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A home equity line of credit (HELOC) is a type of second mortgage that can be a beneficial tool for homeowners in need of cash to fund home improvement projects, debt consolidation, or other financial goals. It works similarly to a credit card, but the money you’re borrowing comes from your home’s equity.
Our favorite HELOC lenders offer beneficial features like customer discounts and no fees. They also allow higher combined loan-to-value ratios (CLTVs), making them more accessible to homeowners who don’t have a large amount of equity in their homes.
Note: HELOC lenders typically like to see a CLTV between 80% and 90%, but it varies. A loan-to-value ratio (LTV) is the ratio of how much you owe on your mortgage versus what your house is worth. If your house is worth $500,000 and you still owe $200,000, your LTV is 40%. A combined loan-to-value ratio (CLTV) includes all of the loans you have on your property, including first and second mortgages.
Best overall HELOC lender: Bank of America
Bank of America
Max CLTV85%Availability50 states and Washington, DC
The bottom line: Bank of America is an overall solid option for HELOC borrowers, with a max CLTV on the more affordable end, no fees, and the ability to explore rates by state on its website.
Current Bank of America customers may be able to get a small rate discount on their HELOCs if they set up auto payments from their checking or savings account, or if they’re a Preferred Rewards member. You may also be able to receive a 0.10% discount for each $10,000 withdrawal you make.
Bank of America offers the option to convert some or all of your HELOC balance to a fixed rate. HELOCs almost always come with variable rates, though some lenders offer this option to convert some of your balance to a fixed rate after you’ve started making withdrawals.
Best for high LTVs: New American Funding
New American Funding
Max CLTV97.5%AvailabilityNot available in Hawaii or New York
The bottom line: New American Funding is a good choice if you have little equity or a lower credit score.
Typically, HELOC lenders want borrowers to have higher credit scores, sometimes above 700. But New American Funding offers HELOCs to borrowers with credit scores as low as 620, which makes it a good option if you can’t get approved for a HELOC elsewhere.
If you have a score above 700, you may be able to get a HELOC with this lender with a CLTV as high as 97.5% Otherwise, the max CLTV is 90%.
New American Funding doesn’t disclose its rates online, so it’s difficult to compare its overall affordability to other lenders.
Best for no fees: Navy Federal Credit Union
Navy Federal Credit Union
Max CLTV95%AvailabilityNot available in Texas
The bottom line: Navy Federal Credit Union charges no lender fees, no annual fee, and no inactivity fee, making it an affordable option for HELOC borrowers.
With a HELOC from Navy Federal Credit Union, you can borrow up to 95% of your home’s value, minus what you currently owe on your first mortgage. This is particularly beneficial for VA loan borrowers who put 0% down at closing, since they may not have a ton of equity built up in their home yet.
To get a HELOC with this lender, you must be a member of Navy Federal. You need to be a member of the military, a veteran, a family member of someone who has served, or a Department of Defense civilian to become a member.
Best for large loan amounts: Flagstar Bank
Flagstar Bank
Max CLTV90%AvailabilityNot available in Texas
The bottom line: Flagstar Bank is a good choice if you want to take out a lot of equity. But its maximum APR is on the high end, and it charges an annual fee.
Flagstar Bank offers HELOC loan amounts up to $1 million, making it a strong choice if you have a lot of equity and are funding a high-cost project. You may also be able to get a customer discount if you have a Flagstar checking or savings account. And you won’t pay lender closing fees if you keep your HELOC account open for at least three years.
But Flagstar isn’t as affordable as some of the other lenders on this list. It charges a $75 annual fee (this fee is waived your first year) and APRs can go up to 21%.
Best for small loan amounts: Citizens Bank
Citizens
Max CLTV80%AvailabilityCT, DE, FL, IL, IN, KY, MA, MD, ME, MI, NH, NJ, NY, OH, PA, RI, VA, VT, and Washington, DC
The bottom line: Citizens Bank offers both a traditional HELOC and its GoalBuilder HELOC. Its GoalBuilder HELOC offers loan amounts as low as $5,000, making it a solid option for borrowers who only need a small line of credit.
Citizens Bank’s advertised HELOC rates are relatively low, and you may be able to get a discount by setting up auto payments from your Citizens checking account.
This lender doesn’t charge an application or closing fee, though you will pay a $50 annual fee (this fee is waived your first year). Availability is limited compared to other lenders on this list, as you can’t get a Citizens HELOC in most states.
Best credit union: Alliant Credit Union
Alliant Credit Union
Max CLTV90%AvailabilityAZ, CA, CO, CT, FL, GA, HI, IL, IN, KY, MA, MI, MN, MO, NC, NJ, NV, NY, OH, PA, TN, UT, VA, WA, WI, and Washington, DC
The bottom line: Alliant Credit Union is an affordable choice for borrowers looking to keep their out-of-pocket costs to a minimum. It charges no lender fees at closing (for loans up to $250,000) and no annual fee on its standard HELOC. Its interest-only HELOC has an annual fee of $50 that’s waived the first year.
With Alliant Credit Union, you can either get its standard HELOC or its interest-only HELOC, which allows you to make interest-only payments for the first 10 years you have the loan.
If you close your Alliant HELOC within a year of getting it, you’ll be charged a $200 cancellation fee. Interest-only HELOC borrowers may pay slightly higher rates than standard HELOC borrowers.
Other HELOC lenders we considered
Northpointe Bank: Northpointe is one of our best mortgage lenders, but it doesn’t provide information on the requirements or features that come with its home equity options.NBKC Bank: NBKC Bank is another strong lender overall, but its HELOCs are only available to Kansas City residents.Pentagon Federal Credit Union: PenFed’s advertised HELOC rates were relatively high compared to the lenders that made our list.Truist: Truist also had relatively high rates, and its availability is fairly limited.Guaranteed Rate: Guaranteed Rate’s HELOC offering has some features that could make it expensive for borrowers.
Methodology: How we chose the best HELOC lenders for 2022
We looked at the top mortgage lenders in the US that offer HELOCs to find the best HELOC lenders. We then evaluated them based on four main criteria:
Affordability. We evaluated HELOC affordability based on rates, fees, and max CLTV. When looking at rates, we looked at both the lender’s current advertised APR and its minimum and maximum APR. For fees, we looked at whether the lender charges any fees at closing or an annual fee. HELOCs typically come with some third-party closing costs, but some lenders will also charge their own fees as well, such as an application fee or an origination fee. Many of the lenders on this list charge no fees, though some charge a small annual fee.Customer satisfaction. We looked at online customer reviews to gauge how satisfied customers are with each lender.Trustworthiness. Most of our top picks earned an A+ rating from the BBB, with the exception of Navy Federal Credit Union, which has an NR (“No Rating”), and Flagstar Bank, which has an A-. We also considered any recent public scandals from the last three years.Availability. Many lenders only offer HELOCs in certain states, so we looked at where each lender offers HELOCs. Most of our picks lend nationwide with the exception of one or two states. Citizens Bank and Alliant Credit Union have a slightly more limited reach, but we felt they were still strong options for borrowers in states where they’re available.
Are these HELOC lenders trustworthy?
The Better Business Bureau grades companies based on responses to customer complaints, honesty in advertising, and transparency about business practices. Here are the BBB grades for our top HELOC lenders:
LenderBBB ratingBank of AmericaA+New American FundingA+Navy Federal Credit UnionNRFlagstar BankA-Citizens BankA+Alliant Credit UnionA+
All but two of our top picks have A+ rating from the BBB.
Navy Federal Credit Union has an NR, or “No Rating” because it’s currently responding to previously closed customer complaints. Flagstar Bank has an A- because it failed to respond to one customer complaint.
Bank of America has a couple of recent public scandals. In 2019 it was required to pay $4.2 million to people who claimed the bank discriminated against women, Black, and Hispanic applicants in the hiring process. And in 2020, the Department of Justice charged Bank of America for unfairly denying home loans to adults with disabilities, even though they qualified for loans.
In 2020, a Navy Federal employee claimed the lender pressured mortgage underwriters to approve loans even if they didn’t have sufficient reason to believe applicants could repay the loans. She filed a lawsuit and said Navy Federal retaliated against her whistleblowing, but she dropped the case in late 2020.
Citizens Bank was subject of a complaint filed by the Consumer Financial Protection Bureau alleging that Citizens violated the Truth in Lending Act by inappropriately handling billing errors on consumers’ credit card accounts.
Frequently asked questions
How does a HELOC work?
A HELOC is a line of credit that borrows from your home’s equity. You’ll be able to borrow money against this line of credit during the draw period of the HELOC.
Then, during the repayment period, you’ll no longer have access to the line of credit, and you’ll make regular payments to pay back what you borrowed. The term lengths on HELOCs can vary, but typically you’ll have a 10-year draw period and a 20-year repayment period.
What’s a good credit score for a HELOC?
The minimum credit score you’ll need for a HELOC varies from lender to lender, but you’ll likely need a higher score than what was required for your first mortgage. Some lenders require scores of 660 or 680, while others require scores above 700. A few lenders allow scores as low as 620.
Is HELOC interest tax deductible?
If you use your HELOC funds to “buy, build or substantially improve your home,” the interest is tax deductible, according to the IRS. But if you use it for personal expenses, you won’t be able to deduct it.
Does a HELOC require an appraisal?
Because the amount you can borrow with a HELOC is based on the value of your property, you’ll likely need to get an appraisal.
Is there a downside to opening a HELOC?
HELOCs can be useful if you need to tap into your home’s equity to cover certain costs, but they also put your home at risk in a way that unsecured loans, like personal loans or credit cards, don’t.
“The first risk, and the most important one — you can lose your house,” says Consra Rosales, a financial advisor and growth and development director for Northwestern Mutual.
Because you’re borrowing from your home’s equity, if you end up defaulting on the HELOC, the lender could ultimately foreclose on your home.
But there are some potential benefits to getting a HELOC over other loan options, such as a home equity loan, cash-out refinance, a personal loan, or a credit card.
HELOCs have the benefit of only charging interest on what you borrow, so you don’t have to worry about inadvertently taking out more than you need and paying interest on a lump sum amount.
Rosales gives an example of a borrower needing $50,000 for a home upgrade but then finding they can complete the upgrade for just $25,000.
“So even though you have the $50,000 available, you can tap into the $25,000,” Rosales says. “So that means, of course, you can manage that money, but you don’t have to get into debt for the $50,000.”
With a home equity loan, on the other hand, you’d get that $50,000 as a lump sum and you’d pay interest on all of it, regardless of how much your project actually ends up costing.
HELOCs also often have lower rates than some alternatives, like credit cards or personal loans.