Best Home Equity Loan Rates for July 2021

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Refinancing has been all the rage in recent months. But with mortgage rates expected to increase this year, home equity loans could become an increasingly attractive option for homeowners to tap into their home equity.

You can use the money from a home equity loan for anything you want: home renovations, emergency costs, tuition. 

These loans can be good options for homeowners looking to leverage their home equity, but keep in mind they are secured loans for which your home is the collateral. That means if you default on paying back the loan amount, you could lose your house.

While home equity loans are still more difficult to access than they were before the pandemic, here’s what you should know about them:

NextAdvisor’s Guide to Home Equity Loans

How We Determine the Best Rates

We regularly monitor home equity loan rates to bring you the best, most-current rates worth looking at, so you don’t have to go digging. Here’s how we do it:

For this list of the best home equity loan rates, we eliminated any lenders that don’t make information on rates and fees easy to find on their websites, or that have stopped offering home equity loans at this time. 

The APRs shown above are accurate as of July 8, 2020. They are the only APRs openly available among the lenders we assessed. The NextAdvisor editorial team updates this information regularly, though it is possible APRs have changed since they were last updated.

Best Home Equity Loan Rates of July 2021

For banks that still offer them, there will be stricter requirements on your credit score and how much equity you need to have in your home. And as with any lending, those with the best credit score will qualify for the best rate. Here are the best rates we could find at lenders still offering home equity loans: 

LenderAPRLoan AmountLoan LengthMinimum Credit Score Required
Regions Bank3.25% to 11.625%$10,000 to $250,0007, 10 or 15 yearsNot specified
Discover4.15% to 11.99%$35,000 to $200,00010, 15, 20, or 30 YearsNot specified
BBVA4.04% to 9.09%$10,000 to $125,0005 to 30 years670*
Frost Bank4.24% to 5.49%$2,000 to $500,0007 to 20 yearsNot specified
BMO Harris4.54% to 7.49%$25,000 to $150,0005 to 20 yearsNot specified

*BBVA website states “most home equity loans require a good to excellent credit history.” 

Details: The Best Home Equity Loan Rates

Regions Bank

Regions Bank operates in 15 states: Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas. Your home must be located in a state where there’s a Regions branch in order to get a home equity loan. Your house may be a primary or secondary residence in order to secure your home equity loan. 

There’s a few fees you’ll want to be aware of:

  • Over limit fee of $29
  • Late fee of 5% of the payment amount
  • Returned check fee of $15

You can qualify for a rate discount between 0.25% and 0.5% if you elect to have your payments automatically debited from a Regions checking account. Regions bank will pay all of your closing costs.

Regions Bank
APR3.25%-11.625%
Loan Amount$10,000-$250,000
Loan Length7, 10 or 15 years

Discover

Discover offers home equity loans from $35,000 to $200,000. There’s no application fee, appraisal fees, origination fees, and Discover pays your closing costs.

Discover
APR4.15% – 11.99%
Loan Amount$35,000-$200,000
Loan Length10, 15, 20, or 30 Years

BBVA

BBVA will pay closing costs for home equity loans between $10,000 and $500,000. These costs will be recouped if the loan is paid off within 24 months of closing. 

BBVA
APR4.04% – 9.09%
Loan Amount$10,000-$125,000
Loan Length5 – 30 years

Frost Bank

You’ll get a 0.25% discount when you set up automatic payment from a frost checking or savings account. 

Frost Bank
APR4.24% – 5.49%
Loan Amount$2,000-$500,000
Loan Length7 – 20 years

BMO Harris

To qualify for the lower rate on your home equity loan from BMO Harris, you’ll need to set up auto pay from an eligible BMO Harris checking account. There’s no application fee and no-to-low closing costs.

BMO Harris
APR4.54% – 7.49%
Loan Amount$25,000-$150,000
Loan Length5 – 20 years

Home Equity Loan Rates Today

The pandemic has made it harder to qualify for a home equity loan. 

“Borrowers are going to need more equity that they wouldn’t have needed prior to the pandemic. And the reason for that is to mitigate risk from the lender’s perspective,” says Greg McBride, chief financial analyst at Bankrate.

Lenders are more wary of risk during a recession. The most risky investments for lenders are unsecured debts, like credit cards, or second-lien secured debt, which includes home equity loans. A second lien position means the lender will get paid second if a person defaults on their payments.

With a house, the mortgage lender would be in the first lien position, and that’s why second lien lenders “get squeamish when the economy goes into the tank,” McBride says. But, “It’s important to emphasize that it’s not like home equity borrowing is shut off altogether, it’s just that they’re tighter.”

How Does a Home Equity Loan Work?

A home equity loan is a fixed-rate loan secured by your home. You’ll get a lump sum payment upfront and then, just like your mortgage, you’ll repay the loan in equal monthly payments over a period of time. Because your house is used as collateral, the lender can seize it if you default. 

Home equity is the difference between the value of your home and what you owe on the mortgage. A home equity loan lets you borrow against that equity, and the more equity you have, the more you can borrow. You can usually borrow up to 85% of your home equity, according to the Federal Trade Commission.

Home equity loans usually have anywhere from 5- to 30-year terms and come with a fixed interest rate, meaning whatever rate you lock in at the beginning of the loan term will remain throughout its duration. Loan APRs have come down this year as interest rates have fallen, but “not in lockstep,” says McBride. 

Still, if you qualify for a home equity loan right now, it’s a good time to get one since interest rates are low. 

What to Use A Home Equity Loan For

A home equity loan is something to consider if you need a large sum of cash up front, like if you’re paying for a large home renovation project or debt consolidation. 

“If someone wants to consolidate debt they may choose the home equity loan because it’s going to pay off all the debt that they want to consolidate in one loan in one fell swoop,” says McBride.

While it’s important to consider the ramifications of debt consolidation that trades unsecured debt (like credit card debt) for a new secured home equity loan (which puts your house on the line if you default), it could make sense if you can get a much lower interest rate that allows you to pay it off faster.

Pros and Cons of Home Equity Loans

Pros

  • One lump sum payment of total loan amount upfront

  • Fixed-interest rate, meaning you won’t have to worry about your rate fluctuating over the repayment period

  • Typically lower interest rate than on other loans like credit cards or personal loans

  • No stipulations about what you can use the money for

Cons

  • Your home is used as collateral, meaning it can be taken from you if you default on the loan

  • If your still paying off your mortgage, this loan payment will be on top of that

  • Home equity loans can come with closing costs and other fees

  • May be harder to qualify at the moment if you don’t have good credit or enough home equity

How to Apply for a Home Equity Loan

Before you apply for a home equity loan, you’ll want to know your credit score and your home equity stake. If your credit score isn’t the best you might not qualify for a home equity loan, especially right now. A common baseline for a home equity loan is 680, but the higher your score the lower your interest rate will be. 

Applying for a home equity loan is simple: go to your chosen lender’s website and fill out the application. You’ll want to have an idea of how much you want the loan to be for ahead of time. 

As stipulations for getting a home equity loan have tightened, you may need to consider looking at banks or credit unions you already have accounts with as some banks have decided to only work with existing customers. 

Home equity loan vs. HELOC

Another common type of home equity financing is a home equity line of credit (HELOC). HELOCs are not a traditional loan where you get paid a lump sum up front, but work more like a credit card secured by your home. A HELOC is a revolving line of credit, so you only have to pay for what you spend, plus interest. HELOCs are similarly more difficult to get approved for at the moment. 

Home Equity LoanHELOC
Fixed-term loanRevolving credit line
Fixed APRVariable APR (usually)
Pay full loan amountPay only what you spend
Home used as collateralHome used as collateral
Funds for as long as they lastSet draw period
Lump sum at onset of loanOngoing cash
Interest can be deducted for home projectsInterest can be deducted for home projects

Alternatives to A Home Equity Loan

If you can’t access a home equity loan or a home equity line of credit right now, you might consider these other options:

Cash-out mortgage refinancing 

A cash-out refinance is when you pay off your existing home loan by getting a new one that’s larger than what you currently owe, and get a check for the difference.

“In the instance where people are tapping equity out of their home, they’re predominantly doing that through the cash-out refinance because mortgage rates have fallen to record lows,” McBride says. “A lot of people are in the position where they can profitably refinance their mortgage and so that becomes the avenue through which they can access their home equity.”

Personal loans

A personal loan lets you borrow a fixed sum of money for a fixed interest rate to be paid over a fixed period of time. 

Reverse mortgage

A reverse mortgage is a loan that allows seniors to turn the value of their homes into cash during their retirement years. They are also known as home equity conversion mortgages.

Home Equity Loan FAQ

What is home equity?

Home equity is the difference between what you owe on your mortgage and what your home is currently worth. In other words, it is your stake in the property, or what you could make if you sold before paying down the mortgage in full.

How do you calculate your home equity?

Calculating your home equity is a simple equation, found by subtracting how much you owe on your mortgage from your home’s estimated market value. For example, if you own a home worth $350,000 and owe $200,000 on your mortgage, your home equity is worth $150,000.

Where can I get a home equity loan?

You can get a home equity loan from a number of different lenders. Check for the best rates from local banks and credit unions, national banks, and online lenders.

When is a good time to use a home equity loan?

A home equity loan can be worth considering if you need a large sum of cash up front, like if you’re paying for a large home renovation project or debt consolidation.

What is the three-day cancellation rule?

When you take out a home equity loan, you have three days to cancel according to federal law, no matter where you get a home equity loan from.

Continue Home Equity Series