HELOCs Without Prepayment Penalties

Some HELOC lenders charge prepayment penalties between 1% and 5% of the total loan amount to discourage borrowers from repaying the balance early. Lenders expect to earn interest on the loan for multiple years, but if you pay it back early, they miss out on interest fees and earn less.  

However, choosing a lender that doesn’t charge prepayment penalty fees gives you more control over the repayment process. Here are our top three HELOC lenders without prepayment fees. 

4 HELOCs with no prepayment penalty

Working with a lender that doesn’t charge prepayment fees makes sense if you plan to pay your balance early or close the account before the draw period ends. But it’s also important to review other potential fees before deciding. 

For example, some lenders that don’t assess prepayment penalties charge origination fees. So it’s essential to understand the loan’s actual cost before signing up.

Figure and Bethpage FCU are two HELOC lenders that don’t charge prepayment fees for home equity lines of credit, so you won’t pay additional penalties if you repay your balance early or close the loan before the draw period ends. LendingTree is a loan marketplace that matches you with prequalified offers from partner lenders, many of which don’t charge prepayment penalties.

Here’s everything you need to know about the top HELOC lenders without prepayment penalties.  

Figure

Best overall

4.9 _/5

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Why it’s one of the best

Figure stands out for its streamlined process, which can deliver funding in as few as five days, making it an efficient choice for homeowners. We’re big fans of Figure’s fixed-rate model, which provides borrowers with stability and predictability in their repayment plans. This feature, combined with the absence of a required in-person appraisal, simplifies and speeds up the borrowing process.

Because Figure requires borrowers to withdraw the entire amount of their approved credit limit at closing, minus any applicable fees, you’ll immediately accrue interest on the full amount. This HELOC is best for those planning to draw the full amount immediately. Be sure to factor the origination fee into your financial planning, which can be as high as 4.99%.

• Fixed interest rates
• No in-person appraisal needed
• Option to redraw up to 100% of funds
• Funding can be available in as few as 5 days
• Check your rate without affecting your credit score

• Must borrow 100% of your credit line (minus fees) at closing
• Origination fee of up to 4.99%
• Unavailable in Hawaii, Kentucky, New York, or West Virginia

HELOC details

Rates (APR)	7.20% – 15.80%
Funding amount	$15,000 – $400,000
Repayment terms	5, 10, 15, or 30 years

Aven

Best customer reviews

4.8 _/5

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Why it’s one of the best

Aven’s HELOC product, AvenCash, stands out for its excellent customer reviews and tech-driven application process. Offering a fixed interest rate from start to finish, Aven provides a unique blend of innovation and stability. 

With a funding time as short as three days after signing and a fully digital application process, Aven makes accessing home equity faster and easier. 

Additional perks like the lowest rate guarantee and a debt protection program through Securian make it a top choice for those seeking a reliable and customer-centric HELOC.

HELOC details

Rates (APR)	6.99% – 15.49%
Funding amount	$5,000 – $400,000
Repayment terms	5-year draw; 5, 10, 15, or 30-year repayment

Bethpage FCU

Best credit union

4.7 _/5

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Why it’s one of the best

We like Bethpage Federal Credit Union for its generous terms and minimal fees. Bethpage offers a credit line of up to $1 million, catering to a wide spectrum of borrowing needs, from modest renovations to major investments. Bethpage stands out for the absence of fees and no closing costs.

Bethpage further enhances its appeal with a 12-month fixed introductory rate for qualified borrowers. This allows homeowners to manage their finances with predictable payments at the outset of their loan terms. You must withdraw at least $25,000 at closing if you qualify for this rate.

• Low fixed interest rate for the first 12 months
• $0 in closing costs
• $0 in application, origination, and appraisal fees
• Ability to convert portions of your HELOC to fixed-rate loans

• Funds available within 35 days, on average
• No prequalification form with a soft credit check

HELOC details

Rates (APR)	12-month intro rate of 6.99% for VantageScores of 720 and up, then a variable rate
Funding amounts	$10,000 – $1 million
Repayment terms	Draw: 10 years / Repayment: 20 years

LendingTree

Best marketplace

4.5 _/5

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Why it’s one of the best

LendingTree is a leading online marketplace that connects borrowers with a wide network of lenders offering HELOCs and other financial products. LendingTree provides borrowers with multiple loan offers from different lenders, allowing for easy comparison of terms, interest rates, and fees. If you’re looking for HELOCs without prepayment penalties, you can filter and choose lenders that offer the flexibility to pay off your loan early without incurring additional costs.

LendingTree’s user-friendly platform makes it simple to input your information and review tailored offers that match your financial needs. The site also offers educational resources and tools to help you make informed decisions. With access to a diverse range of lenders, 

LendingTree empowers borrowers to find HELOCs that fit their specific requirements, including avoiding prepayment penalties and securing a competitive interest rate. This makes it an excellent resource for homeowners seeking flexible, cost-effective borrowing options.

• Compare offers from multiple lenders
• No costs to submit an online form
• No impact on your credit for checking offers

• Only matches you with its partner lenders

HELOC details

Rates (APR)	Vary by lender
Funding amounts	$10,000 – $2 million
Repayment terms	Draw: 2 – 20 years / Repayment: 5 – 30 years

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Best HELOC Rates & Lenders 

What is a prepayment penalty?

Some lenders charge a prepayment penalty if you close your HELOC before the draw periods end or pay back the balance early. 

Lenders use prepayment penalties for several reasons:

• To recover potential interest losses. Early loan payoffs mean lenders miss out on expected interest income. Charging a prepayment fee is one way to recoup this cost.
• To deter refinancing. You may be less likely to switch lenders or pay your loan off early if you know you’ll pay prepayment penalties. 
• To offset administrative expenses. Lenders may charge a fee to cover the extra work caused by unexpected early payoffs.

Prepayment penalties are usually 1% to 5% of your remaining balance; you pay them as part of your final payoff amount. If you’re considering paying off a HELOC ahead of time, review your loan agreement or ask your lender about potential prepayment penalties.

Ask the expert

Erin Kinkade

CFP®

The federal Truth In Lending Act requires all HELOC providers to disclose their fees. It is important to research so you know what fees to look for in case something is missing. The common fees include the following:Annual percentage rate (APR); payment terms; miscellaneous charges; variable-rate feature information; application fees; annual fees; transaction fees; appraisal fees; credit report fees; attorneys’ fees

What if my lender charges a prepayment penalty on my HELOC?

If your current HELOC provider charges prepayment penalties, there are a few things you can do: 

• Read your contract carefully. Understand the specific terms of the penalty. It might only apply during certain periods (like the draw period) or for payments over a certain amount.
• Make strategic payments. If the penalty only applies to large payments, consider making smaller, more frequent payments to avoid triggering the fee.
• Wait it out. Many prepayment penalties expire after a few years. If it makes sense, you can wait until the penalty period ends before making large payments or paying off the loan.
• Calculate the cost-benefit. Sometimes, paying the penalty might still be worthwhile if the interest you’ll save is more than the penalty amount.
• Refinance strategically. Some lenders might be willing to cover your prepayment penalty as part of the new loan terms if you’re refinancing.

Prepayment penalties can be frustrating, but they shouldn’t necessarily prevent you from making financial decisions that are in your best interest. Always crunch the numbers to see what makes the most financial sense in your situation.

How much can you save without a prepayment penalty?

You could save thousands of dollars if you chose a HELOC lender that doesn’t charge prepayment penalties. However, the exact savings will depend on your loan amount, the specific penalty rate, and how early you pay off the loan. We’ll look at a few examples next.

How prepayment fees work

Here are some concrete examples of how prepayment fees work, so you can estimate how much you’d save by avoiding them:

Example 1: Time-based prepayment penalty

Say your lender charges a 5% penalty if you pay off your HELOC in year 1, but a 1% penalty if you pay it off in year 5. 

• Closing a $50,000 HELOC in year 1: 5% penalty = $2,500
• Closing the same HELOC in year 5: 1% penalty = $500

Example 2: Draw period-only prepayment period

Say your lender charges a 2% prepayment period—but only during the draw period. If you wait until the repayment period to pay it off, there’s no fee.

• Closing a $50,000 HELOC with a 2% penalty during the draw period = $1,000
• Closing the same HELOC in the repayment period = no fee

Example 3: Flat-fee prepayment penalty

Say your lender charges a flat $500 “early closure” fee instead of charging you a percentage of your remaining balance.

• Closing a $50,000 HELOC early = $450 fee

Example 4: Reimbursement of closing costs penalty

Say your lender covered $3,000 in closing costs for you when you took out your $50,000 HELOC, but with the disclaimer that you’d repay the full amount if you closed your HELOC within the first 36 months. 

• Closing a $50,000 HELOC with the first three years = $3,000 fee 
• Closing the same HELOC after three years = no fee

Our expert recommends

Erin Kinkade

CFP®

Being able to pay off a HELOC early without a prepayment penalty could help you save thousands of dollars, which you could then invest or use to pay down other debt. Given the option, I would advise a borrower to elect a HELOC that does not charge prepayment penalties over one that does. However, if the company charges other fees instead of a prepayment penalty, I would advise weighing those costs against the terms of the HELOC to understand where the greater savings are obtainable. Paying the prepayment penalty could be more advantageous than paying other fees. The bottom line is to do your research and number crunching; consult a financial professional, trusted friend, or family member if in doubt.

Benefits of paying off your HELOC early

It’s no secret that paying off your HELOC early can lead to major savings.

For instance, say you have a $50,000 HELOC with a 10% fixed interest rate. The HELOC has a 20-year repayment period, but you decide to pay it off in 10 years instead. Here’s how your savings might shake out: 

Scenario 1: You stick to the 20-year repayment period: 

• Monthly payment: $483
• Total interest paid: $65,803
• Total amount paid: $115,920

Scenario 2: You opt for a 10-year repayment period

• Monthly payment: $661
• Total interest paid: $29,290
• Total amount paid: $79,320

Savings by paying off early: $36,600

Given the potential savings, finding a lender without prepayment penalties is worth it if you plan to pay off your balance early. 

FAQ

What lenders charge prepayment penalties?

Lenders can change their policies any time. But as of August 2024, Bank of America HELOCs have a $450 early closure fee. 

Bethpage Federal Credit Union requires you to pay back all closing costs if you close your HELOC within 36 months (three years) of opening. Bethpage states these fees generally range from $500 to $15,000.

How do I know if my HELOC has a prepayment penalty?

You can check if your HELOC has a prepayment penalty by reviewing your loan agreement or disclosure statement for terms like “prepayment penalty,” “early closure fee,” or “early termination fee.” There should be a section on fees that breaks everything down. If you’re unsure, contact your lender directly to ask about early payoff fees. 

Can I negotiate to remove a prepayment penalty from my HELOC?

While uncommon, you may be able to negotiate HELOC prepayment penalty depending on your situation. For instance, if you had the loan jointly with a partner who has since passed, and you want to use their life insurance policy to pay off the HELOC, your lender could make an exception. 

But nothing is ever guaranteed. Since you signed a contract saying you would pay the fee if you closed your loan early, your lender may not budge. Still, it’s worth trying. You can attempt negotiation by contacting your lender, explaining your situation, and requesting to remove the penalty. 

How we chose the best HELOCs without prepayment penalties

Since 2018, LendEDU has evaluated home equity companies to help readers find the best home equity loans and HELOCs. Our latest analysis reviewed 850 data points from 34 lenders and financial institutions, with 25 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of the 3 best HELOCs without prepayment penalties