Best Home Equity Loan Lenders Of 2025

A type of second mortgage, a home equity loan can be a boon to many homeowners because it lets you tap the equity you’ve built up in your property, making it a popular option for financing significant expenses such as home improvements, education or debt consolidation.

Borrowers use their home as collateral to receive a lump sum of cash upfront and repay the loan at a fixed annual percentage rate (APR) in monthly installments over a set term. The APR reflects the actual cost of the loan, including the interest rate and associated loan fees, offering a complete picture of the total borrowing expense.

How Popular Are Home Equity Loans?

Home equity loan lending surged to its highest level in over 15 years in 2024. Many homeowners who locked in ultra-low mortgage rates in recent years and saw their home values skyrocket opted for home equity loans instead of other financing methods, such as cash-out refinances, to preserve their rock-bottom interest rates.

With mortgage rates expected to remain relatively elevated in 2025 and home equity loan rates generally much lower than credit card interest rates—which can often exceed 20%—these loans are likely to remain a go-to option for eligible homeowners who want to tap into their equity while retaining their existing low mortgage rate.

Home equity is what remains after you subtract your remaining mortgage balance from the market value of your property.

It’s an easy figure to calculate. Let’s say your home value is appraised at $450,000, and your remaining mortgage balance is $270,000—the total equity in your property is $180,000. That’s a hefty chunk of cash!

To determine your home’s value, you can begin with a recent tax assessment, which offers an estimate that local governments use for calculating property taxes. Another approach is to check the sale prices of comparable homes in your area—properties with similar lot sizes, square footage, number of bedrooms and bathrooms, and construction age.

For a more accurate value determination, you’ll need to hire a real estate appraiser. The assessed value provides a dollar number for annual tax calculations, while the appraised value better reflects what your home would sell for in an open and competitive market. Most lenders will require a professional appraisal as part of the approval process for a home equity loan.

Not necessarily. Many lenders require your loan-to-value (LTV) ratio to be 80% or lower to qualify for a home equity loan. LTV is a key risk assessment metric that lenders review when comparing a prospective borrower’s remaining mortgage balance against the property’s value.

To calculate LTV, divide your outstanding mortgage balance by your home’s appraised value. For example:

• Appraised property value: $450,000
• Remaining mortgage balance: $270,000

LTV = $270,000 ÷ $450,000 = 60%

If you have more than one mortgage on your home, lenders will calculate your combined loan-to-value ratio (CLTV). CLTV includes all outstanding debt tied to your property, not just your primary mortgage balance, which ensures they’re reviewing the total debt secured by your property when determining your maximum amount of home loan financing.

Home Equity Loan Limits: How Much Can You Borrow?

In most cases, lenders won’t let you borrow the full value of your home equity.

Typically, they prefer to lend no more than 80% of your home equity to avoid default risks. You may be able to borrow more depending on the lender and your location.

Here’s a sample breakdown of how a lender would determine your home equity:

HOME EQUITY LOAN SCENARIO
Appraised home value	$450,000
Less 20%	-$90,000
80% / Maximum LTV	= $360,000
Remaining mortgage balance	-$270,000
Maximum you can borrow	= $90,000

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The lower the LTV, the less the lender considers the borrower a risk and the more likely the borrower will get a more competitive home equity loan interest rate.

Use the handy Forbes Advisor home equity loan calculator to get a sense of how much you’ll be able to borrow based on your unique situation.

There are no restrictions on what you can do with your home equity funds.

People often use the lump sum toward a large expense. While you can certainly use your home equity for a lavish vacation or luxury items, it’s inadvisable. Taking out a home equity loan to pay day-to-day bills can also be a slippery slope.

Remember, you’re using your home to secure the loan, so if you default on your home equity loan payments, you could feasibly lose your home. Consequently, it’s essential to review your finances and goals before taking out a home equity loan to ensure you can manage the costs and that your plans for the money make sense.

Here are some common ways people use their home equity:

• Consolidating debt
• Home improvements
• Medical expenses
• College tuition
• Vehicle purchase
• Wedding costs
• Launching a business
• Retirement income supplement
• Emergency expenses

Just because you see an advertised rate doesn’t mean that’s the rate you’ll receive. Each person’s situation is different, and it is within your control to improve your financial stance to position yourself to get the best rate.

Here are some practical tips to save yourself money when preparing to take out a home equity loan:

• Optimize your credit score. Most lenders prefer a score of 680 or higher for home equity loan approval, and the higher your score, the better your chances for lower interest rates. A strong score also improves your likelihood of getting a loan pre-approval. To kick up your score, pay bills on time, keep your oldest credit card accounts open, avoid applying for new cards, and check your credit reports for errors.
• Reduce your debt-to-income (DTI) ratio. Your DTI ratio measures your recurring monthly debts against your monthly gross income. Lenders typically prefer a DTI of 43% or less, though some may have different thresholds. To reduce your DTI, focus on paying down debt, consolidating loans, cutting unnecessary expenses and boosting your income with a side job.
• Gain more home equity. A lower LTV ratio makes you a less risky borrower in the eyes of lenders, often leading to a lower interest rate. If you have room in your budget, you can quickly increase your home equity by making larger monthly payments, extra payments or both.
• Reduce your loan term. Shorter loan terms typically come with lower interest rates if you can manage the higher monthly payments.
• Follow interest rate movements. Rates can change frequently, so stay informed by following financial news, reaching out to lenders and doing online research. This could help you choose the best time to apply and secure the lowest rate
• Shop several lenders. It’s usually not a good idea to settle for the first offer you get. Shop around and compare APRs, fees, and terms to find the best deal. Reading online reviews can also provide helpful insights. Plus, once you sign with a lender, you have three business days to legally terminate the agreement without penalty if a better offer surfaces.
• Negotiate. Leverage interest rate quotes and fees offered by other lenders to improve your chances of getting the lowest rate.

Home equity loans can be a great option to access the cash in your home. Even so, whether or not you should take out a home equity loan will depend on your unique situation.

Nonetheless, if you’re a homeowner in a strong financial situation and need a lump sum of money on the fly for a single large expense, such as home renovation, an eye-popping medical cost or consolidating multiple higher-interest loans into a single lower-interest-rate loan, then a home equity loan could be right for you.

Additionally, if you prefer certainty, the predictable payments of a home equity loan may help you sleep easier at night compared to riskier financing methods.

We graded the best home equity lenders based on features that have a meaningful impact on the cost of a home equity loan and a borrower’s experience, including interest rates, loan options, minimum credit score, accessibility, closing time, customer service, discounts and the customer sentiment index.

Our scoring method is broken down as follows:

• Interest rate. 17.50%
• Accessibility. 7.50%
• Customer service experience. 7.50%
• Loan options. 8.75%
• Time to close. 8.75%
• Minimum credit score. 5.00%
• Discounts. 5.00%
• Customer sentiment index. 40.00%

We chose to focus on these core elements to bring forward lenders that offer the most competitive rates while also providing a satisfactory customer experience accessible to borrowers of all financial backgrounds. We believe this scoring system best reflects consumers’ top priorities when comparison shopping for mortgage lenders.

To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Reviews Mortgage Lenders.

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