Discover Home Loans offers home equity loans and mortgage refinancing options with low fixed rates and no fees of any kind.
Discover Home Loans is a branch of Discover, focused on free access to its lending services and top-tier customer support. With none of the fees that come standard with home loans and the added benefit of a designated personal banker, Discover offers one of the best home loans platforms in the industry.
Discover Home Loans doesn’t offer purchase mortgages, but you can refinance your existing mortgage to lock in better rates or take out a home equity loan. However, if you have poor credit (below 620) or too much existing debt, it can be hard to qualify.
I tested the site and customer service myself and have outlined my experience below. In this in-depth review, I aim to answer all of your questions about the lender, from how to apply and the minimum requirements, to what you might qualify for and how customer service treats you.
Products & Services
Home Equity Loans
Not to be confused with a home equity line of credit (HELOC), Discover offers home equity loans using the equity you have in your home. Commonly referred to as second mortgages, home equity loans are separate from the original mortgage and will add an additional monthly payment. They’re also different from mortgage refinancing, which replaces your current mortgage with a new one (see more information below).
You can apply for a home equity loan on the Discover Home Loans website or over the phone, and the process is fairly straightforward. I’ll explain it in detail later on in this review.
You can borrow any sum from $35,000 to $300,000, with rates ranging from 3.99% to 11.99% and terms between 10 and 30 years. Discover only offers fixed rates, so your monthly payment will never change and your rate will be locked in. There are no fees or prepayment penalties associated with this type of funding.
To receive funding, you’ll need to verify your income and debts to prove that you have a debt-to-income (DTI) ratio no higher than 43%. Additionally, the maximum loan-to-value (LTV) ratio to work with Discover is 90%. This means that your loan can only be worth up to 90% of the total value of your home.
Combined with the fact that the minimum loan balance is $35,000, this can make it somewhat difficult to qualify for the loan amount that you need. You need to have enough equity built-in to your home to cover the minimum loan required while still having a maximum LTV ratio of 90%.
Although the name Discover Home Loans sounds as if you can take out a mortgage through the company, it actually only offers refinancing for your existing mortgage. But if you want to lock in better interest rates or even do a cash-out refinance, then Discover might be the right option for you.
You can borrow between $35,000 and $300,000 to refinance your mortgage. The rates range from 3.99% to 11.99% APR (fixed) and the terms range from 10 to 30 years. Keep in mind that with either loan type from Discover, you’ll need a credit score of at least 620. To borrow more than $150,000, the minimum is 700.
Refinancing your mortgage through Discover also requires the same DTI and LTV ratios mentioned above of 43% and 90%, respectively. Both types of funding have the same minimums, maximums, and requirements, so it just comes down to which loan type you would prefer to take on and what you qualify for in the end.
Rates and Terms
Whether you’re looking for a home equity loan or mortgage refinancing, the overall rates and terms are similar, and will depend heavily on your financial situation. The biggest factors include how much you’re looking to borrow, how much equity you have in your home, your credit score, and your debt-to-income ratio.
These are the rates and terms you can expect:
|Interest Rates (Fixed)||3.99% to 11.99% APR|
|Terms||10, 15, 20, or 30 years|
|Loan Amount||$35,000 to $300,000|
|Payment Types||Fixed monthly payments|
Note that Discover Home Loans only offers fixed rates. So if you’re looking for an adjustable rate, you’ll need to elsewhere. Also, keep in mind that only borrowers with a credit score of 700 or higher can borrow amounts above $150,000.
One of the biggest reasons to consider using Discover is that there are no fees of any kind. You don’t have to worry about application fees, origination fees, appraisal fees, closing scots, or even prepayment penalties.
The one thing to note is that while there are no prepayment penalties, if you pay off the loan within 36 months, you may be required to reimburse Discover for some of the closing costs. This amount, however, is capped at a maximum of $500 and is only applicable for relevant closing costs – not any other fees.
Application Process and Qualifications
To get an in-depth look at Discover’s application process, I went through it myself as if I were interested in getting a home equity loan. The company’s site claims that you can see your loan options within minutes, so I wanted to put that to the test and see how easy (or difficult) the application process really was.
The online application process is quick and simple, but you can also apply over the phone if you prefer. If you go the online route, all you have to do is fill out three short forms with information about yourself and the property. In addition, you’ll need to upload some verification documents (scanned versions are okay).
This is all of the information that you’ll need to provide:
- Full name
- Date of birth
- Social security number
- Property address
- Phone number
- Email address
- Marriage status
- Citizenship status
- Loan amount you’re looking for
- Purpose of the loan
- Estimated property value
- Existing mortgage information
- Annual income (W-2, pay stubs, 1099s, etc.)
- Monthly debt payments (credit cards, other types of loans, etc.)
While this may seem like a lot, you’ll be able to see some of the loan options you prequalify for without having to upload any documents or verify any information. Prequalification took me about 10 minutes. From there, you can continue, upload your documents, and complete the entire process (including electronically signing all loan documents) online.
You’ll be assigned a personal banker from Discover who can assist you in completing the application process – which may or may not be necessary for you, but either way, it’s a nice touch.
Discover Home Loans’ minimum qualification requirements include::
- A credit score of at least 620 (700+ required to borrow $150,000 or more)
- A debt-to-income ratio of 43% or less
- A history of responsible credit use
- Verifiable employment status
- Verifiable income
If you decide to move forward with a loan offer, Discover will then perform a hard credit inquiry, which may negatively affect your credit. The final rates and terms of your offer may change following this credit check and information verification.
Within three days of your preapproval, Discover Home Loans will provide you with a document containing all of the official loan details. At this time, you’ll need to provide all of the necessary verification documents listed above. Your assigned personal banker can assist you.
Discover will set up a home appraisal and begin underwriting your loan. According to the company’s site, this can take anywhere from 5 to 15 days to complete. Lastly, once all terms are agreed upon, Discover will provide a closing packet with all pertinent information and set up a closing date.
In total, you can expect this process to take up to 30 days or so. The industry standard for home loans is 30 to 60 days, so Discover is among the faster lenders in the business. Throughout the entire process, your personal banker will be in communication to keep you up to speed with everything going on.
To test Discover Home Loans’ customer service, I contacted the company and pretended to be interested in a home equity loan. I went in with the premise that I was looking for a home equity loan worth $60,000 to take on some major renovations around my house.
Discover does not offer live online chat or email support, like many other lenders do. Phone support can be inconvenient if you need to share a screenshot of an issue that you’ve run into, or if you need help outside of normal business hours.
That said, the company offers phone support seven days a week, from 8 am to midnight EST on the weekdays and 10 am to 6 pm EST on the weekends.
When I called in, the representative was polite from the start and sounded happy to start discussing some of my options. I began the conversation by asking what the minimum requirements were to apply for a home equity loan, and the representative was able to easily rattle them off.
After confirming that I met the requirements, the representative asked about how much I was looking to borrow and the purpose of the loan, and also requested some information about my home and existing mortgage.
I asked a few questions such as the difference between a home equity loan and HELOC, what the maximum loan amount was, etc., and they explained everything to me.
Overall, the representative was polite, knowledgeable, and never seemed pushy about getting me to apply immediately. As a potential customer, I appreciated their willingness to explain things to me. For the phone service, I give Discover Home Loans full marks. The only points I’ve docked at the beginning of the review are because there is no online chat or email support.
Overall, Discover Home Loans could be a good option if you’re looking to take out a home equity loan or refinance your existing mortgage. Both types of financing come with no fees or prepayment penalties and have some of the best rates in the industry – but you’ll need a credit score of 700+ to borrow more than $150,000.
The company does not offer first mortgages to purchase a property, nor will you find adjustable-rate home loans through Discover. If you’re looking for one of these, I recommend checking a lending platform such as Credible or LendingTree.
What are the benefits of a home loan from Discover?
Home loan from Discover come with a few key benefits that make the company worth considering:
- No fees of any kind (including closing costs)
- A dedicated personal banker to assist you throughout the entire process
- Customer support seven days a week
- Loan amounts up to $300,000 at competitive interest rates
Can I submit documents online during Discover’s application process?
The entire application process can be done online through Discover’s website. As you move along through the application, you’ll be required to upload the pertinent documents online through the application portal.
Is Discover Home Loans a direct lender?
Yes, Discover Home Loans is a direct lender. Discover is one of the biggest names in the banking business and is one of the five biggest originators of home equity and mortgage refinancing loans in the country.
What fees do Discover Home Loans charge?
Discover Home Loans does not charge any fees. You’ll pay no application fees, origination fees, appraisal fees, or prepayment penalties. However, if you pay the loan off within 36 months, you’ll have to reimburse Discover for some of the closing costs that were covered for you (up to a maximum amount of $500).