Once you’ve built up enough equity in your home, you may be able to take out a home equity line of credit, or HELOC. Since HELOCs are attached to your home, they usually have lower interest rates than other loans, but they can vary wildly.
Right now, these lenders stand out for their competitive HELOC rates.
Which lenders offer the best HELOC rates?
The rate you’re offered will reflect your credit score, where you live and the amount of equity you have in your home. These lenders boast the lowest rates in 2020.
Connexus Credit Union
Lock in an introductory 3.49% APR for the first six months
With this credit union, you could lock in an introductory 3.49% APR for the first six months until April 2020, or 3.99% for 12 months until October 2020. These rates apply to HELOCs with a 15-year draw and 15-year repayment period.
After the introductory period, the rate is variable and may adjust biannually in April and October. The non-introductory rate ranges from 6.57% to a maximum of 15.9%.
- Open a line of credit between $5,000 to $200,000.
- To qualify for the introductory rate, you’ll need a loan-to-value ratio of 80%.
- Your payments will add up to 1.5% of the amount borrowed. For example, if you have a $20,000 credit line and withdraw $5,000, you’ll pay $75 — which is 1.5% of the $5,000 balance.
- The credit union focuses on customers in Wisconsin, Minnesota and Ohio, but anyone can join — and apply for a HELOC — by making a $5 donation to the Connexus Association.
Attractive introductory rate of 3.24% for the first six billing cycles.
This traditional bank has an attractive introductory rate of 3.24% for the first six billing cycles. The rate applies to HELOCs with a 10-year draw and 20-year repayment period, giving borrowers more leeway to pay off their line of credit.
When the promotional period is up, Flagstar charges a variable interest rate based on the Wall Street Journal prime rate. Currently, it’s a competitive 5.75% APR, and the maximum rate is 21%.
- To earn the promo rate, you’ll need to set up auto payments from a Flagstar Bank deposit account and withdraw at least $25,000 at closing.
- Choose a line amount between $10,000 and $1 million.
- There’s an annual fee of $75.
- If you keep the line open for 36 months, the bank will waive closing costs, including title, appraisal and recording fees.
Bethpage Credit Union
A one-year introductory 3.99% APR.
Like most credit unions, Bethpage is a not-for-profit that passes on its savings to members. Its HELOCs reflect this. After a one-year introductory 3.99% APR, the credit union charges a variable rate for the life of the loan. As of June 2019, it’s 5.50%, and won’t exceed 18%.
Bethpage doesn’t charge any closing costs, but it does require a minimum initial draw of $25,000. If you close the line within 36 months, you’ll have to cover the closing costs.
- Open a line of credit up to $2 million.
- To become a member, you’ll need to open a savings account and deposit at least $5. And to qualify for the introductory rate, you’ll need a maximum loan-to-value ratio of 75%.
- You can lock in a portion of your funds at a predictable fixed rate with the Fixed-Rate Loan Option and keep the rest in a flexible line of credit.
- HELOCs aren’t available on co-ops.
You can choose a loan term of five, seven, 10 or 15 years.
This online lender offers HELOCs with a fixed rate that won’t change over time, starting at 4.99% APR for eligible borrowers. You can choose a loan term of five, seven, 10 or 15 years.
Depending on your borrower profile, you may be approved for a HELOC in minutes — without a hard credit pull — and receive the funds in as little as five days. This is the fastest turnaround we’ve seen. Funding may be delayed for those who live in Virginia, or in counties that don’t allow e-signatures.
- HELOCs are available in 37 states and the District of Columbia.
- The lender can open lines of credit between $15,000 and $150,000.
- To apply for a HELOC with Figure, you must have a minimum credit score of 600 and a maximum loan-to-value ratio of 95%.
- You’ll pay a one-time origination fee, which may add up to 3% of the loan amount. The lender doesn’t charge application, appraisal or maintenance fees.
- The property does not need to be your primary residence.
This Big Four bank makes the cut for its interest rate caps.
Its HELOC rates are variable and based on the prime rate — but your rate won’t increase by more than 2% annually, or by more than 7% over the life of the loan. This is a much lower maximum than most lenders. The current rates start at 4.625%.
You can convert all or part of your balance to a fixed rate during the draw period. The lender covers the closing costs.
- Open a HELOC between $25,000 and $500,000.
- Eligible customers can pay down the principal during the draw period and rebuild equity faster.
- To qualify, you’ll most likely need good to excellent credit and a maximum loan-to-value ratio of 85%. For further relationship discounts, set up automatic payments from your Wells Fargo checking account.
How we came up with this list
When analyzing the best HELOC rates for 2020, we started by confirming each lender’s legitimacy, business practices and site security. We also scanned customer reviews from the Better Business Bureau and TrustPilot.
We then weighed each lender’s rates and fees, as well as line amounts and other features. Since fixed and variable rates have been rising steadily, we focused on lenders that offer low starting APRs and impressive introductory rates.
While we make money from the partners we feature on the site, every lender had to meet our strict editorial standards and the lending criteria that matter most to our readers.
What should I look out for?
While you’re comparing HELOC lenders and rates, consider these factors:
- Unpredictable interest rates. After the promotional period, HELOCs are linked to the prime rate. If interest rates rise, so will your monthly payments, so be sure to budget for this.
- Rigorous credit requirements. You’ll typically need a credit score of at least 620 to qualify for a HELOC, and 720 or higher to access the top rates.
- Extra fees. Some lenders charge closing costs or annual, membership, maintenance and prepayment fees. With others, you’ll have to cough up transaction fees for each withdrawal, or pay a fee for late or missed payments. These payments can add up, so look for lenders that forgo prepayment penalties and cover at least part of the closing costs.
What fees can I expect with a HELOC?
It varies between lenders, but these are some of the most common fees:
- Application fee. This covers the costs of processing your application. Some lenders refund this fee once the application is approved.
- Appraisal fee. Many lenders charge $300 to $800 to send an appraiser out to your home to determine its value.
- Closing costs. The average closing costs total 2% to 5% of the loan amount. If you have a high-value property, these costs can quickly stack up.
- Early payment fee. If you pay off or close your HELOC within three to five years after opening it, you might need to pay a $500 fee, or reimburse your lender for the closing costs.
- Annual fee. Some lenders charge an annual fee of $50 to $100.
- Transaction fee. Many lenders charge a fee every time you withdraw cash from your line of credit, which increases the amount of money you’ll pay overall.
- Inactivity fee. If you don’t withdraw from your HELOC at least once a year, you might be charged a non-usage fee of around $100 a year. In many cases, this is negotiable.
How to get the best HELOC rates
These strategies can help you to get the best possible rate:
- Maintain strong credit. Despite using your home as collateral, lenders have strict credit standards for HELOCs. Most lenders will perform a hard pull on your credit, so increase your borrowing power with a positive credit history. To boost your credit score, keep your credit utilization under 30%, make on-time payments, maintain healthy credit accounts and avoid applying for multiple loans or credit cards at once.
- Make sure you have enough equity in your home. Before applying for a HELOC, check that you have enough equity in your home to meet the bank’s requirements. There are two ways to build equity in your home. The first is through price appreciation — when your home increases in value, so does your equity. The second is in your control — repay your loan on time, every time.
- Reach a solid debt-to-income (DTI) ratio. For the cheapest rates, you’ll need to prove you have a debt-to-income ratio of 43% to 50%. To calculate your DTI, assess your monthly debt — think student loans, credit cards and mortgage repayments — against your gross monthly income. This may include your salary, along with tips, bonuses, pensions, and Social Security, alimony and child support benefits.
Other HELOC lenders
While your borrower profile determines your HELOC rate, some lenders offer better base rates than others. With interest rates on the rise, lenders that offer low beginning APRs and introductory rates are often your best bet.
Learn more about the other features to consider in our guide to HELOCS.