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The best HELOC or home equity loan, most folks would say, is the one that costs the least. But low cost is not just about a competitive interest rate. Upfront fees, closing costs and ongoing charges can add up to a significant chunk of money, too. The presence or absence of such fees tends to be entirely at the lender’s discretion. Some charge the full gamut; some never charge any; and others offer promotions that waive them for the first year.
Here’s Bankrate’s rundown of the best low or no-fee home equity lenders.
Best home equity lenders with low or no fees
| Lender | Minimum credit score | Loan amounts | Deal on fees | Bankrate Score |
|---|---|---|---|---|
| FourLeaf Federal Credit Union | 720 (for intro rates) | $10,000-$1 million | No application or appraisal fees; pays closing costs | 4.3 |
| Bank of America | Undisclosed | $25,000-$1 million | No application or annual fees; pays closing costs | 4.3 |
| Fifth Third Bank | 640 | $10,000 to $500,000 | No closing costs | 4.3 |
| Discover | 680 (700 or higher for $150,000 or more) | $35,000-$500,000 | No origination, appraisal or processing fees | 4.0 |
| Amerant Bank | Undisclosed | Starting at $1,000 | No application or origination fees | 3.7 |
| Better | 680 (Better’s One Day HELOC) | $50,000-$500,000 | No origination fees or prepayment penalties | 3.5 |
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- Availability: All states except Texas
- Home equity products: Only offers HELOCs
- Minimum credit score requirement: 720 (for introductory rate)
- Funds available in: 35 days
- How to reach: Physical branches in New York; email, phone and video appointments
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Pros
- For credit lines up to $500,000, FourLeaf will pay all closing costs.
- FourLeaf also covers all application, appraisal and origination fees.
- You can convert all or some of FourLeaf’s adjustable-rate HELOC to a fixed-rate HELOC at no cost.
Cons
- Closing your HELOC within three years of opening the account will require repayment of closing costs, which could run as high as $15,000.
- FourLeaf doesn’t offer home equity loans.
- FourLeaf has a footprint in nearly all 50 states, but you have to live in New York if you want to meet with someone face-to-face.
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- Availability: All 50 states
- Home equity products: HELOCs and ability to convert all or part of the HELOC to a fixed-rate loan
- Minimum credit score requirement: Undisclosed
- Funds available in: Undisclosed
- How to reach: Customers can reach Bank of America at its branches, on the phone, or via online chat
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Pros
- Bank of America pays closing costs for lines up to $1 million.
- You won’t be on the hook for application or annual fees.
- You can convert all or a portion of your HELOC balance to a fixed rate without paying an extra fee.
Cons
- You will have to pay a $450 fee if you close your HELOC account within three years of opening it and repay any closing costs the bank covered.
- Bank of America only offers HELOCs.
- While you can complete most of the application online, you have to go to one of Bank of America’s locations to complete the closing.
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- Availability: 11 states
- Home equity products: Home equity loans, HELOCs and the ability to convert your adjustable-rate HELOC to a fixed-rate home equity loan
- Minimum credit score requirement: 640
- Funds available in: Undisclosed
- How to reach: Branches, on the phone or online
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Pros
- There are no closing fees with Fifth Third’s HELOCs and home equity loans.
- A $65 annual fee is waived in the first year.
- Fifth Third allows borrowers to unlock their adjustable-rate HELOC from a fixed-rate loan at no cost, but you do have to pay a $95 fee to initially lock the line of credit.
Cons
- If the HELOC is secured by a condo, you may have to pay up to $600 to your HOA to complete a questionnaire.
- Fifth Third Bank’s home equity products are restricted to 11 states: Tennessee, Indiana, Michigan, Kentucky, Florida, Illinois, Ohio, South Carolina, Georgia, North Carolina and West Virginia.
- You can start Fifth Third’s application process online, but it must be completed either on the phone or in person.
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- Availability: All U.S. states except Iowa and Maryland
- Home equity products: Offers home equity loans in 10-, 15-, 20-, and 30-year repayment terms
- Minimum credit score requirement: 680, though for loans of $150,000 or more, the minimum requirement is 700 or higher
- Funds available in: Undisclosed
- How to reach: On the phone or online
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Pros
- Discover doesn’t charge origination, application, appraisal fees or prepayment penalties.
- Discover’s loans are available in nearly all states.
- All or part of the company’s HELOC can be converted to a fixed-rate loan in the first 10 years.
Cons
- If your payment is late or is sent back due to insufficient funds, you will be charged a fee.
- Discover only offers home equity loans, no HELOCs.
- Discover’s home equity loan minimums are on the high side: $35,000.
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- Availability: Only in Florida
- Home equity products: Fixed-rate Choice HELOCs (FRC HELOC)
- Minimum credit score requirement: Undisclosed
- Funds available in: 10 days
- How to reach: Phone, email, online or in-person at one of its branch offices in Florida
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Pros
- Amerant Bank’s FRC HELOC has no application or origination fees.
- No closing costs if the line of credit is less than $350,000.
- Amerant Bank’s HELOC starts at a very low $1,000.
Cons
- You will be on the hook for a $75 annual fee after your first year.
- If you close the HELOC within two years of opening the account, you are charged a $500 cancellation fee.
- HELOCs are Amerant’s only product, but you have the option of converting the HELOC to a fixed-rate loan.
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- Availability: Second-lien HELOCs in every state except Texas and Vermont; its first-lien HELOCs everywhere except Texas
- Home equity products: Home equity loans and HELOCs, including a One Day HELOC
- Minimum credit score requirement: 680 (Better’s One Day HELOC)
- Funds available in: As little as 7 days
- How to reach: Online, the phone, via live chat or email
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Pros
- Better’s HELOCs don’t have prepayment penalties or origination fees.
- The company offers home equity loans and its HELOCs can be used for primary, investment or vacation homes.
- Better boasts of a fast application that can be fully completed online.
Cons
- You will be responsible for some closing costs, including recording, appraisal and credit report fees.
- Better’s minimum draws start at $50,000, which is on the high side compared to other lenders.
- Better operates solely online and doesn’t have any physical branches.
How much are home equity loan and HELOC closing costs?
As second mortgages, home equity loans and HELOCs carry many of the same closing costs that primary mortgages do — charges that center on originating, underwriting or processing the loan: application/ origination fees, title searches/insurance costs, home appraisals, legal and recording fees.
In general, mortgage closing costs can range from 2 to 5 percent of the loan, but with home equity products, they often amount to much less — about 1 percent. That’s partly because some of the costs are cheaper: Many home equity lenders use automated valuation models (AVMs) to determine a property’s value, which are less expensive than a traditional in-person appraisal, for example. Many forgo title searches too, since the property isn’t changing hands.
HELOCs tend to have fewer closing costs than HELoans. However, in compensation, they often carry ongoing costs, like annual maintenance fees or prepayment penalties for closing the line early.
How Bankrate rated the best low or no-fee home equity lenders
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Bankrate periodically evaluates more than 40 home equity lenders for factors relating to affordability, availability and borrower experience, assigning each a Bankrate Score out of five stars. To determine the best low/no fee lenders, our editorial team reviewed lenders with a 3.5 Bankrate Score or higher, paying special attention to the affordability portion of the score, which analyzes the lender’s regular and special introductory annual percentage rates (APRs reflecting the fees as well as interest). We then chose the lender with a combination of highest Bankrate Score and lowest fees. In the event of a tie, we chose the lender with the lowest introductory or permanent APR. Learn more about the Bankrate Score for home equity lenders.
Read the full article here
