2024’s Top 9 Home Equity Loan Lenders: Compare Home Equity Loans vs. HELOCs

When considering your options for accessing home equity, it's essential to understand the differences between home equity loans and home equity lines of credit (HELOCs).

 

Both provide access to your home's value, but they function in distinct ways. Here's a breakdown of their key differences!

 

Repayment Structure

 

 

A home equity loan offers you a lump sum of money upfront, which you repay over time with fixed monthly payments at a fixed interest rate—similar to a second mortgage. On the other hand, a HELOC operates more like a credit card. It gives you access to a line of credit that you can draw from as needed, with a variable interest rate. This means your monthly payments may vary based on how much you've borrowed and the current interest rate.

 

Interest Rates

 

One of the most significant differences between home equity loans and HELOCs is the interest rate structure. Home equity loans typically come with fixed interest rates, offering stability and predictability over the life of the loan. In contrast, HELOCs generally have adjustable or variable rates that can fluctuate over time, potentially leading to lower payments initially but higher payments down the road. Some HELOCs do offer fixed-rate options, allowing you to lock in a rate on a portion of the borrowed funds.

 

Fees

 

Both home equity loans and HELOCs may come with fees, but they differ in how they are applied. Home equity loans often have closing costs, similar to a mortgage, which can include fees for appraisal, title search, and loan origination. HELOCs, while they may also have closing costs, can include ongoing annual fees, transaction fees, and even inactivity fees if you don’t use the credit line regularly. It's important to consider these costs when comparing your options.

 

Flexibility

 

 

Flexibility is where HELOCs shine compared to home equity loans. With a HELOC, you have the flexibility to borrow as needed over a draw period, typically 10 years, and only pay interest on the amount you use. This makes HELOCs ideal for ongoing projects or expenses. Home equity loans, however, provide a fixed amount of money upfront, which can be beneficial if you know exactly how much you need, but they lack the flexibility of a revolving line of credit.

 

Minimum Withdrawals

 

When it comes to minimum withdrawals, HELOCs often have lower requirements than home equity loans. HELOCs allow you to borrow smaller amounts as needed, whereas home equity loans typically have minimum loan amounts ranging from $10,000 to $25,000. This can make HELOCs more accessible if you need a smaller sum or want to spread out borrowing over time.

 

Payments

 

The payment structure also differs significantly between home equity loans and HELOCs. With a home equity loan, your payments cover both principal and interest for the entire loan amount, making it easier to plan your budget. In contrast, HELOCs require you to pay only the interest on the borrowed amount during the draw period, with principal payments typically beginning during the repayment phase, which can lead to higher payments later on.

 

Ability to Pay Off Early

 

If you’re considering paying off your loan early, a HELOC might be a better option as it usually doesn’t penalize early payoff. On the other hand, home equity loans may charge prepayment penalties if you decide to pay off the loan before the term ends. This can be a significant factor if you anticipate having the ability to pay off your loan early and want to avoid extra fees.

 

Summary of Key Differences

 

• Home Equity Loans: Provide a fixed lump sum with fixed interest rates, making them predictable but less flexible. Payments cover both principal and interest, and prepayment penalties may apply.
• HELOCs: Offer a revolving line of credit with variable interest rates, providing flexibility but potential payment fluctuations. Payments are interest-only during the draw period, and no prepayment penalties apply.

 

The 9 Best Home Equity Loan Lenders of 2024

 

 

Choosing the right lender is crucial to securing the best home equity loans. Here are the top 9 lenders for home equity loans in 2024:

 

1. Rocket Mortgage, LLC

 

Rocket Mortgage allows borrowers to take out home equity loans on second properties, offering terms of 10-20 years. They do not charge a fee for early repayment, making them a flexible option. However, they don't publish equity loan rates online, and e-closing is not available, which might be a drawback for some.

 

• Pros: No early repayment fees, available for second properties.
• Cons: Rates not published online, no e-closing.
• Best For: Borrowers looking for flexibility and the ability to finance second properties.

 

2. New American Funding

 

New American Funding stands out with a wide variety of purchase and refinance options, emphasizing support for underserved communities. Their home equity line of credit (HELOC) can be used for both primary and secondary homes. However, they tend to have higher origination fees, which can add to the overall cost.

 

• Pros: Wide variety of options, focus on underserved communities.
• Cons: Higher origination fees.
• Best For Homeowners in underserved communities seeking diverse financing options.

 

3. Carrington

 

Carrington is known for considering alternative credit data, such as bank statements, when evaluating loan applications. They offer customized rates online and allow you to apply easily. However, they don't offer HELOCs, and their lender fees are higher than some competitors.

 

• Pros: Considers alternative credit data, and customized online rates.
• Cons: No HELOCs, higher lender fees.
• Best For: Borrowers with non-traditional credit profiles.

 

4. Network Capital

 

Network Capital provides up to 90% of your home equity, with a variety of loan terms available. They also waive the need for an appraisal, which can save time and money. However, they only provide sample purchase rates online, not equity loan rates.

 

• Pros: High equity access, no appraisal required.
• Cons: Equity loan rates are not published online.
• Best For: Borrowers looking to maximize their home equity.

 

5. US Bank

 

US Bank offers a rate discount for existing customers, making it a popular choice for current account holders. They offer loan terms ranging from 5 to 30 years, with no application or closing fees. However, their home equity loans are limited to a maximum of 80% of your home’s equity and may not be available in all states.

 

• Pros: Rate discounts for customers, no application/closing fees.
• Cons: Limited to 80% equity, not available in all states.
• Best For: Current US Bank customers looking for favorable terms.

 

6. Pennymac

 

Pennymac offers home equity loans with terms of 10, 15, 20, and 30 years. You can apply and track your loan online, and they don’t charge a fee for early repayment. However, they don't publish equity rates online and don't offer loans for investment properties.

 

• Pros: No early repayment fees, easy online application/tracking.
• Cons: Rates not published, no loans for investment properties.
• Best For: Homeowners looking for online convenience and no early repayment penalties.

 

7. Flagstar

 

Flagstar provides a wide range of products and allows you to apply and track loans online. They offer customized quotes, but their home equity loans are geographically limited, and they have higher origination fees.

 

• Pros: Wide range of products, customized quotes.
• Cons: Geographically limited, higher fees.
• Best For: Borrowers in eligible areas seeking diverse product options.

 

8. Andrews Federal Credit Union

 

Andrews Federal Credit Union offers up to 95% of your home equity, with competitive rates for both HELOCs and home equity loans. They support military members and locals in the Mid-Atlantic region, but their services are limited to this area.

 

• Pros: High equity access, and competitive rates.
• Cons: Limited to the Mid-Atlantic region.
• Best For: Military members and residents of the Mid-Atlantic seeking high equity access.

 

9. Navy Federal

 

Navy Federal offers home equity loans with up to 100% of your home equity available, along with flexible terms. They don’t charge closing costs or prepayment penalties, but their services are limited to credit union members, and there's a minimum loan amount of $10,000.

 

• Pros: High equity access, no closing costs or penalties.
• Cons: Limited membership, $10,000 minimum loan.
• Best For: Credit union members seeking high equity and no additional fees.

 

Conclusion

 

When it comes to choosing between a home equity loan and a HELOC, the decision often hinges on your financial needs and preferences. If you value stability and know exactly how much you need, a home equity loan with its fixed interest rate and lump sum payment might be the best option. On the other hand, if you prefer flexibility and the ability to borrow as needed, a HELOC could be the better choice.

 

As for finding the best home equity loans in 2024, these nine lenders offer a variety of options to suit different needs