Where's the best place to shop for Home Equity Loans or Home Equity Line of Credit?

It’s easy to find lenders offering Home Equity Loans “HEL” (amortizing equity loans) and Home Equity Lines of Credit “HELOC” (revolving credit).   Local banks and thrifts offer them.  

Although it may be convenient to work with your local bank or thrift, you might be able to save a substantial amount of money over the long term if you shop your local credit unions for your  HEL and HELOC needs.

For example, Keypoint Credit Union has HELOC programs that are Prime rate minus 0.25%, with no closing costs and no annual maintenance fee.   The only possible downside would be you would have to join the credit union (one-time upfront $35 fee to join the credit union) and open a checking account. 

Before the financial meltdown in 2008, banks, thrifts and credit unions were pretty much on par with each other in terms of their pricing and structure with their HEL and HELOC programs.   However since then, I’ve noticed a significant pricing difference in most scenarios between banks/thrifts versus most credit unions.  The pricing for HEL and HELOC programs are generally higher at banks/thrifts versus credit unions.  

Many bank and thrift HELOC programs are prime + 1% or higher in margin, have annual maintenance fees and in some instances there are closing costs.  

Bottom line is this:   when you are shopping for a HEL and a HELOC program, you should include at least 3 local credit unions in your research.

Another note, many home equity loan programs have early termination fees.  For example if you terminate the loan facility within 3 years, you may have a $350 early termination fee.  Don’t confuse this with having a zero balance on your HELOC which is no charge at all.  

Let me know  if you would like to be referred to one of my contacts at a local credit union to discuss their HEL and HELOC programs. 

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