The Best Home Equity Loan Companies for 2019

ByTop10.com StaffDec.16, 2018
Best Home Equity Loans
If you own a property, the value of that property minus the outstanding mortgage is known as equity. With a home equity loan (HEL), you put that equity down as collateral in order to borrow money.

What is a Home Equity Loan?

With a home equity loan—often known as a “second mortgage”—the borrower receives a one-off payment from the lender, and the size of the equity goes down relative to the size of the loan. When you receive an equity loan, your terms will include additional interest and fees, and as you repay the loan, your equity will increase. 

A home equity line of credit (HELOC), is a line of credit taken out against your equity, but you only have to pay back what you use from the credit line. 

How Does a Home Equity Loan Work?

Applying for a home equity loan is similar to applying for a mortgage and if you have equity on your property, you can potentially receive one. If you’re applying for a home equity loan, you’ll need to provide much of the same information and documents as you would for a standard mortgage. This includes things like your credit score, proof of income, and outstanding debts.

The lender will also want you to have your home professionally appraised, in order to get a clear idea of what the home is worth and how much equity you have on your original mortgage. 

Different lenders have different limits on how much they’ll let you borrow against your equity, with some allowing you to borrow up to 80%-90%. The lenders do this by looking at the combined loan to value ratio, which looks at how much you owe on your first mortgage and the HEL as a percentage of your home’s appraised value. 

If the loan is being used to renovate our home, the interest you pay to the lender is tax-deductible. This is not the case if you are using the equity loan for expenses that aren’t related to the home. 

What Are the Best Home Equity Loan Companies?


TermsCredit ScoreUser Fee

LendingTree

10, 15, 20, 30 years fixed, 5/1, 7/1 ARM

620+

None 

Figure

5, 7, 10, and 15 years 

680

3% origination fee

Better Mortgage 

15 to 30 years fixed, 5/1, 7/1, or 10/1 ARM

620+

None

J.G. Wentworth

15, 20, 30 years fixed, 3-, 5-, or 7-year ARM

520+

Closing fees around 3%

HARPQuiz.com

Varies by lender

No minimum

None 

LendingTree

  • Get up to 5 free quotes 
  • Max draw of 80%-90% of home equity 
  • Loan-to-Value ratio of 80% 

Pros 

  • Free credit scoring
  • No user fees

Cons

  • Can lead to repeated solicitations from home equity lenders
  • No live chat customer service

Best for: Home equity line of credit with low closing costs 

LendingTree is an easy-to-use website that can put you in touch with all types of lenders competing for your business, which should help you find a home equity loan with better terms. With LendingTree there is no user fee charged by the service. 

While other lending houses have strict credit requirements, on LendingTree you only need to have a credit score of 620 or higher, and the service also provides free credit scoring to customers. 

In addition, LendingTree is flexible, and can find you fixed-rate loans of 10, 15, 20, or 30 years, and adjustable rate loans of 5/1 and 7/1. 

With LendingTree the application process shouldn’t take more than about 10 minutes or so. Afterwards you’ll be able to see multiple offers from a wide range of lenders at the same time, all within a matter of seconds.

Read the full LendingTree Review or visit LendingTree to get your home equity loan. 

LendingTree LendingTree Get Rates

Figure

  • Minimum draw of $15,000
  • Max draw of up to $100,000
  • Loan-to-Value ratio of 80% 

Pros 

  • No user fees
  • Live chat customer service

Cons

  • 3% origination fee
  • 680 minimum credit score 

Best for: Receiving a reliable loan to cover renovations or large purchases 

Figure is a direct lending company that focuses exclusively on home equity loans, with a simple process that shouldn’t give you any headaches. 

Figure provides loan terms of 5, 7, 10 and 15 years, and the company does not charge any prepayment fees. Applying with Figure is quick and easy, and the company performs a soft credit pull that doesn’t affect your credit score. 

You’ll need to have plenty of equity on their home, with a loan-to-value ratio of 80%. The service can provide home equity loans of $10,000 to $150,000, though you will face a small origination fee. In addition, the company’s customer service is responsive and helpful, and has a live chat that is quick to reply during business hours. 

Read the full review of Figure or visit Figure to get your home equity loan.

Figure Figure Get Rates

Better Mortgage

  • Cash-out refinance loans widely available 
  • Refinance terms of 15, 20, or 30 years 
  • APR as low as 3.75% on 15-year loans 

Pros 

  • No origination fees, lender fees or commission
  • Fast approval process 

Cons

  • Closing costs average around $1,500 to $3,500
  • Minimum 620 credit score 

Best for: No-cost mortgages and cash-out refinance at good rates

Better Mortgage takes a lot of the hassle out of the lending process, with an entirely digital platform that walks you through the process. The company promises a better price guarantee, promising to beat competitors’ offers by $1,000. 

With Better you can find a large number of options for cash-out refinancing, in a variety of states across the country. You will need a credit score of 620 or higher, though this is still lower than what some competitors require. 

Better also connects users with a dedicated loan officer who will help you out once you’ve passed the pre-approval process. 

There are no origination, lender fees, or commissions with Better, though you could face high closing costs, so make sure these are terms you can handle. 

Read the full review of Better or visit Better to take out your home equity loan.

Better Mortgage Better Mortgage Get Rates

J.G. Wentworth Home Lending

  • Cash-out refinance loans widely available 
  • Refinance terms of 10, 20, or 30 years 
  • APR as low as 4.250% on 15-year fixed rate loans 

Pros 

  • Quick and easy application process 
  • Also provides FHA, VA, and HAR loans 

Cons

  • Closing fees of around 3% of the value of the loan 
  • Minimum 620 credit score 

Best for: Borrowers who are looking for variety and convenience

J.G. Wentworth offers a wide range of loans for borrowers of all sorts, and while the company focuses on fixed and adjustable rate conventional loans and government-backed loans, you can also get cash-out refinancing with J.G. Wentworth. 

The company helps veterans get cash-out through VA cash-out refinancing, which allows refinancing at up to 100% of the homes value. 

On the company’s website, an interest rate of 5.250% was quoted for a refinance loan of $200,000. This was for a house worth $300,000 which was half paid off, and whose owner had a fairly low credit score of 620. 

On J.G. Wentworth you can also access a large number of online educational resources that can help you learn more about cash out refinancing as well as mortgages, and much more. 

Read the full review of J.G. Wentworth or visit J.G. Wentworth to take out a home equity loan.

J.G. Wentworth J.G. Wentworth Get Rates

HARPQuiz 

  • Cash-out refinance loans widely available 
  • Wide array of refinance terms depending on lender 
  • Customers receive multiple loan offers to their inbox 

Pros 

  • No fees for getting an estimate, and no obligations to take offer 
  • Can find customers loans for HARP, FHA, and VA

Cons

  • Very little information on website
  • No educational resources online for customers who want to learn more

Best for: Comparing a wide array of loan options

HARPQuiz is an online middleman that can link you up with all types of loan offers from a wide variety of lenders. Most of these are for mortgage loans, but the company also facilitates a large amount of cash-out refinancing.

One drawback of HARPQuiz is that the website is very bare, without extensive educational resources for users who might be borrowing money for the first time. On the other hand, since the site checks from a large number of lenders, it saves you the trouble of doing the legwork on your own. 

When you do search for a loan on HARPQuiz, you won’t be charged any fees for your estimate, and will be under no obligation to accept an offer. 

Read the full review of HARPQuiz or visit HARPQuiz.com to take out a home equity loan.

HARPQuiz.com HARPQuiz.com Get Rates

Why Get a Home Equity Loan

Now that you’ve taken a look at some popular home equity loan companies, the question remains, what are the benefits of taking out a home equity loan?

With a home equity loan, you can borrow money against the equity you have built up in your home. This can be a great way to consolidate debt—such as high-interest credit card debt—in that home equity loans tend to have lower interest rates. These are typically around 5%, while the average credit card interest rate is typically around 15%. 

Another effective use of a home equity loan is to make home renovations. Not only can these be tax exempt, but using the loan for renovations is a solid way to quickly improve the value of the property ahead of a sale. 

Simply put, home equity loans are a quick and easy way to get cash and consolidate debt, assuming you have the equity needed. 

ProsCons

Lower interest than other loans 

You have to put your home up as collateral

Flexible, use it how you please

Closing costs and fees can be pricey

Solid way to consolidate debt 

You are taking on additional debt 

How to Choose the Best Home Equity Lender

Your first step in deciding which home equity lender to go with is to figure out what you need. What is the amount of money you need to take out, what are the average interest rates given by the company, and will you be able to make the payments in time, month after month?

Look at the credit score requirements of the company and see how you match up. If your credit isn’t high enough you might not get approved at all, or only for a loan with terms that aren’t so friendly. 

It’s helpful to find a company that has an easy application process and which will provide you with personalized customer service throughout the process. Ideally the company will also send you multiple loan offers with different terms, so you can decide the one that’s best for you. 

In addition, not all lenders charge fees for the loan. You can easily find ones that don’t charge an application fee or origination fee, and don’t charge you any sort of closing costs. While these fees aren’t as big a burden as the loan itself, they can still take a bite, so shop wisely and you should be able to find a company with no fees. 

The Costs of Home Equity Loans

One of the drawbacks of home equity loans is that you have to put your house up as collateral (you’re borrowing against the equity) and that does bear some risk. In addition, a number of lenders charge a flat origination fee which can be anywhere around $50 or into the hundreds of dollars or more. More significantly, many lenders charge a closing fee as part of the loan which can be as much as 2%-5% of the loan value. 

Home Equity Loans VS Lines of Credit

With both home equity loans and home equity lines of credit (HELOC), you are borrowing against the equity in your home in order to get some cash flow. Both are a way for you to get some of your real estate gains—which are at the moment on paper—and use them in your daily life, for debt consolidation or for expenses that you just don’t have the cash for at the moment. 

With a home equity loan, you receive the money as a lump sum that you then pay back as part of a fixed term mortgage. With HELOC, you receive the funds as a credit line that you can use when needed and you only pay interest on the money you use on the credit line.

One of the drawbacks of a home equity loan is that you’ve taken out the money in a lump sum, which could work to your disadvantage if the value of your property drops for some reason.

On the other hand, you’ll have the benefit of a fixed interest rate and monthly payments.On a HELOC, the interest rates may be variable, which can work to your favor while also being unpredictable at times. 

Type of LoanBest For

Home equity 

Debt consolidation, taking out a large amount of money with fixed rates and payments

Home equity line of credit (HELOC)

To get cash flow that you may not need all at once, only when needed. More flexible, less risk

Home Equity VS Refinance

With a cash-out refinancing loan, you take out a new mortgage that is larger than your remaining loan on the original mortgage, and you take the difference in cash. Ideally this new mortgage will be with interest rates that are lower than the original loan, and the cash influx can easily be used to pay off other, higher interest rates. 

With a home equity loan, you aren’t taking out a new mortgage on the entire property, rather, you are borrowing a set amount of your overall equity, and then paying that back as a loan that is separate from your mortgage. 

A cash-out refinance is better for not only getting some cash flow, but also for securing a new mortgage with better rates. 

No matter what you need the money for—home renovations, medical treatment, or just a family vacation that you don’t quite have the money for—home equity loans, HELOC, and cash-out refinancing can help you get the cash flow you need, and hopefully loan terms that are better than what you’re dealing with. It’s just one way to get a better handle on your finances, and a little relief.