Good for no fees or closing costs
Discover
Good for no fees or closing costs
Discover
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Products offered:
Home equity loan
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Home equity loan terms:
10, 15, 20 or 30 years
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HELOC terms:
N/A
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Maximum LTV:
Not specified
NextAdvisor’s Take
Pros
- No origination fees or closing costs
- Home equity loans are available in 48 states
Cons
- Limited customer service options available
- Home equity loans not available in Iowa and Maryland
- Does not offer HELOCs
The Bottom Line
A financial services company known primarily for its credit cards, Discover also offers home equity loans as part of its suite of banking products. Home equity loans are available in 48 states, but the lender does not offer home equity lines of credit (HELOCs) at all. For Discover’s home equity loans, possible loan amounts range from $35,000 to $300,000. The lender charges no origination fees, application fees, appraisal fees, and mortgage taxes.
You can apply for a home equity loan from Discover online or over the phone. The application process takes approximately six to eight weeks in total, according to Discover’s website.
Discover offers wide nationwide availability for its home equity loans and good price transparency, but its lack of HELOC offerings may be a limiting factor for consumers looking for additional product options. In addition, Discover offers limited customer service options — your only option to get help is by phone, with no in-person service or online options like email or live chat.
Editorial Independence
As with all of our home equity loan and home equity line of credit (HELOC) lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.
Discover Home Loans Full Review
While Discover might be best known for its credit cards, bank accounts, and personal loans, this financial services company also offers home equity loans to qualifying homeowners. Discover lets you draw up to 90% of your equity (up to $300,000) with a fixed-rate home equity loan. There are no origination fees, appraisal fees, or other closing costs. However, the company does not offer home equity lines of credit (HELOCs) at all, providing fewer product options compared to other lenders.
Discover Home Loans: Home Equity Loan Products
Discover offers home equity loans between $35,000 and $300,000 in 48 states. It does not offer loans in Iowa or Maryland.
While many lenders cap your combined loan-to-value (CLTV) ratio at 80%, Discover may let you borrow up to 90% of the equity you hold in your home.
You must have a minimum credit score of 620 to qualify for a Discover home equity loan, according to the lender’s website. If you want to borrow a loan higher than $150,000, you must have a credit score of 700 or higher. The better your credit score is, the better your rate will likely be, although Discover also takes into account other factors such as your income and how much equity you have in your home.
When you take out your loan, you have a choice of repayment terms of 10, 15, 20, or 30 years. Discover covers all closing costs, so you won’t need to worry about origination fees, application fees, appraisal fees, or mortgage taxes.
However, if you decide to pay off your loan balance within 36 months, you may have to reimburse Discover for up to $500 of these closing costs, depending on where you live.
Discover does not offer any home equity line of credit (HELOC) products.
Discover Home Loans: Home Equity Loans Rate and Fee Transparency
Discover offers good price transparency on its home equity loans, sharing the APR ranges, repayment terms, and fees clearly on its website. However, you’ll need to submit an application to get a personalized rate quote, and Discover does not clearly state whether submitting this application will incur a hard credit inquiry.
Some lenders clearly state that you can prequalify for a home equity loan without a hard credit inquiry. When lenders make this information readily accessible, it can help borrowers make better borrowing decisions before going through a credit check.
As you compare loan options, it’s worth noting that the lowest interest rate doesn’t always mean the most affordable loan. High closing costs or other fees could offset the savings of a low interest rate. With a Discover home equity loan, you don’t have to worry about closing costs adding to your costs of borrowing.
Discover Home Loans Compared to Other Home Equity Lenders
| Discover | PNC Bank | U.S. Bank | |
|---|---|---|---|
| Offers HELOCs? | No | Yes: Standard (variable-rate) HELOC and fixed-rate HELOC | Yes: Standard (variable-rate) HELOC and fixed-rate HELOC |
| Offers Home Equity Loans? | Yes: terms of 10, 15, 20, or 30 years | No | Yes: terms up to 30 years |
| States Available | 48 states (not available in Iowa or Maryland) | 44 states (not available in Alaska, Hawaii, Louisiana, Nevada, Mississippi, or South Dakota) | 47 states (not available in Texas, Delaware, or South Carolina) |
| Loan Amount Range | $35,000 – $300,000 | $10,000 – $1,000,000 | $15,000 – $750,000 (up to $1,000,000 for properties in California) |
| HELOC Loan Terms | N/A | Repayment period of 5 to 30 years (5 to 20 years in Tennessee) | 10-year draw period; unspecified repayment period |
| Max LTV | 90% combined loan-to-value ratio (CLTV) | 89.9% (80% or 85% in some states) | 80% |
How to Get the Best Home Equity Loan or HELOC Rate
Along with Discover, there are many other lenders offering home equity loans and HELOCs for qualifying homeowners. Here are some tips to help you find the right loan and lender for you.
Check Out the Products Offered
Before you borrow against the equity in your home, make sure you understand the differences between home equity loans and HELOCs, so that you choose the right product for your needs.
A home equity loan provides a lump sum upfront that you pay back with monthly installments at a fixed interest rate. Your monthly payments are fixed, and you’ll pay interest on the entire balance from the day the loan begins.
A HELOC, on the other hand, is a line of credit that you can draw on as you need to and make payments as you go. You’ll only pay interest on the amount you draw, not the entire line of credit you have available. A HELOC typically has a variable interest rate and variable monthly payments, but some lenders will let you lock in a portion or all of your outstanding balance at a fixed interest rate.
A home equity loan may be preferable if you’re borrowing to cover a project with a fixed cost, or if you’re trying to consolidate debt. On the other hand, a HELOC offers more flexibility if you don’t know upfront how much money you’ll need. Home equity loans can also offer more peace of mind with their fixed interest rates, which can be beneficial in a rising rate environment like we’re in now. Deciding which type of loan you prefer can help you narrow down your list of lenders.
Shop for Multiple Lenders
Before borrowing a loan, it’s always a good idea to compare offers from multiple lenders. By shopping around, you can find a home equity loan or HELOC with the lowest rates and fees. Some lenders make it easy to get a personalized rate quote online with no impact on your credit score.
If a lender requires you to submit a full application before showing you your loan offers, this might involve a hard credit inquiry that could ding your score by a few points. You can still apply with multiple lenders, but try to keep your loan shopping to a 45-day window to protect your credit. According to credit bureau Experian, similar loan-related credit inquiries within 45 days of each other are considered a single inquiry in the FICO credit scoring process.
Compare Interest Rates and Fees
Once you’ve gotten a few loan offers, compare interest rates and fees to determine which loan is the most affordable. Use a loan calculator to estimate your monthly payments and long-term costs of borrowing. Remember that a longer repayment term may mean more affordable monthly bills, but it could cost you more in interest in the long run.
Only Borrow What You Need
You may be able to borrow up to 80% or 90% of your home’s equity with most home equity loans and HELOCs, but that doesn’t mean you should draw on the full amount. Overborrowing can land you with burdensome debt that’s difficult to pay off. Since home equity loans and HELOCs are secured by your home, you risk going into foreclosure if you default.
Before you sign for a loan, do the math to see what your monthly payments will be and how long you’ll be making payments. Take a look at your budget to make sure you can reasonably afford the loan and you aren’t taking on more debt than you can manage.
Also make sure you have a plan for how you’re going to use the loan funds. Even if you can afford the monthly payments, borrowing more than you need will result in more interest costs over the long run. If you aren’t sure how much money you need and don’t want to have to apply for additional loans later, consider getting a HELOC, which lets you continuously draw money from a line of credit while only paying interest on what you actually use.
Improve Your Credit Score
As with any kind of loan, borrowers with excellent credit scores will get the best rates on a home equity loan or HELOC. A lender will look at your credit score, as well as your debt-to-income ratio, income, and other factors, when evaluating you for a loan. If your credit isn’t up to par, you may have trouble getting a favorable interest rate or even qualifying for a loan at all.
Paying down debt, making on-time payments on loans, and disputing any errors on your credit report can all help improve your credit score. Taking some time to improve your credit before you apply could help you get a better interest rate and save money as a result. Some lenders also let you apply for a home equity loan or HELOC with a creditworthy cosigner, whose strong credit could help you qualify for a better rate. However, getting a loan with a cosigner has its own risks and drawbacks you should consider before signing on the dotted line.
