Types of mortgage lenders and how to choose?

The average homeowner sits at nearly $300,000 in available equity, a record, according to CoreLogic estimates from the second quarter of this year. Many types of lenders offer home equity lines of credit (HELOC) or home equity loans, and still others have started offering these products as equity increases. Whatever your financial goals, you can get a home equity loan here today.

What are home equity loans?

HELOCs and home equity loans allow you to borrow against the equity in your home. Your equity is the difference between what your home is worth and what you still owe on it. There are two primary products that use your equity as collateral: a HELOC, which is a type of credit line with a variable interest rate; and a home equity loan, a fixed-rate second mortgage. Calculate your equity now.

Where to get a loan with equity?

Traditionally, you could get a HELOC or home equity loan from a bank. While many still offer them, there are several other types of institutions that now offer them as well.

Banks

Banks such as Bank of America, Citizens Bank and Fifth Third Bank have home equity offerings. Especially if you are already a customer, you can benefit from going to a bank. Some banks, such as Citi and Wells Fargo, have shut down their home equity business during the pandemic and are yet to start up, so check before applying.

credit unions

These are local, national or regional and are led by members who are aligned with factors such as location or profession. Some larger examples include Alliant Credit Union and PenFed Credit Union.

Mortgage lenders

If you bought your home from a mortgage lender like CrossCountry Mortgage or Lower, you can also choose to work with them to find a solution to overvalue your home. Companies such as Guaranteed Rate and Rocket Mortgage now also support home equity products.

Online only

This includes established operations like Discover and newer players like Figure, which offers HELOCs, payout refinancing and a crypto mortgage, and Spring EQ, which gives some borrowers access to $500,000 in equity.

How to choose a lender for equity?

With many more options for a non-bank equity loan, it is best to compare different types of lenders so that you have an idea which one offers the lowest rates and fees and the most convenience or perks.

“You should look for a lender who will think with you upfront about the entire loan process, especially the requirements needed to get a loan,” said Rob Cook, vice president of Home Loans at Discover, adding that “costs and fees are an important consideration for anyone seeking a loan.”

If you are getting a home equity loan, know exactly how much you need to borrow; don’t just accept what the lender wants to offer you, which may be more than you asked for. Remember: you are using your equity – an asset – and you must be able to repay the loan or risk losing your home.

Many mortgage lenders also offer attractively low rates, but charge higher costs. Make sure you understand your all-in costs before making an offer.

Leave a Comment