Best HELOCs 2023 – CBS News

A Home Equity Line of Credit (HELOC) A second mortgage is a type that uses your home equity as collateral for the loan. While collateral increases your risk, it reduces the lender’s risk, often resulting in more favorable interest rates than credit cards, personal loans and other financing options. Most HELOCs come with variable interest rates, although more lenders now offer fixed rate options.

HELOC loan amounts range from $10,000 to $1,000,000, with repayment terms lasting up to 30 years.

As with most loans, shopping around and comparing annual percentage rates (APRs), terms and fees can help you identify the best loan for your situation. You can start by considering the best HELOC lenders here.

Best HELOCs 2023

Here are some of the best HELOC lenders currently available.

Best Overall: PNC

When looking for the best home equity line of credit, it is very important to consider the line of credit interest rate, loan amount, draw period, repayment terms and fees. Working with a reputable lender with a reputation for strong customer satisfaction can also give you peace of mind.

Along these lines, PNC’s home equity line of credit excels across the board, starting with competitive interest rates. When applying, you can choose between variable- or fixed-rate options to borrow up to $1 million. Loan repayment terms range from 5 to 30 years, except in Tennessee, where terms range from five to 20 years.

PNC allows you to borrow up to 89.9% of the value of your home, although this amount may be capped at a lower rate in some states. The amount you can borrow and your interest rate will depend on your creditworthiness, income and other factors. The lender’s biggest advantage is the ability to switch between fixed and variable rates for some of your HELOCs during the draw period (the period when you can access the funds), though a rate unlocks whenever you lock in or pay a $100 fee.

Learn more now.

Best for low APR: Third Federal Savings and Loans

Third Federal Savings and Loans offers a variable 6.99% APR, the lowest HELOC rate we’ve seen (as of April 2023). And if you get a lower interest rate offer from another lender, you may qualify for an interest rate match, or the lender may issue you a $1,000 check.

Third Federal offers HELOCs to keep your borrowing costs low Closing costs or minimum draw requirements. HELOCs come with a 10-year draw period and a 30-year repayment period. While such a long repayment period can make your monthly payments more affordable, be aware that you will pay significantly more in interest than with a shorter repayment period.

Best for home improvement: Penfed Credit Union

Must move quickly A home renovation project? If you qualify, PenFed Credit Union’s home equity line of credit can give you access to your home equity in as little as 15 days. The amount you qualify for will depend on your credit and other factors, but it’s nice to know that PenFed offers loan amounts for any budget, from $25,000 to $500,000.

As of April 2023, HELOC APRs were as low as 8.125% with a 10-year draw period and 20-year repayment period. According to The IRS, you may be able to deduct interest on any amount withdrawn if the funds are used to “buy, build or substantially improve a home.” Consult your tax accountant for more information.

per Qualify for a HELOC, you must be a member of PenFed Credit Union. Fortunately, anyone can become a member, and you can open a savings account with a $5 minimum deposit.

Best for debt consolidation: Citizens Bank

According to the most recent data Federal Reserve, the average credit card interest rate is 20.92%, and some credit cards carry interest rates as high as 36%. If high-interest credit cards are hurting your finances and making it difficult to manage your bills, consider Debt consolidation With a low-interest option, such as a personal loan or HELOC. Personal loans typically have higher interest rates than HELOCs, but they don’t require you to risk your home as collateral.

Citizens Bank offers a HELOC with an 8% variable interest rate and a line of credit up to $400,000. Lenders provide fast funding within two weeks from application to funding. Although Citizens does not charge a set up or evaluation fee, they do charge a $50 annual fee during the draw period after the first year.

Learn more here.

Best for borrowers with excellent credit: TD Bank

Most HELOC lenders add a margin above the US prime rate as part of their APR calculation. As a result, your variable rate APR can fluctuate as the prime rate rises and falls.

With good credit, you can qualify for a TD Bank HELOC with a variable rate as low as -0.16% prime, among other factors such as loan amount and what type of property you own. This low APR includes 0.25% off by maintaining a Citizens Bank checking account. You have the option to lock in some or all of your credit lines at a fixed rate with no set-up fees.

Citizens HELOCs have no minimum withdrawal requirements, meaning you can withdraw as much as you need up to your credit to save on interest charges.

Best for borrowers with bad credit: Fig

If you’re struggling to get a loan elsewhere because of your credit, you can take action Improve your credit Before applying. something Lenders work with bad credit borrowers. Image requires a minimum credit score of 600. Like most lenders, you will likely pay higher interest rates if your Credit score poor and vice versa.

Figure’s home equity line of credit offers loan limits from $15,000 to $400,000. According to the lender, you can get approval within five minutes and funds within five days. The entire application and funding process can be completed online, but be aware that you will pay an origination fee of up to 4.99% of your initial draw on your HELOC.

Bottom line

Most financial experts advise against risking your home to borrow money. If you have insufficient equity, unstable income or a high debt-to-income ratio, adding a HELOC to the mix can increase your financial stress and make managing your debt challenging.

However, a HELOC or home equity loan Makes sense if you have a legitimate need, such as debt consolidation or covering home improvements that could increase the value of your home. Before you apply, consult with your financial advisor or tax accountant to ensure that a home equity line of credit is an appropriate option that aligns with your financial goals and aspirations. Learn more by reviewing your options and eligibility here now.