Home equity loans allow homeowners to borrow against the equity in their homes. Equity is the difference between your home’s value and what you owe on your mortgage. Home equity loans are popular among borrowers who want to use the funds for home improvement projects or to pay off or consolidate high-interest debt.
Forbes Advisor compiled a list of home equity lenders that excel in various areas, including offering low fees, low loan costs, convenience and flexibility, so there’s something for people with different goals and financial needs.
What is home equity?
Home equity is the difference between what you owe on your mortgage and the current appraised value. If your house was appraised at $300,000 and you owe $100,000, you have $200,000 in equity.
If you haven’t had your home appraised since you renovated it or property values have gone up in your area, it might be worthwhile to get an appraisal before you apply for equity financing. If your home has increased in value, you’ll have more equity to draw from and potentially a better chance of getting approved for a loan.
What is a home equity loan?
A home equity loan is a type of financing that uses your equity as collateral. The lender would decide how much to lend based on how much equity you have in your home. Most lenders will not lend you the full amount of your equity, as this increases their risk.
If approved, the lender will create a second mortgage and cut you a check for the full loan amount. Repayment works like any other installment loan, meaning you would make equal monthly payments over time until you pay off the loan balance.
What is a home equity line of credit?
A home equity line of credit or HELOC is a loan that uses your home’s equity as collateral, but instead of issuing the loan in a lump sum, the lender would extend a line of credit based on your equity.
In that way, HELOCs are similar to credit cards. Like a credit card, you have a certain spending limit and when you reach that threshold your credit stops.
The period when you can spend money through your HELOC is called the draw period. After the draw period ends, you can longer access the credit, and you enter your repayment period. HELOC draw periods are usually between five and 10 years.
Bank of America
Bank of America is a big bank lender that offers mortgage and refinance loan products, along with full banking services. There are more than 5,000 branch locations in the U.S., in addition to its online mortgage options, which includes the Bank of America Digital Mortgage Experience. This provides customers with online applications, electronic signatures for documents and online rate locks. Borrowers also can connect with a lending specialist online.
Bank of America offers lower-than-average mortgage rates and the convenience of applying in-person or online. Their Affordable Loan Solution mortgage requires a low down payment of just 3% and no private mortgage insurance, which can save budget-minded borrowers hundreds of dollars per month.
For existing customers, there are several discounts available, including a $600 closing-costs discount.
SunTrust Mortgage (Truist)
SunTrust Mortgage does an all-around good job at offering low rates, low fees and fast pre-approval times for its mortgage customers, all features that are sought after when looking for a home loan.
Borrowers also can get a preapproval letter within 24 hours, which is quite fast and convenient—especially if you’re ready to shop for homes and make an offer.
In 2019, SunTrust Mortgage Banks Inc. and BB&T Corp. merged to form Truist Financial Corp. SunTrust Mortgage will continue to use its name and branding on its website, branch locations and ATMs at least until 2021.
PNC Bank operates in all 50 states and provides a wide range of mortgage products, including specialty loans for low- and moderate-income borrowers.
PNC also offers an innovative online experience called Home Insight, which provides a deep dive into the homebuying process, enabling customers to determine the mortgage payment they can afford and start shopping for homes with real-time rate quotes and loan products. It also allows customers who have applied for a loan to follow along with the approval process and upload supporting documents. In addition, the customer can invite real estate agents into the process to monitor progress.
Home Insight combines a home affordability analysis, a monthly payment estimator that accounts for insurance and taxes and the ability to search for available home listings. It also connects unique budgets, real-time rates and loan products with a real estate listings search to help prospective home buyers better understand how much house they can afford.
PNC also offers a full digital pre-approval application, where borrowers may apply online and receive approval in a matter of minutes.