A HELOC, or home equity line of credit, is a second mortgage that allows you to borrow against the value of your property. You use a piece of your equity as needed and only pay back what you borrowed. Borrowers frequently utilize HELOCs to fund home renovation projects, school expenditures, and debt consolidation.
HELOC interest rates are lower than those on credit cards and personal loans. Lenders determine whether you have adequate equity for a HELOC based on your loan-to-value ratio, or LTV.
NerdWallet has chosen some of the finest HELOC lenders to assist you in finding the ideal one for you.
Best HELOC Lenders
| Lender | NerdWallet ratingNerdWallet’s ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service. | National / regional | Max LTV | Min. credit scoreMinimum credit score on top loans; other loan types or factors may selectively influence minimum credit score standards | Learn more |
|---|---|---|---|---|---|
| Bethpage Federal Credit Union: NMLS#449104Learn more | 5.0/5Best for large withdrawals | National | 85% | 670HELOC:670HEL:620 | Learn moreat Bethpage Federal Credit Union |
| PNC: NMLS#446303Learn more | 4.5/5Best for existing customers | National | 90% | 680HELOC:680HEL:620 | Learn moreat PNC |
| Guaranteed Rate: NMLS#2611Read review | 4.5/5Best for large withdrawals | National | 90% | 640HELOC:640 | Read review |
| State Employees’ Credit Union: NMLS#430055Read review | 4.5/5Best for long draw period | Regional | 90% | 640HELOC:640 | Read review |
| PenFed: NMLS#401822Read review | 4.0/5Best for fixed-rate option | National | 80% | N/AHELOC:N/AHEL:N/A | Read review |
| Alliant: NMLS#197185Read review | 4.0/5Best for large withdrawals | National | 90% | N/AHELOC:N/A | Read review |
| Golden 1 Credit Union: NMLS#669333Read review | 4.5/5Best for no annual fees | Regional | N/A | N/AHELOC:N/AHEL:N/A | Read review |
| Bank of America: NMLS#399802Read review | 5.0/5Best for fixed-rate option | National | 85% | 660HELOC:660 | Read review |
| Truist: NMLS#399803Read review | 4.5/5Best for fixed-rate option | National | 80% | N/AHELOC:N/A | Read review |
| Homebridge: NMLS#6521Read review | 4.0/5Best for no annual fees | National | N/A | N/AHELOC:N/A | Read review |
How a HELOC works
HELOCs function similarly to credit cards in that you can borrow up to a set amount as required rather than withdrawing it all at once. Lenders determine a HELOC limit based on the value of your property, and they loan you a portion of what you own. You can borrow for a long period of time and simply pay interest on the balance. You can no longer withdraw after the cancellation time has elapsed and must pay the principal plus interest.
Compare rates from at least three lenders to find the best HELOC rate. You may locate the greatest home equity loan for your requirements by shopping around for the right mix of features and interest rates.
Pros and cons of HELOCs
The biggest benefit of a HELOC is its flexibility. During the cooling-off period, the minimum monthly payment only includes interest on the balance, so you are not required to pay the principle.
HELOC interest rates may be variable, which means they may climb or decline over time. As loan rates rise, so may the minimum monthly payment. Portion lenders, albeit uncommon, provide a fixed-rate HELOC option, which allows you to lock in some or all of your loan balance at a specified APR.
HELOCs have two big drawbacks: interest rates might rise, and you can get into difficulty if you aren’t diligent. You may eventually need to borrow so much money that you are unable to comfortably pay both the main and interest over the payback period.
Interest rates on HELOCs are often lower than those on credit cards. However, failure to comply with HELOC terms may result in foreclosure of your house.
Alternatives to HELOCs
HELOCs aren’t your sole option for accessing your home equity. If you know precisely how much you need to borrow, a home equity loan, which you get once and repay at a set rate, is an option.
If you need to borrow more money than a HELOC or home equity loan allows, cash financing may be the best choice for you. This replaces your original mortgage with a larger mortgage and pays you the difference in cash between the loan’s value and the amount you presently owe.
Finally, if you are unable to obtain a HELOC, it may be worthwhile to consider a shared appreciation agreement. This transaction lets you to trade a portion of your future stock earnings for an advance on a piece of your existing equity. This sort of offer is usually reserved for homeowners with a lot of equity but little cash on hand, and most customers would be better off with a HELOC if they could secure one. By mortgaging the future worth of your property, you risk losing stock gains. So think twice before selecting this choice.
Methodology
The star ratings on this page reflect each credit star rated lender’s home equity limit. HELOC Star Ratings are given to mortgage lenders who have explored offering HELOCs based on the following examined factors: whether there is a fixed rate option, CLTV loan maximum, product fee year, and key element transparency.
NerdWallet analyzed more than 50 mortgage lenders, including the majority of the leading mortgage lenders in the United States by yearly loan volume (lenders must have at least a 1% market share), lenders with a considerable internet search volume, and those specializing in it for a global audience. Nation.
Lenders must score at least 4 in our HELOC methodology to be included for this round.
Throughout the year, NerdWallet collects information from rated lenders. The lender’s websites and interviews are used to verify the information given by the lender. For initialization volume, initialization costs, average interest rates, and product share rate statistics, we also use HMDA 2021 data.
NerdWallet’s Best HELOC Lenders of 2023
- Bethpage Federal Credit Union is the best option for big withdrawals.
- PNC: Best for existing customers
- Guaranteed Rate: The best option for large withdrawals.
- State Employees’ Credit Union is the best option for extended draw periods.
- PenFed: Best for fixed-rate option
- Alliant is the best option for bulk withdrawals.
- Golden 1 Credit Union: The best option for no yearly fees.
- Bank of America: The best option for a fixed-rate mortgage.
- Truist: Best for fixed-rate option
- Homebridge: Best for no annual fees
