Discover Home Equity Loans Review: Why It Falls Short of Top Competitors

3.9 _/5

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Home Equity Loan

• No fees or closing costs
• Flexible repayment terms
• High maximum loan limit
• Borrow up to 90% CLTV

• Good credit required to qualify
• Takes 6 – 8 weeks from application to funding
• High minimum loan amount

Rates (APR)	7.85% – 12.40%
Loan amounts	$35,000 – $300,000
Repayment terms	10, 15, 20, or 30 years
Min. credit score	680

Discover home equity loans offer a straightforward way to borrow against your home’s value with no hidden fees and fixed interest rates. However, the lender falls short compared to higher-rated options, with a lengthy application process, strict credit requirements, and limited loan flexibility.

Here’s everything you need to know to decide whether Discover is right for you or you should explore better alternatives.

Table of Contents

1. How does a Discover home equity loan work?
2. Who’s eligible?
3. Costs and fees
4. How does your home’s value affect your terms?
5. Pros and cons
6. Alternatives
7. Is Discover a reputable lender? 
8. Discover customer service
9. How to apply for a Discover home equity loan
10. How we rated Discover home equity loans

Discover home equity loan at a glance

Terms	Details
Loan amounts	$35,000 – $300,000
Rates (APR)	7.85% – 12.40%
Term lengths	10, 15, 20, or 30 years
Origination fee	$0
Application fee	$0
Min. credit score	680
Max loan-to-value ratio	90%
Unique features	No application, appraisal, origination, processing, or closing fees

How does a Discover home equity loan work?

A home equity loan is a secured loan that uses your home as collateral. The amount you can borrow is determined by how much equity you’ve built up in your home and the lender’s maximum allowable loan-to-value ratio (LTV). 

Discover’s LTV is set at a maximum of 90%, meaning you can borrow up to 90% of your home’s appraised value, minus any outstanding mortgage balance. The formula for determining how much you can borrow looks like this:

(Home’s appraised value × LTV) − Current mortgage balance = Maximum loan amount

For example, if your home’s current value is $300,000, and you have an outstanding mortgage balance of $100,000, you can borrow up to $170,000. Here’s how we arrived at this figure:

($300,000 x 0.9) – $100,000 = $170,000

Interest rates on Discover’s home equity loans are fixed. This differs from a home equity line of credit (HELOC), most of which come with variable interest rates. Also unlike HELOCs, Discover’s home equity loans are disbursed in one lump sum. 

Who’s eligible for a Discover home equity loan?

To qualify for a Discover home equity loan, you must meet these eligibility requirements:

Requirement	Details
Eligible properties	Primary residences only (single-family homes, townhouses, condos, PUDs)
State of residence	All except Iowa and Maryland
Max. LTV	90%
Max. debt-to-income (DTI)	42%
Min. credit score	680

Discover relies on your credit history and DTI to determine creditworthiness, with no specified minimum income. Home equity loans through Discover are restricted to primary residences, which excludes many property types and uses.

What are the costs and fees of a Discover home equity loan?

Discover stands out for its no-fee structure, meaning you’ll pay no application, appraisal, origination, processing, or closing fees. This can save you thousands of dollars compared to other lenders.

However, you’ll still pay interest, and rates range from 7.85% to 12.40%, depending on your credit profile. Fixed interest rates ensure predictable monthly payments, but your rate influences the total cost of the loan significantly. For example:

Interest rate	Monthly payment	Total payment over 20 years
8%	$501.86	$120,447
11%	$619.31	$148,635

In this scenario, a 3% difference in rates increases costs by $28,188. Comparing offers from multiple lenders is crucial to securing the best terms.

How does your home’s value affect your terms?

Discover determines your home’s value using an automated valuation model (AVM), which relies on data such as property characteristics, neighborhood details, recent comparable sales, and local market trends. This method eliminates the need for a physical appraisal, streamlining the process.

Your home’s appraised value helps the lender determine how much you can borrow. Discover allows a maximum LTV of 90%, meaning you can borrow up to 90% of your home’s value, minus any outstanding mortgage balance. For example, if your home is worth $500,000 and you owe $200,000, your maximum loan amount would be $250,000.

While borrowing up to the maximum LTV may seem appealing, loans with higher LTVs often come with higher interest rates due to the increased risk for lenders. Borrowing a lower percentage of your home’s value can result in more favorable rates, saving you money over time.

Understanding how your home’s value and LTV affect your loan terms can help you borrow responsibly and secure the best possible interest rate.

Pros and cons of Discover home equity loans

Evaluate the benefits and drawbacks to determine whether Discover is the right home equity lender for you.

Pros

• No fees or closing costs

• Flexible repayment term

• High maximum loan limit

• Strong U.S.-based customer service

Cons

• Good credit required to qualify

• Takes 6 – 8 weeks to close on the loan

• No HELOC option available

• High minimum loan amount

Not sure Discover is the best option? Check out our list of the best home equity loans, or check out the alternatives below.

Discover home equity loan alternatives

When considering a home equity loan, it’s wise to spend time shopping, checking with multiple home equity companies, and comparing their loan offers to find which one best meets your needs. 

• For example, if you need to borrow more than 90% of your home’s value, consider Spring EQ, which offers an LTV of up to 95%.
• Or if you’re open to a fixed-rate HELOC from a lender that can get funds to you as fast five days from the time you apply, check out Figure.

Be mindful of interest rates when comparing offers. Reducing your interest rate by as little as a quarter of a percent can save you thousands of dollars on a large, long-term loan. To compare rates from multiple lenders at once, consider applying through LendingTree, which offers free prequalification through multiple lenders without affecting your credit score.

Use this chart to see how other home equity lenders stack up:

Is Discover a reputable lender? 

Discover is a legitimate lender that’s accredited with the Better Business Bureau and has an A+ rating. However, its reputation among past customers is less than stellar. 

Source	Customer rating	Number of reviews
Trustpilot	1.8/5	272
Better Business Bureau	1.22/5	385

When you look at the Trustpilot and BBB websites, it’s difficult to determine which ratings are for Discover’s home equity loans. All reviews are lumped together under “Discover Financial Services,” which also includes credit cards, personal loans, and online banking. 

Most reviews on these sites mention Discover’s credit card services. Those that review the company’s home equity loans have few positive takeaways. They mention the difficulty of the application process, how long it takes, and the payment site being down. The positive comments we observed were about friendly customer service personnel.

Does Discover have a customer service team? 

Yes, Discover home equity loans offers a dedicated customer service team based in the United States. If you need to begin a loan application or have questions about an application that’s in process, you can call 1-855-361-3435 on weekdays between 8 a.m. and midnight and on weekends from 10 a.m. to 6 p.m. Eastern tme. 

If you already have a home equity loan through Discover, you should call 1-855-295-2193 to discuss any issues you may be experiencing. We couldn’t find any other way to contact Discover, such as email or chat, on its public website. 

How to apply for a Discover home equity loan

If you’d like to apply for a Discover home equity loan, here’s what you need to do:

1. Begin your application

You can apply by calling Discover at 1-855-361-3435 to connect with a Personal Banker or through the website. If you choose to use the Discover website, just select “home loans” and then click on the “Get Started” button in the upper right-hand corner of the page. 

2. Provide basic information 

Be ready to share your: 

• Loan purpose and desired amount
• Address, residence type, and estimated value
• Name, contact information, and citizenship status
• Employment and income information

3. Review your personalized quote

Once Discover reviews the information you provided, you’ll get a customized quote that includes the loan amount, terms, interest rates, and the next steps to follow. 

4. Submit necessary paperwork

Discover will provide you with a list of documents to verify the information you provided. These may include: 

• Pay stubs
• Tax forms (W-2s, 1099s)
• Bank statements
• Asset and investment information 
• Homeowners insurance
• Title insurance

5. Prepare for closing

After receiving the necessary documentation, Discover’s team of processors, underwriters, and closers will review it in detail. 

6.  Close and receive your funds

The next step is to sign the closing documents once your loan has been approved. After a mandatory three-day right-to-cancel period, Discover will disburse your loan!

How we determined ratings for our Discover home equity loan review

We designed LendEDU’s editorial rating system to help readers find companies that offer the best home equity loans. Our system awards higher ratings to companies with affordable solutions, positive customer reviews, and online transparency of benefits and terms.

We compared Discover to several home equity lenders, using hundreds of data points from company websites, public disclosures, customer reviews, and direct communication with company representatives. We weighted, scored, and combined each factor to produce a final editorial rating. This rating is expressed on a scale from 1 to 5, with 5 being the highest possible score. Our take is represented in our rating, recapped below.

Product	Our rating
Discover home equity loan	3.9/5