Review of Home Equity Loans in 2024
Home equity loans from Discover® have a lower-than-average minimum APR and do not require an application, origination, or appraisal fee, which is a significant advantage among lenders, as closing costs can amount to up to 6% of the total loan amount.
Discover approves loans for borrowers with minimal equity and is available in most states, while other home equity lenders have stricter requirements and are limited geographically.
Discover only approves home equity loans within a specific range.
What is a home equity loan?
Using the value of your home as collateral, you can obtain a loan to borrow money through a home equity loan. The amount you can borrow is determined by the difference between your remaining mortgage balance and your home's current market value.
Unlike a home equity line of credit, which allows borrowers to borrow and repay funds as needed, a home equity loan provides a lump sum of money that must be repaid in fixed monthly payments over a set period.
You can use the money for any purpose, such as funding home repairs, covering emergency medical bills, or paying down a higher-interest debt, like a credit card bill.
Discover home equity loan rates and terms
Discover offers home loans in every state except for Iowa and Maryland.
- Fixed-rate options range from 7.99% to 12.86% (as of July 2024)
- Repayment terms: 10, 15, 20 or 30 years
- Loan minimum and maximum: $35,000 to $300,000
- Closing timeline: Six to eight weeks
Discover home equity loan requirements
- A minimum credit score of 680 is necessary for obtaining a home equity loan from Discover.
- Discover allows for a cumulative loan-to-value ratio (CLTV) of up to 90%, while most lenders prefer a ratio of 80% or less.
- The debt-to-income ratio (DTI) is the proportion of a homeowner's monthly income used to repay debts. Discover has a maximum DTI requirement of 43%.
- A complete appraisal is necessary, but Discover does not charge a fee for it.
Discover home equity loan fees
- Discover does not charge lender fees such as application, origination, appraisal, or closing costs.
- Prepayment penalty: No fee if you pay off your loan early.
- Discover will lock your fixed rate for free upon completion of your application. Rate lock fees.
Discover customer service
J.D. Power's 2024 Consumer Lending Satisfaction Study ranked While Discover in second place, with customer feedback on loan offerings, ease of doing business, trust, and staff being measured.
Discover received an A+ rating from the Better Business Bureau, its highest grade, due to its exemplary behavior, particularly in terms of transparency, truthful advertising, and consumer complaint response.
How does Discover compare to other home equity lenders?
Here's how Discover stacks up against two other home equity loan providers.
Discover vs. TD Bank
The interest rate for a 10-year, $30,000 home equity loan from TD Bank is 8.84%, which is higher than Discover's minimum APR of 7.99% and the industry average of 8.60%. Additionally, TD charges a $99 origination fee, which Discover does not.
The choice of lender ultimately depends on the loan size, location, and preferred experience.
TD Bank offers loans ranging from $10,000 to $500,000 (or more under certain terms), while Discover only approves loans within the range of $35,000 to $300,000.
Discover offers loans in all 49 states, including Washington, D.C., while TD Bank only serves 16 states and the District. Although TD Bank has over 1,000 branches for in-person service, Discover requires online or phone applications.
Discover vs. Rocket Mortgage
Rocket Mortgage and Discover are evenly matched in terms of online lending, as Rocket does not reveal its minimum APR.
Discover offers loan repayment terms of 10, 15, 20, or 30 years with no lender fees or closing costs, while Rocket Mortgage charges a $99 origination fee and closing costs that range between 2% and 6% of the loan, and limits repayment terms to 10 or 20 years.
Rocket Mortgage has a slight advantage in terms of availability as it approves loans nationwide, while Discover only lends in 48 states.
While Discover has a maximum of $300,000 on home equity loans, Rocket can go up to $500,000.
Discover home equity loan pros and cons
The benefits and drawbacks of a Discover home equity loan.
Pros
- Accepts combined loan-to-value ratio of up to 90%
- No lender fees or closing costs
- Also offers mortgage refinancing
- Available in most states
Cons
- No purchase mortgages or home equity lines of credit
- Must apply online or via phone
- $35,000 minimum loan amount is higher than most
- $300,000 maximum loan amount is lower than most
How do I apply for a Discover home equity loan?
You can apply for a home equity loan on the Discover website or by calling 855-361-3435 during specific hours.
Please provide me with your personal details, such as your name, address, birth date, employment status, and income, as well as information about your home, including the type of property, estimated value, and current mortgage balance.
To obtain a customized quote, you must submit identification, mortgage statements, W2s, and your homeowner's insurance policy. You may need to mail in additional paperwork.
The timeline for any home loan can vary, with the process from quote to closing day typically taking six to eight weeks. While some lenders may promise a quicker closing, the actual timeline depends on several factors, including the loan amount, credit history, and the speed of scheduling an appraisal.
Is a Discover home equity loan right for me?
A Discover home equity loan may be the best option for you if cost and availability are your top priorities. With a minimum APR lower than many competitors and no lender fees, it's a smart choice.
In all but two states, Discover offers loans and has a reputation for excellent customer service with easily accessible loan representatives.
While Discover offers a maximum of $300,000 on home equity loans, other lenders may provide higher amounts, up to $500,000 or more.
Compare offers to find the best mortgage
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