Best HELOC and Home Equity Loan Lenders in Arizona

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Arizona’s real estate market has been sizzling hot for the better part of the past 12 months. June data from the Arizona Association of Realtors shows that the median home sales price was up 14.5% from last year. 

If you’re like many homeowners in the Grand Canyon State, there’s a good chance you’ve seen your home equity skyrocket in the past few years due to rising property values. With plenty of options for home equity line of credit (HELOC) and home equity loan lenders, you can turn that equity into cold, hard cash

Home equity is the difference between your home’s value and your outstanding mortgage balance. Lenders typically allow you to borrow up to a certain percentage of your home’s equity, so having more equity in your home means having more borrowing power. You’ll have a greater ability to get cash to achieve your financial goals, such as consolidating high-interest debt, financing home improvements, or funding additional education to increase your earning potential.

There are many places to get a home equity loan or HELOC, from traditional banks to credit unions to online lenders. They all offer varying terms, rates, and fee structures, and some are better than others. We’ve done the research and compiled our top picks for the best home equity loan and HELOC lenders in Arizona. 

Editorial Independence

As with all of our home equity loan and home equity line of credit (HELOC) lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.

Best National Home Equity Line of Credit (HELOC) and Home Equity Loan Lenders in Arizona

Good for wide nationwide availability
U.S. Bank
U.S. Bank
Good for wide nationwide availability
U.S. Bank
  • Products offered:
    Home equity loan, HELOC, rate-lock HELOC
  • Home equity loan terms:
    Up to 30 years
  • HELOC terms:
    10-year draw period, unspecified repayment period
  • Maximum LTV allowed:
    80%

NextAdvisor’s Take

Pros
  • Rate discount for setting up autopay from a U.S. Bank checking or savings account (home equity loans only)
  • Extensive availability nationwide (47 states for both home equity loans and HELOCs)
  • Can apply online, over the phone, or in person at a branch
  • Good price transparency
  • Many customer support options
Cons
  • There may be an annual fee for HELOCs if you don’t have a U.S. Bank Platinum Checking Package
  • Not available in TX, DE, SC
  • Potential early closure fee if you close your HELOC within 30 months of opening
The Bottom Line

Based in Minneapolis, Minnesota, U.S. Bank is the fifth largest banking institution in the U.S. It offers both home equity loans and HELOCs in 47 states, with the option of interest-only HELOCs  available to qualified borrowers. You also have the option to lock all or part of your outstanding HELOC balance into a fix-rate option during your draw period. Available loan amounts for HELOCs and home equity loans range from $15,000 to $750,000, and up to $1 million for properties in California.

There are no closing costs on home equity loans or HELOCs from U.S. Bank, but you’ll be charged an early closure fee of 1% of the line amount ($500 max) if you close your HELOC within 30 months of opening. In addition, HELOC borrowers may be charged an annual fee of up to $90, which can be waived with a U.S. Bank Platinum Checking Package. U.S. Bank offers a rate discount of 0.5% for home equity loan borrowers who set up automatic payments from a U.S. Bank personal checking or savings account.

You can apply for a home equity loan or HELOC through an online application, by phone, or by visiting a U.S. Bank branch in person. If you want a loan estimate for a home equity loan — which includes the estimated interest rate, monthly payment, and total closing costs — without completing a full application, you can get one by speaking with a banker over the phone. 

We like U.S. Bank because of its extensive nationwide availability, many customer support options, and excellent price transparency — meaning you can get a personalized rate quote and fee information just by filling out some basic information, no credit check required. 

Good for wide range of customer service options
Connexus Credit Union
Connexus Credit Union
Good for wide range of customer service options
Connexus Credit Union
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC
  • Home equity loan terms:
    5 to 15 years
  • HELOC terms:
    15-year draw period, 15-year repayment period
  • Maximum LTV:
    90% for home equity loans

NextAdvisor’s Take

Pros
  • No annual fee
  • Available in 46 states
  • Excellent customer service options
  • Membership requirements are relatively easy to meet
Cons
  • Credit check required to get a personalized rate quote and product terms
  • Not available in Alaska, Hawaii, Maryland, and Texas
  • Potential for high closing costs
  • Must be a member of the credit union to get a loan
The Bottom Line

With over 420,000 members in all 50 states, Connexus Credit Union has a far reach in the United States. The credit union offers home equity loans and HELOCs in 46 states (excluding Alaska, Hawaii, Maryland, and Texas). Loan amounts for home equity loans and HELOCs range from $5,000 to $200,000. Within its HELOC product offerings is an interest-only HELOC which may allow you to pay a lower monthly payment. Since Connexus is a credit union, its products are only available to members. But, membership eligibility is open to most people: you (or a family member) just need to be a member of one of Connexus’s partner groups, reside in one of the communities or counties on Connexus’s list, or become a member of the Connexus Association with a $5 donation to Connexus’s partner nonprofit. 

Connexus does not specify any rate discounts, but it does offer an introductory rate for the first six months of your loan term. You won’t have to pay an annual fee for a home equity loan or HELOC with Connexus, but closing costs can range from $175 to $2,000 depending on your loan terms and property location. 

To apply for a home equity loan or HELOC with Connexus, you can fill out a 3-step application online. Though the application process is quick, you won’t be able to see a personalized rate or product terms without a credit check.

Connexus offers expansive nationwide availability and has several product offerings, part of the reason this lender ranked highly for us. Its straightforward application process is another bonus that makes applying for a home equity loan or HELOC easy.

Good for online application user experience
Spring EQ
Spring EQ
Good for online application user experience
Spring EQ
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC
  • Home equity loan terms:
    5 to 30 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    90% for home equity loans, 97.5% for HELOCs

NextAdvisor’s Take

Pros
  • No credit check required to see personalized rates
  • Available in 38 states
Cons
  • Origination fee of $995
  • Minimum credit score of 620 required
  • No specified rate discounts
The Bottom Line

Spring EQ may be a relatively new bank founded in 2016, but it has already earned a positive reputation from customers across the 38 states it serves. Spring EQ offers home equity loans, HELOCs, and interest-only HELOCs, providing borrowers with flexible loan options. Home equity loan amounts range from $5,000 to $500,000, while HELOC line amounts range from $50,000 to $500,000.

Spring EQ loans may be subject to an origination fee of $995 and an annual fee of $99 in some states. Spring EQ does not specify any rate discounts.

The Spring EQ loan application process is transparent and easy to understand. Customers can see an extensive breakdown of their loan term and rate options without needing to undergo a credit check or provide their social security number. To be eligible for a home equity loan or HELOC with Spring EQ, you’ll need a credit score of 620 or higher, along with a debt-to-income ratio of 45% or less.

We ranked Spring EQ highly because of the lender’s price transparency, which allows potential borrowers to get pre-qualified for a loan with only basic information. This makes it easy to compare rates without needing to provide sensitive personal information or undergo a hard credit check. Additionally, the online experience is user-friendly and the application’s breakdown of rates, fees, and terms is easily digestible for customers.

Good for HELOCs with longer repayment periods
PNC Bank
PNC Bank
Good for HELOCs with longer repayment periods
PNC Bank
  • Products offered:
    HELOC, rate-lock HELOC
  • Home equity loan terms:
    N/A
  • HELOC terms:
    10-year draw period, 30-year repayment period
  • Maximum LTV:
    89.90%

NextAdvisor’s Take

Pros
  • Variable and fixed-rate HELOC options
  • 30-year repayment period on HELOC
  • Option to choose a custom loan term
  • User-friendly website
Cons
  • Don’t offer home equity loans
  • $50 annual fee on HELOCs
The Bottom Line

PNC Bank is the sixth-largest bank in the U.S. by consolidated assets, according to the Federal Reserve. Headquartered in Pittsburgh, PA, PNC serves 44 states. Though the bank does not offer home equity loans, it offers both variable-rate HELOCs and fixed-rate HELOCs. You can even switch between variable and fixed-rate interest over the course of your draw period. Another benefit of a PNC HELOC is that the repayment period is 30 years, unlike most other lenders who have 20 year terms. A longer payment period generally means lower monthly payments (but more interest paid in the long run), which can be beneficial to those who want to borrow large amounts. Line amounts from $10,000 to $1,000,000 are available on a PNC HELOC.

PNC offers a 0.25% interest rate discount to borrowers who set up and maintain automatic payments from a qualifying PNC checking account. There is a $50 annual fee for HELOC borrowers, except in Texas. 

The PNC website is user-friendly, giving customers the ability to estimate their home equity with an easy-to-use calculator. It also provides several useful graphics and videos to help borrowers better understand how their HELOCs work. PNC allows potential borrowers to see their rate and term options early on in the application process, indicating good price transparency. PNC also gives customers the option to choose a custom loan term. 

We like PNC Bank because its application is straightforward and the bank is very transparent about its rates, fees, and terms without requiring a credit check. Though PNC doesn’t don’t offer home equity loans at all, its wide nationwide availability for HELOCs is noteworthy.

Good for high loan-to-value ratio options
BMO Harris Bank
BMO Harris Bank
Good for high loan-to-value ratio options
BMO Harris Bank
  • Products offered:
    Home equity loan, HELOC, interest-only HELOC, rate-lock HELOC
  • Home equity loan terms:
    5 to 20 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    85% for HELOCs; 89.99% for most home equity loans

NextAdvisor’s Take

Pros
  • Available in 48 states
  • No hard credit check required
  • Flexible product offerings
  • Option for 100% CLTV for borrowers who meet certain qualifications
Cons
  • Limited customer service options
  • Can only receive personalized rates on the phone
  • $75 annual fee for HELOCs
The Bottom Line

As the 8th largest bank by assets in North America, BMO Harris Bank (a subsidiary of the Canadian financial services company Bank of Montreal) serves more than 12 million customers globally.  Currently, BMO Harris products and services are available in 48 states (all but New York and Texas). BMO Harris offers home equity loans and three variations of a HELOC. Loan amounts for home equity loans start at $5,000 and up while HELOC lines start at $10,000 and up. 

The normal maximum combined loan-to-value ratio allowed is 85% for HELOCs and 89.99% for home equity loans, but a 100% max CLTV option is available for low-to-moderate income borrowers or Low to Moderate Income Census Tract customers who need to make home improvements.

There is no application fee for a home equity loan or line of credit with BMO Harris. In addition, BMO Harris will pay closing costs for loans secured by an owner-occupied 1 to 4-family residence, but borrowers will have to pay a $75 annual fee for a HELOC. If you authorize auto pay from a BMO Harris checking account, you’ll be eligible to receive a 0.50% rate discount.

You can apply for a home equity loan or HELOC online or in-person, but in order to get personalized rates, you’ll have to speak with a representative on the phone. Getting personalized rates does not require a hard credit check. 

We like that BMO Harris offers both home equity loans and three types of HELOCs almost nationwide, but the lender fell short because of its low price transparency. Additionally, the online application requires your social security number and has some elements that could be confusing for customers. 

Good for 24-hour customer support
Flagstar Bank
Flagstar Bank
Good for 24-hour customer support
Flagstar Bank
  • Products offered:
    Home equity loan (in some areas), HELOC, interest-only HELOC
  • Home equity loan terms:
    10, 15, or 20 years
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    80%

NextAdvisor’s Take

Pros
  • Available in 49 states
  • Accessible customer service, including 24-hour phone support
  • Flexible product offerings
Cons
  • No online application (can only request a phone call)
  • Unable to get personalized rate quote through website
The Bottom Line

Flagstar Bank has the highest nationwide availability yet, offering home equity loans and HELOCs in 49 states (all but Texas). Though both products are offered in 49 states, the availability of home equity loans may be limited depending on your area. Available loan amounts for home equity loans and HELOCs are $10,000 to $1,000,000.

HELOCs with Flagstar require a $75 annual fee, but it is waived the first year. To avoid closing fees, you’ll have to keep your HELOC open for at least 36 months. Additionally, there is a 0.50% rate discount for borrowers who have monthly automatic payments set up from a Flagstar Bank deposit account.

Flagstar doesn’t have a full online application, only a form where you can submit your information to be contacted by a representative later.  Flagstar does not provide rates on its website, you can get a custom rate based on a soft credit check and some additional information. 

While its nationwide availability for HELOCs is strong, Flagstar’s tedious application process and lack of transparency may be frustrating for customers seeking a quick, easy process. The lender does offer several customer service options, including 24-hour loan support via phone, so this may be appealing to those who enjoy accessible communication with customer service. 

Good for no fees or closing costs
Discover
Discover
Good for no fees or closing costs
Discover
  • Products offered:
    Home equity loan
  • Home equity loan terms:
    10, 15, 20 or 30 years
  • HELOC terms:
    N/A
  • Maximum LTV:
    Not specified

NextAdvisor’s Take

Pros
  • No origination fees or closing costs
  • Home equity loans are available in 48 states
Cons
  • Limited customer service options available
  • Home equity loans not available in Iowa and Maryland
  • Does not offer HELOCs
The Bottom Line

A financial services company known primarily for its credit cards, Discover also offers home equity loans as part of its suite of banking products. Home equity loans are available in 48 states, but the lender does not offer home equity lines of credit (HELOCs) at all. For Discover’s home equity loans, possible loan amounts range from $35,000 to $300,000. The lender charges no origination fees, application fees, appraisal fees, and mortgage taxes. 

You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website. 

Discover offers wide nationwide availability for its home equity loans and good price transparency, but its lack of HELOC offerings may be a limiting factor for consumers looking for additional product options. In addition, Discover offers limited customer service options — your only option to get help is by phone, with no in-person service or online options like email or live chat. 

Good for unique product offering
Figure
Figure
Good for unique product offering
Figure
  • Products offered:
    Non-traditional HELOC
  • Home equity loan terms:
    N/A
  • HELOC terms:
    5, 10, 15, or 30 years
  • Maximum LTV:
    95%

NextAdvisor’s Take

Pros
  • Wide nationwide availability
  • Good online user experience
  • 0.75% discount for qualifying customers
  • Flexibility of a home equity loan/HELOC hybrid
Cons
  • Only one product offered
  • Limited price transparency
  • Potentially high origination fee
The Bottom Line

At only three years old, Figure uses a unique combination of technology and banking to provide customers in 41 states with HELOCs. Though officially called a home equity line of credit, Figure’s HELOC product has characteristics of both a traditional HELOC and a home equity loan. Borrowers will withdraw the full line amount (minus the origination fee) at the time of origination. Once they repay the initial balance at a fixed rate, they will be able to make additional draws over a specified draw period. Available line amounts range from $15,000 to $400,000.

A HELOC with Figure has no closing costs, but the borrower will be responsible for an origination fee of up to 4.99% of the initial draw, depending on the state the property is located in and the borrower’s credit profile. You may also have to pay a recording fee if your county requires it. Borrowers may receive a rate discount of up to 0.75%; 0.50% for opting into a credit union membership and 0.25% for enrolling in autopay. 

You can apply for a Figure HELOC 100% online, in only a few minutes, according to the website. You’ll be prompted to fill out some basic personal information, but you may have to wait for your application to be reviewed before you can continue with the application process.

Figure’s main draws are its fast funding — it advertises funding in as few as 5 days — and easy-to-navigate website with an accompanying chatbot. However, its downsides include the fact that you can only fill out the first part of the application before you’re told you must wait for your information to be reviewed before you can continue. In addition, Figure only offers a single product which might not be right for everyone. If you don’t want a unique HELOC/home equity loan hybrid and want to go with a traditional HELOC or home equity loan, you’ll need to find another lender. 

Good for borrowers outside the continental U.S.
PenFed Credit Union
PenFed Credit Union
Good for borrowers outside the continental U.S.
PenFed Credit Union
  • Products offered:
    HELOC, interest-only HELOC, rate-lock HELOC
  • Home equity loan terms:
    N/A
  • HELOC terms:
    10-year draw period, 20-year repayment period
  • Maximum LTV:
    90%

NextAdvisor’s Take

Pros
  • Offered in all 50 states as well as Guam, Puerto Rico, and Okinawa
  • Flexible HELOC product offerings
  • Credit union membership easy to obtain
Cons
  • No online application
  • Poor price transparency
  • Does not offer home equity loans
The Bottom Line

Established in 1935, Pentagon Federal Credit Union (widely known as PenFed) offers HELOCs in all 50 states as well as Guam, Puerto Rico, and Okinawa. PenFed is a credit union so its products are only available to members, but you can easily become a member by opening a PenFed savings account and funding it with at least $5. With PenFed, you’ll have the flexibility to choose between a standard, interest only, or rate lock HELOC with line amounts ranging from $25,000 to $1,000,000. But, the lender does not offer home equity loans at all.  

HELOCs with PenFed will have an annual fee of $99 unless you have paid $99 in interest during the preceding year. PenFed will pay most closing costs, but for credit lines greater than $500,000, the borrower will likely be responsible for closing costs. No rate discounts are specified. 

If you’re interested in applying for a HELOC with PenFed, you’ll have to request a callback over the phone or online. This feature may be a major drawback for customers who prefer online services and applications.

While PenFed may be a good option for borrowers in U.S. territories who don’t have many other alternatives when it comes to home equity lenders, the lender’s lack of an online application and lack of price transparency earned it a low score in our ratings. If you prefer communication via telephone, however, PenFed may be a good option for you.

How We Chose These Lenders

Our Methodology

NextAdvisor developed a framework to evaluate home equity lenders using a weighted average score between 1 and 5 based on the following criteria. A higher weight was given to the criteria we determined to be most important:

  1. Nationwide availability: We rated lenders on a scale of 1 to 5 based on how many states their home equity products were offered in. For lenders that only offered either home equity loans or HELOCs, we looked at how many states offered that specific product. For lenders that offered both home equity loans and HELOCs, we looked at how many states each individual product was offered in, and then took the average. A lender scored a 5 if it offered home equity products in at least 45 states which equates to 90% of U.S. states. Nationwide availability counted for 10% of the composite score. We eliminated any lender from this list that does not offer a home equity product in Arizona.
  2. Online user experience: We rated lenders on a scale of 1 to 5 based on the user experience of their online application process. A 5 was given to lenders who had a clear, easy-to-navigate online application process with no technical issues or confusing instructions. A score of 1 was given to lenders who did not offer an online application at all, instead requiring customers to apply in person at a branch or over the phone. Online user experience counted for 20% of the composite score.
  3. Products offered: We rated lenders on a scale of 1 to 5 based on how many types of home equity products they offered. Product offerings were categorized into the following types: home equity loans; standard variable-rate, interest-and-principal HELOCs, interest-only HELOCs, HELOCs with fixed-rate or rate-lock options, and miscellaneous products that did not fall into any of the previous categories. Lenders who offered at least 4 types of products received a 5. Products offered counted for 20% of the composite score.
  4. Price transparency: We rated lenders on a scale of 1 to 5 based on their price transparency, which we defined as how much information you could get about rates and fees without a hard credit check. Comparing rates and fees from multiple lenders is one of the best ways to ensure you’re getting the best deal, and we gave high scores to lenders who made it easy to do so. On the other hand, lenders who kept detailed rate and fee information behind a hard credit check — which can slightly lower your credit score and should only be done when you’re serious about moving forward with a particular lender — scored lower. Lenders who provided personalized quotes for rates, fees, and important loan information with only basic information (and no hard credit check) required received a 5. Price transparency counted for 30% of the composite score.
  5. Customer service options: We rated lenders on a scale of 1 to 5 based on how many different customer service options were available to consumers needing help with their loan application or loan servicing. Examples of customer service options we counted included, but were not limited to, online live chat, phone, email, visiting an in-person branch, in-person or virtual appointments with dedicated loan officers, and social media direct messaging. Lenders who had five or more customer service options received a 5. For each option that was available only to existing customers (and thus would not be available to new customers needing help with the application process), we deducted 0.5 from the score. For any lender that had a 24/7 customer service option, regardless of what form that option took, we added 1 to the score. We did not evaluate the quality of the customer service itself, as that can be subjective and highly dependent on the specific customer service representative a borrower is working with. Customer service options counted for 20% of the composite score.

Local Arizona Home Equity Line of Credit (HELOC) and Home Equity Loan Lenders 

National Bank of Arizona

The National Bank of Arizona is a division of financial services company Zions Bancorporation, N.A. The bank is a full-service financial institution that has been in operation for more than 30 years and has 56 locations across the state. In addition to deposit accounts, the bank also offers investment management services, credit cards, auto loans, student loans, mortgages and refinancing, and more. 

Among its home loan offerings is a home equity line of credit. This HELOC product has no annual fee, no closing or origination costs, and offers the option of interest-only payments during the draw period. Applications can be submitted online, at a branch, or over the phone. The National Bank of Arizona does not offer a home equity loan product.

Desert Financial Credit Union

Desert Financial Credit Union, like other credit unions, is a not-for-profit organization. The credit union has been in business for over 80 years and has more than 50 branches across Arizona. It offers many of the same products and services as a bank, including wealth management services, investment products, deposit accounts, mortgages and refinancing, and loans. 

Although Desert Financial does not offer a home equity loan, its HELOC product does feature the ability to lock in a portion of your balance at a fixed interest rate. There are no application fees or closing costs on a Desert Financial HELOC. You can apply online, over the phone, or by going to one of the credit union’s branches.  

How to Find the Best HELOC or Home Equity Loan Rate in Arizona 

Just like Arizona’s temperatures can vary significantly depending on where in the state you are, so too can interest rates vary from lender to lender. But the interest rate shouldn’t be the only factor you look at when you compare lenders; also consider the fees and terms offered. 

The loan with the lowest rate may end up being more expensive if the terms do not align with how you intend to use the funds, or if the loan comes with fees and closing costs. Similarly, a lender could offer a low introductory rate that may seem attractive but cost you more once the regular rate kicks in. 

Here are some more details on what you should consider when finding the best HELOC or home equity loan

Rate and Fee Transparency

When comparing offers from multiple lenders, pay close attention to not only the interest rate, but also the fees. Lenders may sometimes offer a low rate in exchange for high fees, which can cost you more over the life of the loan. Using a loan calculator can help you figure out if it’s worth it to pay additional fees for a lower rate.

Also consider whether the lender provides all rate and fee information online, or if you need to fill out a full application and consent to a hard credit pull just to see that information. A hard credit pull can temporarily ding your credit score, so you should limit how many you get when shopping around for a loan. If you speak with a loan officer to get information, remember to ask about any fees and closing costs that come with the loan. 

Products Offered 

HELOCs and home equity loans, while similar, do have some notable differences. Since funds for a home equity loan are disbursed in a lump sum when you take out the loan, it can be a good option if you have a one-time, large expense and won’t need additional funds in the future. You can also have peace of mind knowing that the interest rate is fixed and your monthly payment won’t go up if market rates do. 

A home equity line of credit, or HELOC, is a revolving credit line that you can draw on for a certain time frame, up to the maximum credit limit. Because of this, HELOCs can be a good option for homeowners who are unsure of how much money they need, or prefer the flexibility of having access to additional funds for several years. HELOCs typically have a variable interest rate, which means your rate regularly adjusts based on the prime rate. Because of this, your monthly HELOC payment could increase unexpectedly if market interest rates do. However, some lenders offer the ability to lock a portion of your HELOC balance at a fixed interest rate

Not all lenders offer both of these home equity products, and the terms for each can also vary. Do some research to find the lender who offers the right loan product for your needs. You can also check out NextAdvisor’s picks for the best HELOC lenders and best home equity loan lenders

Shop Around with Multiple Lenders 

Before you make any final decision as to which lender you’ll be using, it’s important to compare rates and offers from several different places. This will give you an idea of who is offering the best deal. 

It’s also possible for banks to occasionally have promotional rates or discounts, such as a rate discount if you have monthly payments automatically deducted from a checking account at that bank. If you shop around widely, you’re less likely to miss out on any money-saving incentives or programs. 

In addition to getting the best rate, comparing different lenders can help you find a home equity loan or HELOC with the lowest fees or terms that best fit your needs. 

Here are some common fees to watch out for:

  • Appraisal fees
  • Application fees
  • Origination fees
  • Inactivity fees (HELOCs only)
  • Prepayment penalties
  • Early closure fees
  • Annual fees (HELOCs only)
  • Closing costs 

And these are some other important terms to know:

  • Draw period: How long you have to access your HELOC’s line of credit.
  • Repayment period: How long you have to repay what you borrowed with a HELOC after the draw period ends.
  • Introductory rate: A promotional interest rate commonly seen with HELOCs that applies for a limited amount of time at the start of the loan. After the introductory period ends, the interest rate changes to the regular, typically-higher rate.
  • Interest-only HELOC: A HELOC structure that allows you to pay only the accrued interest, and not the principal, during the draw period. When you enter the repayment period, you’ll make full principal-and-interest payments. An interest-only HELOC can reduce your monthly payment during the draw period, but will result in a larger monthly payment during the repayment period or a balloon payment at the end of the HELOC term. 
  • Minimum draw amount: The minimum dollar amount you’re required to draw from your HELOC.

Only Borrow What You Need and Can Afford 

Before taking out a loan, you’ll need to look at your budget to determine what you can comfortably afford. Do not rely on a lender’s approval as a sign that you can or should take out a certain loan amount. Lenders use different criteria (including credit score, income, and debt-to-income ratio) to determine whether to approve a loan. They may not take into account all your expenses, particularly those that do not appear on a credit report. 

Taking on more debt than you need will cost you more in interest in the long run, as well as raise your risk of defaulting. Defaulting on a home equity loan or HELOC is especially risky because, unlike with an unsecured personal loan or credit card, your home is used as collateral and your lender can foreclose on your house if you default.

Keep in mind that the amount you can borrow will be limited by how much equity you have in your home. Lenders will typically cap your loan-to-value ratio at 85%, meaning that the balance of your home equity loan and existing mortgage combined cannot exceed 85% of your home’s value. This is to reduce the risk of your loan having negative equity (also known as being “underwater” on your loan) in the event your home’s value drops. 

Improve Your Credit Score

Besides shopping multiple lenders to find the most competitive rate, having a high credit score is the other thing you’ll need to ensure you can qualify for the best rates. Your credit score indicates your likelihood of missing a payment. The higher your score is, the less risky you are as a borrower. When you represent a lower risk to the lender, you’ll be able to qualify for more favorable interest rates. Lenders will also typically require a minimum credit score to qualify for a loan at all. 

Credit scores are calculated based on five major factors: your payment history, credit utilization and balances owed, the age of your credit history, what types of accounts you have, and your recent credit activity (such as recently opened accounts or credit applications). 

Here are a few quick tips to give your credit score a quick boost:

  • Keep your credit card balances below 30% of your total credit limit
  • Do not apply for credit cards or other loans in the months leading up to your HELOC or home equity loan application
  • Always pay your bills on time and in full, if possible
  • Regularly check and monitor your credit to quickly spot and fix errors

How to Get a HELOC or Home Equity Loan in Arizona

If you live in Arizona, you’ll have plenty of lenders to choose from, including online lenders and brick-and-mortar banks or credit unions. While rates, fees, and loan terms can vary quite a bit from one lender to another, the process of applying for a home equity loan or HELOC is typically very similar. 

Here are the steps you can expect to go through:

  1. Choose a lender that offers your desired loan product — either a HELOC or home equity loan — and terms.
  2. Submit an application online, in person at a branch (if available), or over the phone with a loan officer.
  3. Sign preliminary disclosures.
  4. Provide any documentation requested by the lender. These can include pay stubs, tax returns, mortgage statements, and more.
  5. Order and schedule any required home appraisals or inspections.
  6. Provide any additional documentation requested by the lender’s underwriting department for full approval.
  7. Upon receiving a full approval and clear to close from the lender, sign final loan documents with a notary. 
  8. Once final loan documents are signed and reviewed by the lender, you’ll typically receive your loan funds or access to your line of credit within 24 hours.