Best Home Equity & HELOC Lenders -

May 2025

Home equity is the value of your home minus any remaining mortgage payments. If your home is valued at $300,000 and you owe $200,000, your equity is $100,000. Increasing your home's value through renovations or if your area's property values rise can boost your equity. Before seeking equity financing like a home equity loan, consider getting an updated appraisal to potentially enhance your loan approval chances and terms, as a higher home value increases your available equity.

When you refinance your mortgage, you pay off your current loan by replacing it with a new one. As a result, you’ll pay the new loan from then on. The purpose of refinancing is to help you save money.

For this, you need to make sure you get a new loan with terms that are convenient for you. Most homeowners who choose to refinance their loans look for lower interest rates. Another reason why you might want to refinance is to shorten the term of your loan. You can also get a new loan that comes with a fixed mortgage rate, which is beneficial because you don’t risk losing money as the rates fluctuate based on market conditions.

All these benefits might seem appealing, but remember that it only makes sense to consider refinancing if you’re 100% sure you will get a loan with better terms. This means you have to calculate the interest rate of your new loan and how much you will pay over the life of your loan. Also, remember that mortgage refinancing can cost 3% - 6% of your principal plus application fees.

A Home Equity Line of Credit (HELOC) is a flexible loan where your home equity serves as collateral. Unlike traditional loans that provide a lump sum, a HELOC offers a credit line you can draw from as needed, much like a credit card. You have a set limit based on your equity, and once you hit that limit, you cannot borrow more until you repay some of the credit used.

The time you can use the HELOC is known as the draw period, typically lasting 5 to 10 years. After this period, you can't access additional funds and must start repaying what you've borrowed.

The amount you can borrow through a home equity loan or line of credit varies by lender and is influenced by the amount of equity you have in your home and your financial standing, including your credit score. Generally, some lenders may allow you to borrow up to 85% of your home's equity, with the possibility of more if you have an exceptional credit score and solid financial history. Your borrowing capacity is determined by assessing your home's value, your existing equity, and your ability to repay the loan.