5 Best Home Equity Loan Lenders of June 2025

If you own a home, you may have equity that can be turned into cash for big expenses like home renovations, debt consolidation, or unexpected costs. A home equity loan lets you borrow a lump sum, using your house as collateral, with fixed monthly payments and interest rates that are often lower than personal loans or credit cards.

With home prices fluctuating, many homeowners still have equity built up from past appreciation. Lenders offer different loan terms, interest rates, and borrowing limits, so choosing the right lender can save you money and make the process smoother.

5 Best Home Equity Loan Lenders

Not all home equity loans are the same. Some lenders offer lower interest rates, fewer fees, or faster funding times, making them a better fit depending on your financial needs. We’ve reviewed the top home equity loan providers based on loan terms, borrowing limits, and overall customer experience to help you find the best option.

What is a home equity loan?

A home equity loan, sometimes referred to as a “second mortgage,” allows homeowners to borrow money by leveraging the equity they’ve built in their home. This form of borrowing lets you tap into the value of your home by taking out a lump sum amount, which is repaid in fixed monthly payments over the life of the loan.

This loan type usually comes with a fixed interest rate, meaning your monthly payment stays the same over the loan term. Home equity loan rates can vary significantly among different home equity lenders, so it’s smart to shop around and compare lenders to secure the best home equity loan.

Home Equity Loan vs. Home Equity Line of Credit (HELOC)

While both a home equity loan and a home equity line of credit (HELOC) allow you to tap into your home’s equity, they work differently.

A home equity loan provides you with a lump sum of money upfront, repaid over a set term at a fixed interest rate. On the other hand, a HELOC operates more like a credit card. It’s a revolving credit line that allows you to borrow as needed, up to a certain limit, during the draw period.

HELOCs typically come with variable interest rates, meaning your monthly payment could fluctuate based on how much you borrow and interest rate changes.

How to Calculate Home Equity

Calculating home equity is straightforward. You’ll need to subtract your existing mortgage balance from your home’s current market value. For example, if your home is worth $300,000, and you owe $200,000 on your mortgage, you have $100,000 in home equity. The more mortgage payments you make and the more your home appreciates in value, the more equity you build.

Some home equity loan lenders offer loans up to 85% of your home’s equity, depending on your credit score and other factors like your debt to income ratio. This percentage is known as the loan to value ratio (LTV). So, using the above example, if a lender offers an 80% LTV, you could potentially borrow up to $80,000.

Risks and Benefits of Home Equity Loans

A home equity loan can be a smart way to borrow money at a lower interest rate than personal loans or credit cards. Many homeowners use them for large expenses, such as home improvements or debt consolidation.

In some cases, the interest may even be tax-deductible if you use the funds to substantially improve your home. Always check with a tax professional to see if this applies to your situation.

But there are real risks to consider. Your home is the collateral for the loan. If you fall behind on payments, you could lose your home through foreclosure. You also reduce the equity you have in your property. If home values drop, you could end up owing more than your home is worth.

Take time to weigh the benefits and risks carefully before moving forward with a home equity loan.

Factors to Consider When Choosing a Home Equity Loan

Not all home equity loans are the same. Comparing the interest rate, loan terms, fees, and lender reputation can help you find the right loan and avoid unnecessary costs.

Interest Rates: Fixed vs. Variable

The interest rate is one of the biggest factors to consider. It will affect both your monthly payments and the total cost of the loan.

A fixed interest rate stays the same over the life of the loan, keeping your monthly payments predictable. A variable interest rate can change based on market conditions, which means your payments could go up or down.

If you want consistent payments and peace of mind, a fixed rate is often the better choice. A variable rate might make sense if you think rates will drop and you can handle payment changes.

Loan Terms: Long Term vs. Short Term

The loan term—how long you have to repay—also plays a key role. Terms can range from just a few years to several decades.

Shorter terms mean higher monthly payments, but less interest paid overall. Longer terms lower your monthly payments, but increase the total interest you will pay.

Choose a loan term that fits your monthly budget while helping you save on interest where possible.

Fees: Application Fees, Closing Costs, and Prepayment Penalties

Home equity loans often come with added costs. Be sure to ask each lender what fees apply.

Common fees include application fees, closing costs (which often cover origination and appraisal fees), and sometimes prepayment penalties if you pay off the loan early. Closing costs typically run 2% to 5% of the loan amount.

Do not just compare interest rates—look at the full cost of the loan, including fees.

Lender’s Reputation and Customer Service

A lender’s reputation matters. Check online reviews and customer feedback to see how they handle loan processing, customer service, and problem resolution.

You’ll be working with this lender for the life of your loan, so choose one known for helpful service and clear communication. It can also help to pick a lender that offers educational tools, such as calculators or guides, to make the process easier to manage.

Take time to compare your options and review each loan’s full terms. The more informed your choice, the more likely you are to get a loan that works well for your needs.

What You Need to Qualify for a Home Equity Loan

Lenders look at several factors when reviewing your home equity loan application. You will also need to provide specific documents to verify your financial situation. Here is what to expect.

1. Proof of Income

Lenders want to confirm that you can repay the loan. You will need to provide proof of income, such as pay stubs or tax returns. Some lenders may also ask for W-2 or 1099 forms or recent bank statements. If you are self-employed, be prepared to show two years of tax returns or profit and loss statements.

2. Good Credit

Your credit score plays a key role in qualifying for a home equity loan. Most lenders look for a credit score of at least 620. A higher credit score can help you secure better rates and terms. If your credit score is low, take steps to improve it before applying—such as paying down debt or correcting errors on your credit report.

3. Debt-to-Income Ratio

Lenders use your debt-to-income (DTI) ratio to measure how much of your monthly income goes toward debt payments. Most lenders prefer a DTI of 43% or lower, though some may allow higher ratios. To improve your DTI, consider paying down existing debt before applying.

4. Home Appraisal

A home appraisal determines your home’s current market value. Most lenders will require an appraisal to confirm how much equity you have. An appraiser will visit your home and compare it to similar properties in your area. The appraisal result helps set your maximum borrowing limit.

5. Sufficient Home Equity

Equity is the portion of your home you own—its market value minus your mortgage balance. Most lenders require you to have at least 15% to 20% equity to qualify for a home equity loan. They also typically cap your total loan-to-value ratio (existing mortgage plus home equity loan) at about 80% to 85%. This means you cannot borrow against the full amount of your equity.

How to Apply for a Home Equity Loan

Applying for a home equity loan takes a few key steps. Here is what to expect.

1. Evaluate Your Equity

Start by calculating how much equity you have. Subtract your current mortgage balance from your home’s market value. This gives you an estimate of how much equity you may be able to borrow against. Keep in mind that most lenders will not let you borrow the full amount.

2. Check Your Credit Score

Your credit score affects your chances of approval and the rate you receive. Most lenders look for a credit score of at least 620, though higher scores get better terms. If your credit score is low, work on improving it before you apply.

3. Compare Lenders

Take time to shop around. Look at banks, credit unions, and online lenders. Compare interest rates, loan terms, fees, and customer reviews. Many lenders also offer pre-qualification, which lets you see potential loan terms without affecting your credit score.

4. Submit Your Application

When you’ve chosen a lender, complete the application. You’ll need to provide personal information, employment and income details, debt information, and the amount you want to borrow.

5. Schedule a Property Appraisal

Most lenders require a home appraisal to verify its current value. An appraiser will inspect your home and review comparable sales in your area. The appraisal helps determine how much you can borrow.

6. Review Loan Approval Terms

If your application is approved, the lender will send you a loan offer with the details. Review it carefully. Make sure the loan amount, interest rate, term, and fees match what you expect.

7. Receive Your Funds

Once you accept the offer and sign the documents, the lender will disburse the funds. You’ll typically receive a lump sum in your bank account. From there, begin making monthly payments on time to protect your home equity and avoid penalties.

Smart Ways to Use a Home Equity Loan

A home equity loan gives you access to a large sum of money at a lower interest rate than most credit cards or personal loans. Used wisely, it can help you manage major expenses or improve your financial position. Here are some smart ways to use one.

Home Improvement

One of the best uses for a home equity loan is to invest in your home. You can fund repairs, renovations, or upgrades that improve comfort and increase property value.

Another benefit: If the loan is used to “buy, build, or substantially improve” the home that secures the loan, the interest may be tax-deductible. Consult a tax professional to confirm whether this applies to your situation.

Debt Consolidation

If you have high-interest debts, such as credit cards or personal loans, consolidating them with a home equity loan can save money. Home equity loans usually carry lower interest rates, helping you reduce the total interest you pay and simplifying your finances with one fixed monthly payment.

Emergency Expenses or Large Purchases

A home equity loan can help cover large, necessary expenses or emergency costs—such as medical bills, tuition, or business startup costs. But borrow only what you need, and make sure you have a solid repayment plan. Your home is the collateral for this loan, so the risk is real.

Common Mistakes to Avoid With Home Equity Loans

A home equity loan can be a useful financial tool, but using it the wrong way can create long-term problems. Here are some common mistakes to avoid:

1. Borrowing more than you need: It can be tempting to take the maximum loan amount offered. But doing so increases your debt and your monthly payments. Only borrow what you need and can comfortably repay.
2. Ignoring the fine print: Loan terms include important details about interest rates, repayment schedules, fees, and penalties. Skimming over the terms can lead to costly surprises. Read all documents carefully before you sign.
3. Forgetting the risks: A home equity loan is secured by your home. If you miss payments, you could face foreclosure. Make sure you can afford the loan and have a repayment plan in place before moving forward.

If you are unsure about taking on this type of debt, talk to a financial advisor or a trusted lender. Careful planning helps you avoid mistakes and use your home equity loan wisely.

Final Thoughts

A home equity loan can be a smart way to manage large expenses or refinance high-interest debt. But it is important to choose the right loan and use the funds carefully.

Pay attention to interest rates, loan terms, fees, your credit score, and your debt-to-income ratio. Shop around and compare offers from several lenders to find the best deal.

Above all, borrow with a purpose. Use a home equity loan for home improvements, debt consolidation, or major, necessary expenses—not for discretionary spending. And always be aware of the risks before you borrow.