Discover Home Equity Loan Review 2024
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Our Take
5.0
Discover’s home equity loans stand out for having no closing costs, application fees or appraisal requirements. Discover’s home equity loan rates are especially competitive for borrowers who meet minimum requirements, including creditworthiness and loan amounts. Customers must borrow at least $35,000.
Pros
- Maximum borrowing limit is higher than industry standard.
- No closing costs or application fees.
- Repayment terms up to 30 years.
Cons
- Minimum loan amount is $35,000.
Lender | Max. loan amount | Max LTV | Min. credit score | |
|---|---|---|---|---|
$400,000 | 85% | 640 | Visit Lenderat Figure at Figure | |
$750,000 | 80% | 580 | Visit Lenderat New American Funding at New American Funding | |
$350,000 | 80% | 680 | Visit Lenderat Rocket Mortgage, LLC at Rocket Mortgage, LLC |
Full Review
Discover home equity loan rates and transparency
Most home equity loan interest rates are affected by the movement of a base rate called the prime rate. Your rate will include a margin the lender has added to the prime rate. These margins depend largely on factors like your credit score, your existing debt, your income and the amount you wish to borrow. They will vary by lender.
Current prime rate | Prime rate last week | Prime rate in the past year — low | Prime rate in the past year — high |
|---|---|---|---|
7.75% | 8% | 7.75% | 8.50% |
On the day we checked, Discover’s home equity loan APRs ranged from prime - 0.85 percentage points to prime + 0.6 percentage points for first mortgages, and prime - 0.18 percentage points to prime + 4.57 percentage points for second mortgages. To qualify for the lowest rates, homeowners must borrow at least $150,001 for first mortgages or $50,000 for second mortgages.
Applying for a Discover home equity loan
Borrowers can apply by phone, or begin an application online before being contacted by a loan officer.
To qualify for a Discover Home Loans home equity loan, borrowers must have a credit score of at least 680 and a debt-to-income ratio (DTI) less than 43%. Your DTI is your gross monthly income divided by your debt obligations. Discover Home Loans does not have an in-person appraisal requirement.
Customer service is available over the phone. When we tried it, we were placed on a brief hold before being connected with an agent who was able to address our questions.
» MORE: Getting a home equity loan
What you should know about Discover home equity loans
Discover home equity loans have a maximum borrowing limit of 90% of the value of your home, minus what you owe on your primary mortgage. Your choice of repayment terms are 10, 15, 20 or 30 years.
Discover Home Loans home equity loans have fewer upfront costs than many competitors: there are no application fees, closing costs or appraisal requirements.
You do not need to be a Discover credit card customer to apply.
» MORE: Best home equity loan lenders
Alternatives to a Discover home equity loan
Borrowers looking to avoid closing costs and application fees may be a good fit for U.S. Bank.
Borrowers who need to access a large amount of their home’s equity may be interested in Rocket Mortgage, which has a maximum borrowing limit of 90%.
Home equity loans let homeowners access a lump sum by converting equity into debt. You’ll repay the loan at a fixed interest rate over an agreed period of time. Alternatives to a home equity loan include a home equity line of credit (HELOC) or a cash-out refinance.
HELOCs offer greater flexibility to withdraw funds up to the credit limit as needed, but often have adjustable interest rates. A cash-out refinance replaces your existing mortgage with a larger loan. It will be most appealing if mortgage rates are lower than your current rate, and closing costs will apply.
Of these options, Discover Home Loans also offers cash-out refinancing.
NerdWallet’s home equity loan star ratings are awarded by the editorial team based on the following evaluated factors: maximum combined loan-to-value ratio, available terms, closing costs, application fees, appraisal requirements, interest rate transparency, digital application availability, customer support experience and whether the lender has been subject to government penalties exceeding $1 million.
