# The Best Home Equity Loan Lenders of September 2021

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Owning a house gives you a valuable asset that you can tap into for various purposes, ranging from major purchases to debt consolidation to home improvement

### BMO Harris

BMO Harris only has branches in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, and Wisconsin, but it’s possible to access a home equity loan in other states. You can get a rate quote online if you live in one of the states where there’s a branch. For residents of other states, you need to call for a rate quote.

BMO Harris is one of the best home equity lenders because it offers a variety of options in terms of loan amounts and term lengths, making it easier to tailor your loan. BMO Harris also covers your closing costs so you don’t pay anything upfront, but you might end up repaying your closing costs if you pay off your balance and close your account within 36 months.

### U.S. Bank

U.S. Bank was established in 1863 and is one of the largest national banks in the United States. You don’t need a U.S. Bank checking or savings account to apply for a home equity loan, but you can only get access to the lowest advertised rates if you set up automatic payments from another U.S. Bank account. Its streamlined online process makes it easy to apply from almost any device.

Additionally, U.S. Bank offers a wide range of loan amounts, from $15,000 to$750,000 (or $1 million in California) and doesn’t charge closing costs. The best rates are available for those with shorter loan terms and a loan-to-value ratio of below 70% — meaning you’ll need at least 30% equity in your home. You also might need a credit score of more than 730 to qualify for better rates. ### Connexus Credit Union Connexus is a credit union available in all 50 states, with fee-free ATMs and cooperative institutions that make transactions easy, including managing your account online. You can become a member of Connexus by opening any account with the institution, including a home equity loan. Even though Connexus is available in all 50 states, the credit union doesn’t offer home equity loans in Alaska, Hawaii, Maryland, and Texas. Connexus is one of the best home equity loan companies because it makes it easy to process home loans online without the need for an appraisal. However, the loan terms aren’t as flexible, with terms of five to 15 years, rather than allowing terms of up to 30 years. ### Regions Bank Regions Bank only offers home equity loans on properties located in states where there are Regions branches. As a result, the property in question must be located in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, or Texas. While Regions Bank offers limited availability for home equity loans, if you are in an eligible location, you could benefit from the high loan-to-value ratio ceiling and the ability to choose a loan term of between seven and 20 years. Regions also offers autopay discounts ranging from 0.25% to 0.50%. While Regions Bank will cover the loan closing costs, late payment fees could be charged if you don’t make payments on time. ### TD Bank TD Bank prides itself on having some of the longest bank hours, including on the weekends, and excellent customer service. TD Bank offers 24/7 customer service by phone in English and Spanish, as well as additional options to contact support via Facebook Messenger or Twitter DMs (available hours may vary). TD Bank offers home equity loan amounts starting as small as$10,000, which can make it attractive for those with smaller projects. Additionally, TD Bank offers a rate discount of 0.25% for autopay out of another TD account.

However, getting information about home equity loans online can be difficult without putting in your location. You must be located in Connecticut, Delaware, Florida, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and Washington, D.C. in order to get information about rates and available products online. Fees are also hard to find, with the schedule directing you to look at loan docs for information.

## Which Type of Home Equity Financing is Right for You?

When you buy a home with a mortgage, you build equity with each payment you make. As you pay down the principal on your home loan, you gain more ownership of the home, allowing you increased access to the most valuable asset you own.

There are three main types of home equity financing: a home equity loan, a home equity line of credit (HELOC), and a cash-out refinance. Each of these allows you to tap into the value of your home equity to borrow cash upfront. The type of loan best for you depends on your situation and goals, says Rebecca Neale, an attorney with Bedford Family Lawyer in Massachusetts.

### Home equity loan

A home equity loan offers you a lump sum of cash, with the maximum amount you can borrow determined by how much home equity you have. Home equity loans typically have a fixed interest rate, according to Casey Fleming, a mortgage advisor in the Silicon Valley area and author of “The Loan Guide”. You’ll receive your loan funds in a lump sum and can then use the money for whatever you wish. You’ll repay the loan over a set period of time, usually ranging from 5 to 30 years.

A home equity loan can potentially provide the most benefit to borrowers who have fixed costs and a defined goal for their money. If you know you’ll need a certain amount to pay for a major expense like a home improvement project, a home equity loan could be a good choice. Neale points out that some of her clients like using home equity financing because there’s a potential for a tax deduction on the interest paid — but only if the money is used for home improvements.

### Pros

• Fixed interest rate might provide greater predictability

• Payments can be relatively low

• Works well for fixed costs

• Interest might be tax-deductible if used on qualified home improvement costs

### Cons

• If you need more money, you’ll need to apply for another loan (not revolving credit like a HELOC)

• Your home is at risk if you miss payments

• Rates can be higher than with a HELOC

### Home equity line of credit (HELOC)

With a HELOC, you’ll be able to borrow money on an ongoing basis up to a maximum credit line, similar to having a credit card — except secured with your home. Unlike with a home equity loan, which is paid in a one-time lump sum, a HELOC lets you access ongoing cash (up to the credit line) without needing to reapply for funds. HELOCs typically charge a variable interest rate that fluctuates based on the prime rate, but some lenders may offer a low introductory rate for a set amount of time.

In general, Fleming says, a HELOC comes with two phases, a draw period, which is specified when you sign the loan, and a repayment period. During the draw period, you’ll only need to make payments towards the interest. After the draw period ends, you’ll make payments to both the interest and the principal. You can also make payments towards the principal during the draw period. Some lenders may charge a penalty if you pay off and close your HELOC early, so be sure to check with your lender about their exact policy.

A HELOC can work well for someone who isn’t sure how much a project will cost, and who needs access to an ongoing, low-rate source of capital over a period of months or years.

However, Fleming has a warning for those using a HELOC. “It’s easy to get comfortable during the draw period, never paying toward the principal. Once that period ends, though, you typically have less than 15 years to repay the loan and it can be hard to do,” he says. “The other trap is that it’s easy to end up in a cycle of endless financing.”

### Pros

• More flexible access to money without the need to reapply for funds

• Interest rate could potentially be lower

• Potential interest tax deduction when funds are used for qualified home improvements

### Cons

• You could lose your home if you miss payments

• Variable rates could rise over time

### Cash-out refinance

Rather than taking out a separate home equity loan or HELOC, you could use a cash-out refinance to replace your old mortgage with a new one that’s worth more than what you currently owe, and pocket the difference. For example, let’s say you owe $150,000 on your mortgage. Your home is worth$300,000. You could potentially refinance your mortgage with a new home loan for $225,000. You’d use the new$225,000 mortgage to pay off the remaining $150,000 balance of your current mortgage, and keep the$75,000 left over as cash. You can then use the money for whatever you wish.

If the current refinance interest rates are much lower than your original mortgage rate, a cash-out refinance could save you money in the long run. On top of that, you may be able to improve your cash flow with a lower monthly payment. A cash-out refinance can work well for someone who wants to take out a chunk of capital, perhaps for an investment property or credit card consolidation, while changing their mortgage terms.

Neale points out another use for a cash-out refinance: working things out during a divorce. “A cash-out refinance is a good way to use your home’s equity to buy out your spouse’s interest in a divorce because it gets you cash for the buyout and gets your spouse’s name off the mortgage,” she says.

### Pros

• If you have a lot of equity in your home, this can be a way to access it at once

• Interest rates can be lower than with a home equity loan or HELOC

• Potentially improve your cash flow with a lower rate

### Cons

• Depending on the terms, you could be in debt longer since your loan term resets (unless you’re refinancing to a shorter loan term)

• Potential to lose your home if you can’t make the new payments

• You might have to pay private mortgage insurance if your cash-out refinance puts your loan-to-value above 80%

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