Home equity loan rates vary by lender, your credit score, and how much equity you have
There is no single bank with the "best" rates for everyone. The rate you receive depends on your credit score, the amount you want to borrow, how much equity is in your home, and current market conditions. A rate that is competitive for someone with a 750 credit score and 50% equity may not be available to someone with a 650 score and 20% equity.
The banks and credit unions offering the lowest published rates change month to month. What matters more than chasing the lowest advertised rate is understanding what rate you will actually receive, what fees come with it, and how it compares to other lenders when you run the numbers yourself.
Key Takeaways
- Your actual rate depends on your credit score, debt-to-income ratio, home value, and how much equity you have, not just which bank you choose.
- Banks, credit unions, and online lenders all offer home equity loans, and the lowest rate is often not at the largest bank.
- Origination fees, appraisal costs, and closing costs can add hundreds or thousands to the true cost, so compare the full picture, not just the interest rate.
- Getting rate quotes from at least three lenders lets you see what you actually may have access to for and compare total costs side by side.
Where rates come from and why they differ between lenders
Banks set home equity loan rates based on the federal funds rate, their cost of borrowing money, and the risk they take on your loan. A lender with lower operating costs or access to cheaper funding can offer lower rates. Credit unions often have lower rates than large banks because they are member-owned and do not need to generate profit for shareholders.
Your personal risk profile—credit score, income stability, how much you owe compared to what you earn, and how much equity cushions the loan—determines whether you get the lowest rate a lender advertises or a higher one. A lender's published "as low as" rate is only available to borrowers with excellent credit and strong finances. Most borrowers receive a higher rate based on their actual profile.
Banks, credit unions, and online lenders compared
Large national banks like Wells Fargo, Bank of America, and Chase offer home equity loans, but their rates are often higher than smaller competitors. They have higher overhead costs and market to borrowers who value convenience and existing relationships over the lowest rate.
Credit unions typically offer lower rates and fees than banks, but you must be a member to borrow. Membership rules vary—some credit unions are open to anyone in a geographic area, others require employment at a specific company or membership in an organization. If you are already a member, your credit union should be one of your first stops.
Online lenders and mortgage brokers can move faster than banks and sometimes offer competitive rates, but they may charge higher origination fees or require an appraisal that costs $300 to $500. Compare the total cost, not just the rate.
What to look at beyond the interest rate
An origination fee is a percentage of the loan amount, usually 1% to 3%, charged by the lender for processing and underwriting. A $100,000 loan with a 2% origination fee costs $2,000 before you receive a dollar. Some lenders advertise no origination fee but charge higher rates instead—the math may work out the same or worse.
Appraisal costs range from $300 to $600 and are required by most lenders to confirm your home's value. Some lenders cover this; others pass it to you. Closing costs—title search, recording fees, attorney fees if required in your state—typically run $1,000 to $2,000 total.
A loan with a 6.5% rate and $3,000 in fees may cost you more over time than a 7% loan with $500 in fees, depending on how long you keep the loan. Use an online calculator or ask each lender for a Loan Estimate, which shows the rate, all fees, and the total amount you will pay.
How to get actual rate quotes and compare them
Contact at least three lenders—your bank, a credit union if you are a member, and one online lender or broker. You do not need to apply formally; most lenders offer a rate quote based on basic information about your income, credit, and home value. This is called a pre-qualification or rate quote and does not affect your credit score.
When you request a quote, provide the same information to each lender so the quotes are comparable. Tell them your approximate credit score, annual income, total monthly debt payments, home value, and how much you owe on your mortgage. Ask for the rate, origination fee, appraisal cost, and estimated closing costs.
Ask each lender for a Loan Estimate form, which is required by federal law and shows all costs in a standard format. This makes it easy to line up quotes side by side. The Loan Estimate is valid for three business days, so you have time to compare before committing.
Timing and market conditions affect what rates are available
Home equity loan rates move with the broader economy and the Federal Reserve's interest rate decisions. Rates tend to be lower when the Fed is cutting rates and higher when it is raising them. You cannot control the market, but you can control when you shop.
Rates can shift week to week, so if you are not borrowing urgently, checking rates over a few weeks can show you whether rates are trending up or down. If rates are falling, waiting may save you money. If they are rising, locking in a rate sooner may be worth it.
Lenders also adjust rates based on loan size, loan-to-value ratio (how much you are borrowing compared to your home's value), and how long you want to borrow for. A smaller loan or one that borrows less of your home's value may have a lower rate. A longer repayment term usually means a higher rate.
Red flags and common mistakes to avoid
Do not assume the bank where you have your checking account will offer the best rate. Shop around even if it is inconvenient. The difference between a 6% and 7% rate on a $100,000 loan is about $100 per month in interest alone.
Avoid lenders who pressure you to decide quickly or who will not provide a written Loan Estimate before you commit. Legitimate lenders expect you to compare offers and take time to decide. If a lender is vague about fees or rates, move on.
Do not confuse a home equity loan with a home equity line of credit (HELOC). A home equity loan gives you a lump sum at a fixed rate. A HELOC is a credit line you draw from as needed, usually with a variable rate. They have different costs and work differently—make sure you are comparing the right product.
Frequently Asked Questions
What credit score do I need to get a home equity loan?
Most lenders require a credit score of at least 620, but the best rates go to borrowers with scores of 740 or higher. If your score is below 620, you may not be able to borrow, or you will pay a significantly higher rate. Check your score before you start shopping so you know what to expect.
Can I get a home equity loan if I have not paid off my mortgage?
Yes. A home equity loan is a second mortgage, meaning it sits behind your first mortgage in priority. Lenders will lend you money based on the equity you have left after your mortgage balance is subtracted from your home's value. If your home is worth $300,000 and you owe $200,000 on the mortgage, you have $100,000 in equity to borrow against.
How long does it take to close a home equity loan?
Most home equity loans close in 7 to 14 days after you submit your application and all required documents. Online lenders may move faster—sometimes 3 to 5 days. Banks may take longer if they require an in-person meeting or have a backlog. Ask the lender for an expected closing date when you apply.
Should I lock in my rate before closing?
Yes. Once you receive a Loan Estimate with a rate, ask the lender to lock that rate in writing. A rate lock protects you if rates rise between now and closing. Most lenders lock rates for 30 to 60 days at no extra cost. If rates fall, you may be able to renegotiate, but check the lender's policy first.
What if I have bad credit or a low income?
A home equity loan is harder to get with bad credit or low income, but not impossible. Credit unions and some online lenders are more flexible than banks. You may pay a higher rate or need to borrow less. Consider improving your credit score before you apply if you have time—even a 50-point increase can lower your rate by 0.5% or more.