Best HELOC Rates for February 2021

Home equity lines of credit (HELOC) are a way for homeowners to use home equity to help fund things like home renovation projects, debt consolidation, or even paying for a child’s college tuition.

But in a year that’s seen a pandemic and recession, lenders have gotten stingier when it comes to who gets credit and on what terms. Is a HELOC still a good option for homeowners?

Banks and lenders have pulled back their HELOC offerings. And the banks that are still offering home equity lending are more strict about their qualifications and terms. 

Here’s Where to Start:

• Best HELOC Rates
• Best HELOC Lenders in 2021
• HELOC Rates Today
• How Does a HELOC Work?
• Pros and Cons of HELOCs
• How to Apply for a HELOC
• How to Get a Good HELOC Rate
• HELOC vs. Home Equity Loan

If your credit is subpar right now, or you don’t own much equity in your home, you may struggle to find a lender for a HELOC at the moment. Some lenders have stopped taking applications altogether, while others may only be working with existing clients. 

The Best HELOC Rates for February 2021

Among banks that still have HELOC options available for those who meet the stricter credit requirements, here are the best rates we could find:

Details: Best HELOC Lenders in 2021

• Bank of America
• PenFed Credit Union
• Citi
• SunTrust
• BMO Harris Bank
• Fifth Third Bank

Bank of America 

Overview

Bank of America is a large national bank with many locations. You can access its home equity line of credit offerings online or in person. It takes about 15 minutes to submit your application for a home equity line of credit online through Bank of America. 

Pros

Bank of America is the second-largest bank in the U.S. with over 4,000 locations, making the lender very accessible. 

Bank of America has no HELOC application fee, closing costs (on lines up to $1,000,000), or annual fee, and you can qualify for discounts on your HELOC interest rate:

• An interest rate discount for auto pay of 0.25% for setting up automatic payment at or prior to opening your HELOC account and maintaining them through an eligible Bank of America deposit account
• A 0.05% interest rate discount for every $10,000 initially withdrawn at account opening (up to 0.75% for initial draws of $150,000 or more)
• A 0.25% interest rate discount for a HELOC in a first lien position
• An interest rate discount of up to  0.375% for Preferred Rewards members with Bank of America

There’s also no fee to convert a withdrawal from your HELOC into a fixed-rate loan (fixed-rate HELOC). Converting to a fixed rate will result in fixed monthly payments at a fixed interest rate. The minimum HELOC amount that can be converted at account opening is $5,000, and the maximum is 90% of your line amount with a minimum loan term of 1 year. You may also convert all or a portion of your outstanding HELOC variable-rate balance to a fixed rate option. 

You can access your HELOC online or via mobile banking, or with a home equity line of credit check or a Visa Access card. Pay down your bill by transferring funds using online banking, or set up automatic payments using Bill Pay. 

Cons

Bank of America does not offer a narrower APR range that some other lenders do. Your variable APR will fall somewhere between 1.99%-24%, based on your home equity, loan-to-value ratio, creditworthiness and other factors. 

Bank of America’s minimum line amount is $25,000. Other lenders offer lower line minimums, so you may want to look elsewhere if your project or reason for getting a HELOC will not require up to $25,000. Lines go up to $1,000,000 for primary residences, or $500,000 for secondary residences. 

PenFed Credit Union

Overview

PenFed Credit Union has 2 million members worldwide, and though many credit unions have strict requirements for joining members, anyone can join PenFed. 

Pros

PenFed pays most, but not all, closing costs associated with an interest-only HELOC, which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. 

Cons

Members are responsible for paying city, county, and/or state taxes if the property is located in: Florida, Louisiana, Maryland, Minnesota, New York, Tennessee, or Virgina. Members are responsible for appraisal costs and notary fees. 

There’s an annual fee of $99 that will be assessed on each account anniversary if $99 in interest was not paid during the preceding 12-month period. 

Citi

Overview

Citigroup is a large national bank that offers two variations of home equity lines of credit: a traditional and interest-only HELOC. A traditional HELOC payment is made up of both principal and interest. Your payments will stay pretty consistent throughout your draw and repayment periods. 

An interest-only HELOC lets you make minimum payments of only interest during the draw period. But then your payments will likely increase when you start adding in your principal to the repayment period. 

Pros

You can qualify for a lower interest rate on your HELOC if you meet balance requirements on other Citi accounts, have excellent credit, use Citibank Auto Deduct for repayment, meet certain loan-to-value and lien position requirements, take an initial draw of at least $25,000 at closing, and have a line amount of at least $100,000. 

You can avoid the annual fee of $50 if you are a Citigold or Citi Priority customer, or an employee of Citigroup or its subsidiaries at the time of account opening. You can elect to pay closing costs and receive an additional rate reduction.

Cons

Citi doesn’t offer an estimate for how big of a loan you can get — it’s based on the current value of your home and mortgage. Citi doesn’t offer HELOCs in Alaska, and in Texas a HELOC is only available on collateral properties that are single-family, primary residences. You can’t get a HELOC for a mobile home in any state.

You may only qualify for an interest-only HELOC if you have $200,000 or more in personal assets with Citi, or $1,000,000 or more in combined personal assets with Citi and other financial institutions. 

SunTrust

Overview

SunTrust operates primarily in the southeastern United States, which may prevent your from accessing a HELOC if you don’t live near a branch.   

Pros

You won’t pay closing costs for your HELOC, and for lines of $10,000 or more, SunTrust will advance certain costs on your behalf, including the first property/collateral valuation. 

Cons

HELOCs are only available for owner-occupied, single-family primary residences in Florida, Georgia, Tennessee, Alabama, South Carolina, Virginia, North Carolina, Maryland, Washington, D.C., Arkansas, West Virginia, and Mississippi. 

BMO Harris Bank

Overview

BMO Harris is America’s 8th largest bank with more than 12 million customers. HELOCs may not be available in all states.

Pros

You can get interest rate discounts through BMO:

• Premier customers may be eligible for an additional 0.25% interest rate discount
• You can get a .5% auto pay discount if you authorize BMO to withdraw your home equity line of credit payment each month from an eligible BMO Harris checking account

BMO Harris will pay closing costs for loans secured by owner-occupied, 1-4 family residences. 

Cons

There’s a $75 annual fee on the loan opening date, and each year after during the draw period. If your property is located in Florida or Minnesota, you are responsible for mortgage and government taxes. 

You can convert a HELOC to a fixed rate at a minimum withdrawal of $2,000, and up to 100% of your line. You can have no more than three fixed rate lock options open at one time, and there’s a $75 fee each time you convert a fixed rate lock option after the date of origination. 

Fifth Third Bank

Overview

Although Fifth Third is a national bank, their HELOCs are only available in certain states. And unlike other lenders, you’ll have to visit a branch in person to fill out an application. 

Pros

Fifth Third will waive your annual fee for the first year, and every year after that if you’re a Preferred checking account holder. 

You can qualify for interest-only payments for the first 10 years, but your payments will increase for the rest of the life of the loan. Your interest may also be tax deductible. Fifth Third will pay your closing costs, as well. 

Cons

Fifth Third is a national bank, but doesn’t offer HELOCs in every state— and you must have an eligible checking or savings account with the lender to qualify.  

For a primary residence, your line can be up to $500,000, but the maximum for secondary residences is $250,000. 

Your annual fee is waived for the first year, but $65 after that (unless you’re a Preferred checking customer). There’s a $95 fee to fix your HELOC rate. 

Methodology 

This list does not represent the entire market. To rank the home equity line of credit (HELOC) rates you’re most likely to be considering, we began by analyzing 18 of the most popular HELOC options.

We eliminated any banks that don’t make information on rates and fees easy to find on their websites, or that have stopped offering HELOCs for the time being. 

Some lenders also offer fixed-rate HELOCs, special introductory period offers, or other interest-only period payment plans. Since HELOCs are long-term loans, we only looked at currently available variable-rate APR ranges excluding those special factors. 

The APRs shown above are accurate as of Feb. 3, 2021. They are the only APRs openly available for the lenders we looked at. The NextAdvisor editorial team updates this information regularly, though it is possible APRs and even the existence of these HELOC offerings have changed since they were last updated. 

HELOC Rates Today

It is going to be more difficult to qualify for a HELOC today than it was before the pandemic.  

“As the economy rolls over, lenders start to become much more restrictive with credit, particularly those that are most prone to loss,” says Greg McBride, chief financial analyst at Bankrate.

Those that are most prone to loss are lenders of unsecured debt, like credit cards, and those in a second lien position with secured debt. This refers to the position of a lender to get paid if someone defaults on their loans. For a house, the mortgage lender is the first lien holder. 

“In other words, they’ve got the primary spot if the borrower defaults. They’re the biggest claim, and they’re first in line. They’re the ones who would typically foreclose to get their money back,” McBride says. “It’s only after they get their money back that any subsequent lien holders would get paid.”

And as the economy remains unsteady, lenders have significantly tightened who they allow to put them in a second lien position. 

“Lenders don’t want to have to foreclose in the first place, because it’s expensive and there’s no guarantee they’ll get their money back, but if that does happen you definitely don’t want to be second in line. You want to be first,” McBride says.

But while it is more difficult to qualify right now, it’s important to note that home equity borrowing hasn’t shut off completely. It’s just gotten tighter as lenders try to limit their risk exposure. 

How Does a HELOC Work?

A home equity line of credit (HELOC) lets you borrow against the available equity in your home — similar to a credit card. Your home is used as collateral, meaning if you default on your payments the lender can seize your home. 

Like a credit card, you’ll be able to access funds from your HELOC as you need them, instead of like a loan where you take out a predetermined lump sum amount at the onset. However, there’s usually a minimum withdrawal amount based on the total amount of your credit line. This means you’ll be required to spend up to a certain amount.

Standard HELOCs work on a 30-year model, with a 10-year draw period and 20-year repayment period, though there are some exceptions. During the draw period, you may take funds from your HELOC up to the amount of your line of credit, and then you have the repayment period to pay it back.

HELOCs traditionally have variable-rate APRs, meaning your interest rate adjusts over time based on the benchmark U.S. prime rate. The prime rate is the base rate on corporate loans posted by at least 70% of the 10 largest U.S. Banks, according to the Wall Street Journal.

Fixed-rate HELOCs

Some lenders can offer a fixed-rate, but it’s more common in a rising-rate environment. Offering a fixed-rate on an outstanding balance, for example, can help consumers if there’s risk that rates will rise. 

But that’s really “not something to be concerned about now because interest rates are low and not likely to go anywhere for the next couple of years,” McBride says.

What To Use a HELOC For 

HELOCs can be useful for large expenses, like home renovations or paying for your child’s college, according to the FTC. They’re particularly good for ongoing expenses, like projects or tuition, since you only have to pay back what you spend. 

They can also be used for debt consolidation, though a home equity loan may make more sense in these cases. A lump sum, through a home equity loan, would lend itself to paying off the debt in “one fell swoop,” says McBride. 

But be careful, as tapping into your home’s equity can put you at risk for losing your home if you default for any reason. 

Pros and Cons of HELOCS

How to Apply for a HELOC

You can apply for most HELOCs online. After you’ve done your research and selected a lender, go to their website and start an application. 

You’ll need to have some personal information ready to enter into your application: name, address, estimated credit score, and how much you want your credit line to be. You can rarely open a line of credit for less than $10,000, and the maximum amount you can get will also depend on your credit score and home equity. 

How to Get a Good HELOC Rate

With interest rates at a low right now, HELOC rates are already better than those for other types of loan like credit cards. For those who qualify for better rates closer to 5%, that’s still much better than credit cards, which have an average APR of 16%.

There are several factors that determine what your HELOC rate will be:

• Your credit score and history: Lenders will pull your credit score to determine your creditworthiness, just as they would for any other type of loan or credit card application. Having good credit, or improving your credit before you apply, can increase your chances of a more favorable rate.
• Your home equity: The more you have, the more it will positively affect your combined loan-to-value ratio (CLTV). The CLTV is a metric used to measure the relationship between a loan amount and the market value of your home. The more equity you have, the lower your CLTV will be and the better you’ll look to the lender. 
• The lender: Different lenders offer different rates. Make sure to shop around and consider all of the options for HELOC rates, and don’t discount local credit unions or banks.

HELOC vs. Home Equity Loan

HELOCs are different from another common type of home equity financing — home equity loans. The interest rates you’ll get for each are determined by your credit score, home equity, where you live, the value of your property, and other factors. 

Home Equity Line of Credit FAQs