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The Best Home Equity Lenders in 2021
The Best Home Equity Lenders in 2021
June 06, 2021 / Nadav Shemer
The Best Home Equity Lenders in 2021
June 06, 2021 / Nadav Shemer

Own your own home? In need of cash to pay for a renovation, medical expenses, college tuition, or some other major expense? You may be able to use a home equity loan or home equity line of credit (HELOC) to tap into your equity to access funds.

Because the borrower’s home is used as collateral, a home equity loan usually has lower rates and more flexible qualifying requirements than other alternatives such as personal loans. The repayment terms often last for up to 15-30 years, giving you plenty of time to pay off the debt.

Here’s everything you need to know about home equity loans and HELOCs, including our list of the top 3 home equity lenders in 2021.

What is a Home Equity Loan?

A home equity loan is a fixed-rate loan in which the borrower uses their home equity as collateral. The loan creates a lien against the borrower’s home and reduces the borrower’s home equity. As the borrower makes payments, their home equity increases again. A home equity loan term can range from 5-30 years although most lenders allow 5-15 years.

A home equity line of credit, or HELOC, is an alternative home equity product. Like a home equity loan, a HELOC uses the borrower’s home equity as collateral. But in contrast to a home equity loan, a HELOC is an open-end revolving line of credit with an adjustable interest rate. With a HELOC, the borrower may draw funds at any time, up to the approved credit limit. The borrower only pays principal and interest on the funds drawn, in addition to certain closing fees at the start of the loan.

How to Apply for a Home Equity Loan

The basic requirement of a home equity loan is that you own your home. Most lenders permit a combined loan-to-value (CLTV) ratio of up to 90%, meaning your home equity cannot go below 10% of your home’s current appraised value. However, some credit unions allow 100% CLTV. Generally, home equity loans can only be taken on owner-occupied properties, although in some cases it may be possible to use a rental or investment property as collateral.

Applying for a home equity loan or HELOC is quite similar to applying for a regular mortgage. It typically involves:

  • A credit check, although your score may have a lesser impact on your lender’s decision than it would for a regular mortgage or an unsecured loan;
  • A home appraisal, to help the lender calculate your current home equity and potential loan-to-value ratio; and
  • Assessment of financial documentation, in order to calculate your debts and income.

Closing costs for home equity loans and home equity loans can reach up to 2-5% of the loan amount. Many home equity lenders are open to negotiating the closing costs, so always shop around before making a decision.

Bottom Line

Home equity loans offer many benefits compared to alternative products. The average interest rate on a home equity loan in 2021 is 3-5%, substantially lower than the average personal loan rate of 10-20%. Although cash-out refinances are available at slightly lower rates, home equity loans usually have lower closing costs – making them the best option for tapping into your home equity for modest loan amounts. Home equity loans come in many shapes and sizes, so always compare a few lenders before making a final decision.

Top 3 Mortgage Lenders

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  • Offers Fannie Mae 3% down conventional loans
  • Loan experts are on hand to assist at any time
  • Full suite of non-conventional loans
  • No weekend phone hours
  • Not licensed in NY
AmeriSave Mortgage Corporation is a direct mortgage lender operating in 49 states and DC. Since 2002, it has financed more than 400,000 homes to the tune of $105 billion in funding. It is known for its competitive rates and streamlined application, with approvals in as quickly as 25 days. It offers a wide range of loans, making it a good choice for anyone looking to purchase a home or refinance their mortgage.
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  • Digital-only mortgage platform
  • Loans customized to your needs
  • Millions of satisfied borrowers
  • Only cash-out refinance option is available
One thing makes Rocket Mortgage stand out from all other mortgage lenders: speed. Some lenders might be able to offer you better rates, others might offer great customer service, but few come close to matching Rocket for speed. This might seem like a small thing, but speed is important in the mortgage industry. Getting stuck with a time-consuming mortgage application and not even knowing whether you’ll get approved can be costly in terms of both time and energy. With Rocket, you know where you stand within a few minutes of applying and you can save time by having all your documentation verified automatically.
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  • 100% online application (in most cases)
  • Quick pre-approval and closing times
  • Flexible repayment terms (8-29 years)
  • Lack of support for self-employed borrowers
If you’re looking for an easy and comfortable loan, QuickLoans can help. Not only do QuickenLoans help ensure you get a mortgage that’s right for you to save time, but the platform ensures you are aware of your loans status 24/7 so you can keep track of what is required of you and what has already been done to avoid repeating steps that have already been completed, saving you time and confusion.

By Nadav Shemer
Nadav Shemer specializes in business, tech, and energy, with a background in financial journalism, hi-tech and startups. Nadav writes for He enjoys writing about the latest innovations in financial services and products.
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