Types of home equity lenders and how to choose

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The average owner is sitting on nearly $300,000 in available equity, a record, according to CoreLogic estimates for the second quarter of this year. Many types of lenders offer home equity lines of credit (HELOCs) or home equity loans, and still others have started offering these products as equity increases. Whatever your financial goals, here’s where you can get a home equity loan today.

What are home equity loans?

HELOCs and home equity loans allow you to borrow against the equity in your home. Your equity is the difference between the value of your home and what you still owe on it. There are two main products that use your equity as collateral: a HELOC, a type of variable interest rate line of credit; and a home equity loan, a fixed rate second mortgage. Calculate your equity now.

Where to get a home equity loan

Traditionally, you could get a HELOC loan or a home equity loan from a bank. While many still offer them, there are several other types of institutions that now also provide them.

Banks

Banks like Bank of America, Citizens Bank, and Fifth Third Bank offer home equity deals. You might especially benefit from going to a bank if you are already a customer. Some banks such as Citi and Wells Fargo halted home equity business during the pandemic and have yet to restart, so check before applying.

credit unions

These are local, national or regional, and led by members aligned on factors such as location or profession. Some larger examples include Alliant Credit Union and PenFed Credit Union.

Mortgage lenders

If you purchased your home with a mortgage lender like CrossCountry Mortgage or Lower, you may also choose to work with them to find a home equity solution. Companies like Guaranteed Rate and Rocket Mortgage now also support home equity products.

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This includes established operations like Discover and new players like Figurewhich offers HELOCs, cash refinances, and a crypto mortgage, and Spring EQ, which allows select borrowers to access up to $500,000 in equity.

How to Choose a Home Equity Lender

With many more options for a home equity loan beyond the bank, it’s best to compare different types of lenders to get an idea of ​​which offer the lowest rates and fees and the most value. convenience or benefit.

“You should look for a lender who is upfront with you about the entire loan process, especially the requirements needed to get a loan,” says Rob Cook, vice president of home loans at Discover, adding that “costs and fees are an important consideration for anyone looking for a loan.

If you get a home equity loan, know exactly how much you need to borrow; don’t just accept whatever the lender is willing to offer you, which might be more than you asked for. Remember: you are leveraging your equity — an asset — and you will need to be able to repay the loan or risk losing your home.

Many home equity lenders also offer attractive rates, but charge higher fees. Make sure you understand your all-inclusive costs before committing to an offer.

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