property address and details, how much you want to borrow and your desired repayment term.

Next, the loan officer will request documentation to support your application. These documents may include your most recent paycheck stubs, tax returns, property tax bills, insurance policy, and (if applicable) homeowners association statements.

Depending on your home's value, your equity and the loan amount, the lender may require an appraisal, which is performed by an independent appraiser and determines your home's value based on its features and recent sales of comparable homes in your local area. Homeowners can get an early estimate of their home's value through websites or apps like Zillow and Redfin or by speaking with a local real estate agent.

Once the lender completes its underwriting process, it will make a decision on your application. If approved, you'll receive a lump-sum distribution to your bank account or in a cashier's check. You'll start receiving monthly statements with loan details, including your minimum monthly payment and due date.

While a home equity loan is a good choice for many homeowners, it isn't the best fit for everyone. If a homeowner wants to use their equity, they can also take out a HELOC, a cash-out refinance loan or a reverse mortgage (if they’re older). Plus, there are other options available that don’t use your home as collateral.

• HELOC. A home equity line of credit is a line of credit that homeowners can use repeatedly. You'll receive a maximum credit limit based on your home's value, the maximum LTV ratio, your loan request and other factors. You can withdraw funds up to your credit limit and as you pay down the balance, you can make additional withdrawals — similar to using a credit card. Monthly payments for HELOCs are interest-only during the draw period, which is often five to 10 years.
• Cash-out refinance. Instead of adding a second mortgage, many borrowers refinance their existing mortgage and pull cash out. While this increases the balance you owe on your primary mortgage, you may be able to lower your interest rate, saving you money in the long run. Depending on the loan amount and your income, you can also adjust the term of the loan to meet your needs.
• Reverse mortgage. A reverse mortgage is a loan product for older homeowners who want to withdraw cash from their home but don't want a monthly payment. To qualify for a reverse mortgage, homeowners typically have to be at least 62 years old and have significant equity in their homes. While there are no monthly payments, interest continues to accrue, and the lender must be repaid once the homeowner moves out of the home or dies.
• 0% APR credit card offers. For a smaller loan amount, a credit card with a 0% introductory APR may be a good choice. It is an unsecured line of credit, so your home is not at risk. And some of the best 0% APR credit cards offer no-interest financing for almost two years. However, if you do not pay off the balance before the introductory period expires, the unpaid balance reverts to the standard interest rate, which is typically much higher than a mortgage rate.

To make our choices for the top home equity loan lenders, we collected 13 individual data points from 15 mortgage lenders, including over 8,000 customer reviews and overall ratings from ConsumerAffairs readers submitted between 2020 and 2022. We then used this data to examine the factors that have the most impact on borrowers.

• Minimum credit score: We considered this for all lenders, but most required a 620 minimum score. However, there are several lenders that will work with borrowers who have less-than-stellar credit.
• LTV ratio: We gave higher consideration to lenders that allow a higher LTV ratio (most common is 80%).
• APR: We looked for lenders that have starting APRs below 10%. However, market conditions fluctuate rapidly, so we placed less emphasis on this factor when making our choices.
• Repayment terms: We examined payment term ranges and noted which lenders offer longer repayment terms of 360 months.
• Time to funding: We reviewed how quickly borrowers could receive their funds and gave greater consideration to lenders with funding times of less than 30 days.
• Closing costs and other fees: We considered lenders that have closing costs ranging from 2% to 5%, available rate discounts and low origination fees.

All of our top picks offer comparable starting APRs, work with borrowers who have fair credit, allow an 80% LTV ratio and have funding times of less than eight weeks, along with long repayment terms. They also have other features, such as online applications, nationwide availability and high maximum loan amounts.

Because customer feedback is a critical indicator when evaluating companies, it was an important factor as we selected our top picks. However, for those companies on our list with no ratings from ConsumerAffairs reviewers, there were other variables that made them stand out as good options for home equity loans, and those factored into our decisions.