If you’re hoping to tap into your home’s equity, a home equity line of credit (HELOC) can be a big help. HELOCs are flexible, allowing you to borrow as needed, up to your credit limit. It’s similar to having a credit card, but secured by the equity in your home.
With the best HELOC lenders, you can usually find a competitive rate and borrow more than you might be able to with an unsecured personal loan or credit card. Your credit line is based, in part, on the equity available in your home, so if you have a lot of value built up, a HELOC might be a good choice. We reviewed more than a dozen lenders and considered low rates and fees, repayment terms, and more to find the best HELOCs available for your home improvement projects.
Best HELOCs of 2021
|Lender||Why We Picked It||HELOC Amounts||Annual Fees||Draw Period||Repayment Period|
|U.S. Bank||Best Overall||$15,000 to $750,000 ($1 million in California)||Up to $90 (can be waived)||10 years||20 years|
|PenFed||Best Credit Union||$25,000 to $500,000||Up to $99 (can be waived)||10 years||20 years|
|Bank of America||Best for Low Fees||$25,000 to $1 million||$0||10 years||20 years|
|PNC Bank||Best for Small Home Improvements||$10,000+||$50||7 or 10 years||30 years|
|TD Bank||Best for Large Home Improvements||$25,000 to $500,000||$50||10 years||20 years|
|Frost Bank||Best Regional Lender||$8,000+||$0||10 years||20 years|
U.S. Bank: Best Overall
U.S. Bank is widely available, offers its HELOC with no closing costs or application fee, and enables you to borrow up to $1 million. Additionally, there are relatively low rates and a number of different term lengths available, which makes U.S. Bank a solid choice for many borrowers. However, in order to get the best rates, starting at 3.4% APR, you may need a credit score of at least 730 and/or a loan-to-value (LTV) ratio of 70% or less.
There are no closing costs, but you may pay a prepayment penalty of 1% on the original credit amount, up to a maximum of $500, if you pay off the HELOC within two-and-a-half years.
HELOC amounts range from $15,000 to $750,000 (up to $1 million in California), and repayment periods are available in 10-, 15-, or 20-year terms after a 10-year draw period. U.S. Bank charges an annual fee of up to $90 after the first year, unless you sign up for the bank’s Platinum Checking Package (then it’s waived, but you may have to pay a monthly maintenance fee on the checking account).
No closing costs
Penalty of up to $500 if paid off within three years
Annual fee of $90 if you’re not a bank member
Depending on state, a U.S. Bank checking account may be required to get the lowest rate
PenFed: Best Credit Union
As a credit union, PenFed has generous and easy-to-meet membership requirements, as well as perks for all members, including discounts, a financial hardship center where you can receive assistance online, and more. Additionally, it provides a higher HELOC in terms of loan to value, and rates starting at 3.75% AP. PenFed also allows borrowers to take out a line of credit of up to 90% combined loan to value (CLTV)—a competitive rate, as the norm for most lenders is 85%.
PenFed covers your closing costs, as long as you don’t pay off your line of credit within three years—otherwise you’ll have to repay them. Additionally, as long as you pay at least $99 in interest on your line of credit during the year, you won’t pay an annual fee (also $99). The repayment period is up to 20 years following a 10-year draw period. HELOC amounts range from $25,000 to $500,000.
PenFed is a credit union that primarily serves U.S. military service members, their families, and veterans of all branches, but anyone can join if they become a member of one of PenFed’s affinity partners, such as the Coast Guard Auxiliary Association (CGAuxA), which may come with a small fee. A minimum deposit of $5 is also required to open a PenFed account.
Lets you borrow up to 90% CLTV
Ways to avoid fees
Penalty if paid off in three years
Bank of America: Best for Low Fees
Bank of America offers one of the best HELOCs, with no application fee, no closing costs (on up to $500,000), and no annual fee. As the second largest bank in the country, Bank of America offers HELOCs on properties in all 50 states, plus Washington, D.C. On top of that, if you want to convert a portion of your HELOC to a fixed-rate loan, there’s no fee for that, either. The only fee you face is a repayment penalty if you pay off your HELOC within three years ($450 plus any other taxes and fees). Rates aren’t as good as at some of the other lenders, starting at 4.32% APR, and increasing depending on where the property is located.
As a bonus, if you’re a member of the bank’s Preferred Rewards program when you apply for the loan, you’re eligible for a small discount on your interest rate (0.125% for Gold tier, 0.250% for Platinum tier, and 0.375% for Platinum Honors tier).
No application fee, closing costs, or annual fee on lines up to $500,000
Integration with Bank of America’s Preferred Rewards
Closing must be done at a financial center
PNC Bank: Best for Small Home Improvements
PNC Bank offers a minimum loan amount of $10,000, making it a good option for small home improvement projects. You also only pay interest on what you spend, and you have ongoing access to funds throughout the draw period. For well-qualified applicants with variable lines of credit from $5,000 to $24,999.99, though, APRs start at 8.05% and can be up to 9.05%.
PNC offers a fixed-rate option too, with APRs ranging from 7.19% to 7.89%. This option offers terms of between five and 30 years when you convert an amount during the draw period. However, each time you make a fixed-rate conversion, you must pay a $100 transfer fee.
There is no application fee with PNC, but there is an annual fee of $50. On top of that, if you have a PNC checking account, you can get a 0.25% rate discount if you set up automatic payments from that account.
Low minimum loan amount
Ability to switch to a fixed rate
Fee to convert to fixed rate
TD Bank: Best for Large Home Improvements
Even though TD Bank HELOCs are only available in 15 states on the East Coast, plus Washington D.C., the bank is on our list because there is no minimum draw, and you can access a credit line between $25,000 and $500,000, making it possible to complete large projects. Other benefits include the ability to lock in a fixed rate and connect your line of credit with your bank account. It’s even possible to use your HELOC for overdraft protection and access the credit line with a debit card. Depending on which state your property is located in, APRs can vary, but the starting rate is a competitive 3.54%.
There is an annual fee of $50 on lines of $50,000 or more, as well as an origination fee of $99, though. You may also pay an early termination fee of 2% of the HELOC amount (up to $450) if you pay off your balance within two years of the date it’s opened.
High customer service rating
No setup fees for locking in a fixed rate
Ability to connect your HELOC to your TD Bank account
More fees than other lenders
Only available in 15 states, plus Washington D.C.
Frost Bank: Best Regional Lender
If you live in Texas, you can get access to a HELOC from Frost Bank and take advantage of a product that comes with no application fee, no annual fee, and no prepayment penalty. Frost Bank’s HELOC lets you borrow from $8,000, up to 80% of the property value. On top of that, if you open a new Frost Plus account for banking, you can have your monthly service charge waived. There is also a 0.25% discount on rates, which start at 3.74% APR, when you sign up for automatic payments from your Frost checking or savings account.
However, in order to complete your loan, you need to go into a center in person, and the property securing the HELOC must be located in Texas. Your Frost HELOC is also set up with a 10-year draw period, during which you make interest-only payments, and then repay the loan within the following 20 year.
No fees on your loan
Discount for automatic payments from a Frost account
Loan amounts of up to 80% of your home’s equity
Only available on properties located in Texas
Must complete closing in person
What Is a HELOC?
A HELOC is not an installment loan, like a home equity loan. Instead, it is a home equity line of credit based on how much equity you have in your home. Your HELOC works a lot like a credit card, with you “freeing up” more room as you make payments. But it’s different from a credit card in that it has a draw period, during which you take money out as needed. After the draw period is over, though, you begin making regular payments.
If you’re planning to make home improvements and you’re not sure how much they will cost, or if you want access to ongoing financing, a HELOC might work for you. However, if you just need a set amount of money, want a shorter pay-off period, and don’t anticipate needing to borrow more, a home equity loan might be a better fit.
Consider what you’re using the HELOC for. If you’re paying off debt or taking a vacation, you’re securing the line of credit with your home and if you can’t make payments, you could end up losing your house. Carefully consider your situation before moving forward with a HELOC.
How Does a HELOC Work?
You can use a HELOC for home improvement and repair projects, debt consolidation, or other large life expenses.
With a HELOC, you can borrow up to a percentage of your home’s value, based on how much you owe. In general, a HELOC lender bases your credit amount on your combined loan-to-value (CLTV) ratio. CLTV is the total of both your primary mortgage and the HELOC added together and then divided into the appraised value.
For example, a lender may limit you to 85% CLTV. If your home is worth $250,000, 85% equals $212,500. So if you have 50% equity in your home at $125,000, you can only borrow a HELOC up to $87,500—the difference between the total CLTV and the amount of your equity.
Before getting a HELOC, you need to make sure you have available equity in your home. When you’re ready to get a HELOC, fill out the application with the lender online or in person at a branch. The lender will then check your credit and verify your income, and you may be approved for the HELOC and receive the line of credit within just a few days.
The HELOCs draw period is often 10 years. You can make payments during this time frame, and many HELOC lenders let you choose whether to make interest-only payments or payments that also include the principal.
Most HELOCs come with variable interest rates, though some lenders may offer the option to convert your variable rate to a fixed rate during the initial draw phase, potentially for a fee.
Is HELOC Interest Tax Deductible?
Depending on how you use your HELOC, you might be able to deduct some of the interest on your taxes. In order to qualify for a tax deduction, however, the funds must be used on home improvements. You can’t claim a tax deduction for HELOC funds used for other purposes, like debt consolidation or special events.
HELOC vs. Home Equity Loan
A HELOC is a revolving line of credit that can be accessed as much as needed during the draw period without reapplying. You have a credit limit that’s determined by the equity in your home and how much of the available credit you’ve used. A home equity loan, on the other hand, is an installment loan with a set amount borrowed and a fixed payment schedule.
|HELOC||Home Equity Loan|
|Based on your home’s equity||Based on your home’s equity|
|Revolving line of credit||One lump sum of money|
|Draw period and then repayment period||Repayment period|
|Variable interest rate||Fixed interest rate|
HELOC vs. Refinance
With a refinance, you get a new home loan designed to pay off your old mortgage. This is a completely new mortgage with a new rate and term. It’s also possible to refinance for more than you owe and receive cash for the difference. The most common reason why people refinance is to lower their interest rate and monthly payments.
|Based on your home’s equity||Replaces your current mortgage|
|Revolving line of credit||Possible to get extra cash by borrowing more than you owe|
|Draw period and then repayment period||Terms may vary, usually up to 30 years|
|Variable interest rate||Fixed and variable interest rates available|
How We Chose the Best HELOC Lenders
We determined our list of the best HELOCs by comparing over 18 different lenders. We looked at fees, repayment terms, and more to find the best HELOC options for homeowners. Our recommendations take into account that borrowers have different financial situations and needs and that not all HELOCs meet those priorities. Not every recommendation is right for every borrower, so consider all your options before applying.
U.S. Bank. "Lasting Home Improvements Could Be Well Within your Reach," Disclosures. Accessed Jan. 5, 2021.
U.S. Bank. "Nearing the End of Draw Period on your Home Equity Line of Credit?" Accessed Jan. 5, 2021.
PenFed Credit Union. "Home Equity Line of Credit." Accessed Jan. 5, 2021.
Federal Trade Commission. "Home Equity Loans and Credit Lines." Accessed Jan. 5, 2021.
PenFed Credit Union. "Home Equity Line of Credit," Disclosures. Accessed Jan. 5, 2021.
PenFed Credit Union. "Home Equity Line of Credit." Accessed Jan. 5, 2021.
PenFed Credit Union. "Membership Disclosures," Page 3. Accessed Jan. 5, 2021.
The Federal Reserve. "Large Commercial Banks." Accessed Jan. 5, 2021.
Bank of America. "Home Equity." Accessed Jan. 5, 2021.
Bank of America. "Home Equity." Accessed Jan. 5, 2021.
PNC. "Choice Home Equity Line of Credit," Important Disclosures. Accessed Jan. 5, 2021.
PNC Bank. "Choice Home Equity Line of Credit," Important Disclosures. Accessed Jan. 5, 2021.
TD Bank. "TD Bank Home Equity Line of Credit," Accessed Jan. 5, 2021.
Frost Bank. "Home Equity Lines of Credit." Accessed Jan. 5, 2021.
IRS. "Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) 2." Accessed Jan. 5, 2021.