Comparing the Best Home Equity Loan Rates
Thinking about using your home’s equity to obtain affordable financing? Take the time to research and compare home equity loan rates. By understanding the rates and terms of your loan options you can make a smart choice and responsibly consolidate your debt, renovate your home or finance a lifelong goal.
What is a home equity loan rate?
A home equity loan rate is the interest rate you pay on the amount you borrow through a home equity loan.
Typically, home equity loan rates are fixed, meaning that they are established when the loan application is approved and determined by factors that include the amount you are borrowing, the value of your home and your current mortgage balance (together known as your equity), and your income and credit score. Discover Home Loans offers home equity loans with fixed rates that range from 3.99% to 11.99% APR*.
How are home equity loan rates calculated?
In general, rates are calculated based on your current home value, mortgage balance, payment term, loan amount, verifiable income and credit history. A loan applicant with a large amount of equity in their home and an excellent credit score is likely to get a lower rate than an applicant with little home equity and a spotty credit history. However, individual loan providers may use different qualifications to determine home equity loan rates.
To see the lowest home equity rate your financial status and home equity can earn, use our monthly payment calculator.
Discover Home Loans does not charge application, origination, or appraisal fees, and no cash is required at closing
Comparing home equity loan rates
The biggest factor in most home equity loan decisions is the APR. Do your homework and receive quotes from many lenders in order to find the best APR. Locking in a rate at just half a percentage point lower can mean saving hundreds of dollars on a 15-year loan.
But the APR isn’t the only factor to consider in comparing loan options. For example, there’s a significant difference between a fixed and an adjustable rate loan. With a fixed rate you know what your monthly payment is every month without question, which makes it easier to responsibly manage this debt. Adjustable rates can fluctuate with the market, meaning that a year from now your rate could be much higher or possibly lower than the day you signed up for the loan.
Another factor is the fees and closing costs associated with the loan. Some home equity loans have application fees, and appraisal and closing costs. Others have prepayment penalties for making extra payments during the loan term or paying off the loan before the full term. If you plan to hold the loan for its full duration, paying origination fees on a loan with a lower APR may make sense. If you plan to pay down the loan quickly, a lower or no fee loan may be a better option. These costs can vary from state to state and from lender to lender so be sure to follow up with a loan officer to receive an accurate quote for your particular situation before making your decision. Discover Home Loans does not charge application, origination, or appraisal fees, and no cash is required at closing.
Finally, consider the customer service aspects of taking out and managing the home equity loan. If the rates are equal, but one lender offers assistance from a personal banker, online account management and automatic payments you may want to take advantage of these additional services.