Discover Home Equity Loans Review

3.9 _/5

View Rates

Home Equity Loan

• No fees
• Flexible repayment terms
• High maximum loan limit

• Good credit required to qualify
• Takes 6 – 8 weeks from application to funding
• Minimum loan amount is high

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

With Discover home equity loans, you can leverage the hidden value of your home to take control of your financial future. Whether you need to fund home renovations, pay off debts, or make a major purchase, Discover offers a straightforward way to tap into your home’s equity with no hidden fees. 

With fixed interest rates and flexible repayment terms, you can enjoy predictable monthly payments that fit your budget. However, the minimum loan amount is high, and you need good credit to qualify. Here’s everything to know.

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
Minimum 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 (LTV) ratio. 

Discover’s LTV ratio is set at a maximum of 90%. That means 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 Ratio) − Current Mortgage Balance = Maximum Loan Amount

For example, if your home is worth $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 home equity loans are typically fixed—this allows homeowners to make consistent, predictable payments month in and month out over the life of the loan. This differs from a home equity line of credit (HELOC), which offers variable interest rates. Also unlike HELOCs, home equity loans are disbursed in one lump sum. 

Applying for a home equity loan can be rather involved; you do need to provide a substantial amount of paperwork to complete the process. Discover estimates that it could take anywhere from six to eight weeks from the time you fill out the application to receive your funds. 

Who’s eligible for a Discover home equity loan?

To qualify for a Discover home equity loan, you must own and have equity in a single-family home, townhouse, condo, or Planned Unit Developments (PUD) that serves as your primary residence. Borrowers must have a credit score of at least 680 and a debt-to-income ratio of 42% or lower to qualify.

While you need verifiable employment and income to take out a Discover home equity loan, the company does not disclose any minimum income requirement; instead, it relies mostly on your credit history and debt-to-income ratio to determine creditworthiness. 

Requirement	Details
Eligible properties	Primary home only
State of residence	Any except Iowa and Maryland
Maximum loan-to-value (LTV)	90%
Maximum debt-to-income	42%
Minimum credit score	680
Minimum income	Not disclosed

Home equity loans through Discover can only be taken out on your primary residence; loans on second homes, investment properties, manufactured homes, log homes, trusts, commercial properties, and properties larger than 20 acres are not allowed.

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

One of the standout features of a Discover home equity loan is its lack of fees; borrowers aren’t required to pay any application, appraisal, origination, processing, or closing fees. This can end up saving you thousands of dollars over other lenders.

Of course, you still have to pay interest on your loan. Interest rates on Discover home equity loans are fixed, which allows you to have predictable monthly payments over the life of the loan. Discover currently offers rates between 7.85% and 12.40% with the lowest rate reserved for the most qualified applicants. 

The interest rate you end up qualifying for will have a huge impact on the total cost of the loan. Let’s look at an example to illustrate. You take out a home equity loan of $60,000 that must be repaid over 20 years. 

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 interest rates will cost you an additional $28,188. That’s why it’s a good idea to check several lenders to find an offer that matches your needs. 

How does your home’s value affect your terms?

Discover uses an Automated Valuation Model (AVM) to determine the value of your home. This method doesn’t require a physical property assessment; instead, it relies on vast amounts of data to estimate home value. Some of the data these models use include:

• Information about your neighborhood
• Property characteristics
• Property tax assessments
• Recent sales of comparable homes
• Local market trends
• Historical sales data
• Economic conditions

A home appraisal is necessary because it helps determine the total equity you have in your home and how much you can borrow. Your equity is calculated by subtracting the money you currently owe on your home from the appraised value. For example:

$500,000 appraised home value – $200,000 mortgage = $300,000 home equity

The lender then determines how much you can borrow based on the maximum loan-to-value (LTV) ratio it permits. Discover has set its maximum LTV at 90%, allowing homeowners to borrow up to 90% of their home’s appraised value minus any outstanding mortgage balance. Here’s the calculation:

($500,000 appraised home value x .9 LTV) – $200,000 mortgage  = $250,000 maximum amount of home equity loan

Because of the way the maximum loan amount is calculated, a lower home value will naturally decrease the total amount you can borrow. It’s important to understand these calculations to make an informed decision on how much to borrow.

Of course, you may not want to take out the maximum loan amount the lender allows. Lenders like Discover also use LTV to assess the level of risk associated with financing a loan. Loans with a high LTV ratio are riskier because the lender may be unable to recoup the entire loan amount if the borrower defaults.

Because of this risk, a high LTV ratio often translates into higher interest rates. When a homeowner borrows a large percentage of the property’s value, the lender often charges higher interest rates to compensate for the increased lending risk. Lower LTV ratios imply less risk, which results in lower interest rates.  

Pros & cons of Discover home equity loans

Discover offers home equity loans up to $300,000 at competitive interest rates without charging any additional origination, appraisal, or closing fees. You’re given either 10, 15, 20, or 30 years to repay the loan, allowing you to pick a repayment plan that matches your budget and goals.

However, this may not be a good option if you only need a small loan; the minimum amount you can borrow is currently set at $35,000. You’ll also need to look elsewhere if you need money fast. It typically takes between six to eight weeks to complete Discover’s application process and receive your funds. 

Pros

• No fees

• Flexible repayment term

• High maximum loan limit

• Strong U.S.-based customer service

Cons

• Good credit required to qualify

• Takes six to eight weeks to close on the loan

• No HELOC option available

• High minimum loan amount

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 not very good. 

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 are regarding Discover’s credit card services. Those that do review the company’s home equity loans have few positive things to say. Complaints include the difficulty of the application process, how long it takes, and the payment site being down. The only positive comments were about friendly customer service personnel 

Source	Customer rating	Number of reviews
Trustpilot	1.7/5	259
Better Business Bureau	1.21/5	366

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 Time. 

If you already have a home equity loan that’s been funded by Discover, you should call 1-855-295-2193 to discuss any issues you may be experiencing. Unfortunately, there doesn’t seem to be any other way to contact Discover; no customer service email address or online chat is offered 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

There are two ways to apply: either 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, all you need to do is select “home loans” and then click on the “Get Started” button in the upper right-hand corner of the page. 

2. Provide basic information 

You’ll be asked to provide some information, including: 

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

3. Receive a personalized quote

Once the information you provided has been reviewed, you’ll receive a customized quote that includes the loan amount, terms, interest rates, and the next steps to follow. 

4. Submit necessary paperwork

Discover will then provide you with a list of documents that will 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 the necessary documentation is received, your application will be carefully reviewed by Discover’s team of Processors, Underwriters, and Closers. 

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, your loan will be disbursed!

Discover home equity loan alternatives

When considering a home equity loan, it’s a good idea 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, you may want to consider Spring EQ, which offers a LTV ratio of 95%. Or if you would rather take out a home equity line of credit or you need funds fast, you might be better off applying with Figure. 

Also, be mindful of interest rates when comparing offers. Reducing your interest rate by as little as a quarter of a percent can save thousands of dollars on a large, long-term loan. To compare rates from multiple lenders at once, consider applying through LendingTree; they offer free prequalification with just a soft credit check.

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

If you want to check out even more lenders to compare quotes, view our list of the best home equity loan providers.

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