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 several lenders and considered low rates and fees, repayment terms, and more to find the best HELOCs available for your projects.
Best HELOCs of 2020
|Lender||Why We Picked It||HELOC Amounts||Annual Fees||Draw Period||Repayment Period|
|PenFed||Best Overall||$25,000 to $500,000||$99 (can be waived)||10 years||20 years|
|U.S. Bank||Runner-Up||$15,000 to $750,000 ($1 million in California)||Up to $90 (can be waived)||10 years||20 years|
|Bank of America||Best for Low Fees||$25,000 to $1 million||$0||10 years||20 years|
|Connexus Credit Union||Best for Small Improvements||$5,000+||$0||15 years||15 years|
|Bank of the West||Best for Large Improvements||Up to $2 million||Up to $75||10 years||10-20 years|
|Citi||Best for Rate Discounts and Member Savings||$10,000 to $1 million||$50 (can be waived)||10 years||20 years|
PenFed: Best Overall
PenFed allows you to borrow up to 90% combined loan to value (CLTV). PenFed covers your closing costs as long as you don’t pay off the HELOC 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 previous 12 months, you won’t pay an annual fee (which is 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.
Even though it’s a credit union that primarily serves military service members and their families, 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.
Opportunity to avoid closing costs
Borrow up to 90% CLTV
U.S. Bank: Runner-Up
For the best rates, U.S. Bank considers homeowners’ credit scores (at least 730), the loan limit (up to $100,000), and the loan-to-value (LTV) ratio. 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 three 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 trade it for a monthly maintenance fee).
No closing costs
Annual fee of $90 if not a bank member
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 $1 million), and no annual fee. 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).
Bank of America offers a 0.25 percentage-point discount when you sign up for automatic payments and other discounts that may help lower your rate even more, such as an initial withdrawal discount and Preferred Rewards clients discount. HELOC amounts range from $25,000 to $1 million, with a repayment term of 20 years after a 10-year draw period.
No application fee, closing costs, or annual fee on lines up to $1 million
Closing must be done at a financial center
Connexus Credit Union: Best for Small Improvements
Connexus offers a minimum loan amount of $5,000, which makes it ideal for small home improvement projects. Additionally, Connexus offers a 15-year draw period, which is longer than the common 10-year draw period offered by other institutions on our list. Closing costs start at $175 and can be as high as $2,000, but there are no annual fees and Connexus doesn’t state whether there’s an early payoff penalty.
Since Connexus is a credit union, there are membership requirements to join. You can become a member of the credit union by joining the Connexus Association through a one-time $5 donation and depositing at least $5 into a savings account.
Low minimum loan amount
Longer than usual draw period
Not available in Maryland
Bank of the West: Best for Large Improvements
With lines of credit of up to $2 million, Bank of the West is one of the best HELOCs if you have a large project, high amount of debt to consolidate, or other large expense to pay for. There are no origination fees or closing costs, and it’s not clear if there’s an early repayment penalty, but there is an annual fee of up to $75. And if you elect to convert from a variable rate to a fixed rate (and vice versa), you could incur another $100 fee. There is a 10-year draw period, and then a repayment period of 10, 15, or 20 years.
High maximum line of credit
No way to waive annual fee
Fee for converting to a fixed rate
Citi: Best for Rate Discounts and Member Savings
Citi offers repayment options of 20 years, like many other lenders. However, where Citi shines is in offering various discounts as well as savings for those who have other Citi accounts. Homeowners can borrow up to $1 million. There is an annual fee of $50, but you can waive it if you have certain accounts with Citi. You can also choose whether to pay closing costs, which start at $680. Paying them will get you another rate discount. You can save even more by signing up for autopay too, which will result in another rate discount. However, if you pay off the line of credit within 36 months, you may incur an early closure fee.
Several opportunities for rate discounts
Borrower’s choice in paying closing costs
Annual fee of $50 if not a bank member
High minimum amount in personal assets required for interest-only draw period
How Do HELOCs Work?
A home equity line of credit (HELOC) is a revolving line of credit, which means you can keep drawing on it, up to your limit, as long as you make payments. It’s similar to a credit card, except it’s based on the equity you’ve built in your home. 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. For example, if you have a home worth $250,000, and you still owe $125,000 on your original mortgage, you have $125,000, or 50%, in available home equity. However, a HELOC lender bases your credit amount on your combined loan-to-value (CLTV) ratio. For example, a lender may limit you to 85% CLTV, which includes your HELOC plus your original mortgage. 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.
HELOCs are generally divided into a draw phase, during which you can withdraw money as needed, up to your available line. This phase is often 10 years. You can make payments during the draw phase, 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, potentially for a fee.
After the draw phase ends, you have the repayment phase. This is when you can no longer withdraw money, and must make regular payments until the line of credit is paid off. Repayment periods vary per lender, though it is common to have a repayment term of up to 20 years. Keep in mind that if you pay off the line of credit early, you may incur a penalty fee.
HELOC vs. Home Equity Loan
|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|
How We Chose the Best HELOC Lenders
We determined our list of the best HELOCs by comparing over 15 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.