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Thursday, July 29, 2021

Discover Home Equity and Mortgage Refinancing Review 2021

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Discover is a major credit card issuer, but its financial products and services go beyond that. In addition to credit cards and banking, Discover offers home equity loans to qualified borrowers. These loans can be used for many purposes, including home improvement, debt consolidation, mortgage refinancing and other major expenses.

  • No application or origination fees.
  • Multiple repayment term options with fixed monthly payments.
  • Convenient digital application process.

  • Discover home equity loans are not available in all states.
  • Loans are fixed-rate only, which may be a drawback for borrowers interested in a variable-rate option.

Discover home equity loans are available from $35,000 to $200,000. All Discover home loans have fixed interest rates and fixed monthly payments, offering predictability in budget planning.

Discover does not offer mortgages for purchasing a property.

To begin the loan application process, you can call Discover or apply online. Discover will access your credit report and will ask you for your employment information, debt and expenses, and other information.

Within three days of completing your application, you should receive a document that explains the fees associated with your loan.

Discover will need various documents from you before you can be approved for a home loan. Some things you may be asked to provide include:

  • W-2 tax forms and your tax returns from the previous two years.
  • Names and addresses of all your creditors, along with the monthly payments and total amount due of all your current loans.
  • Statements of current assets, such as IRAs, certificates of deposit, stocks and bonds.
  • Account numbers and current balances of your bank accounts.

Discover will arrange for a home appraisal; after the appraisal is complete and you submit all your required documents, Discover will begin underwriting your loan. The lender says it will provide you with a closing packet that includes your loan details before your closing date.

Discover offers loans from $35,000 to $200,000, and loan terms can be 10, 15, 20 and 30 years. Annual percentage rates range from 4.15% to 11.99%, and monthly payments are fixed. The lender advertises no origination fees, application fees or appraisal fees, and no cash required at closing.

Discover’s website says the lender pays all closing costs during the loan process.

If you pay off your loan balance in full within 36 months of the loan closing, you’ll need to reimburse Discover for some of these closing costs, not to exceed $500. However, those living in Connecticut, Minnesota, New York, North Carolina, Oklahoma or Texas aren’t required to reimburse closing costs.

Aside from meeting credit score requirements, prospective borrowers of a Discover home equity loan must meet other expectations to qualify. These include:

  • Verifiable, consistent income. You’ll need to provide a recent pay stub and have an employment history of at least two years. Other documents are required if you’re self-employed.
  • A history of responsible credit use. Paying your bills on time and keeping your spending in check can help you show lenders that you’re a safe risk.
  • Sufficient equity in your home. Your home’s value plays a big role in determining how much you can borrow. To estimate the equity, subtract debts secured by your home (often this is just the mortgage) from the home’s estimated market value. The equity you need depends on the loan amount you want.

Discover has fixed loans from $35,000 to $200,000. The lender’s website says it can’t use commercial property, investment property or manufactured homes for a home equity loan.

What Credit Score Do I Need for a Discover Home Loan?

You need a credit score of 620 or better to qualify for a home equity loan with Discover. The lender’s website says loan amounts requested above $150,000 are only available to applicants with credit scores of at least 700.

Mortgage Refinance Calculator

Could refinancing your mortgage save you money? Try U.S. News’ Mortgage Refinance Calculator to see if refinancing makes sense.

Where Does Discover Operate?

Discover’s home loans site says, “Not all products are available in all states or for all loan amounts,” but it does not specify in which states its products are not available.

Is Discover Reputable?

Discover Financial Services has an A+ rating from the Better Business Bureau and has been BBB accredited since 1989.

In 2020, the Consumer Financial Protection Bureau received 20 mortgage-related complaints for Discover, with a timely response for all. Complaints were most commonly related to:

  • Applying for or refinancing a mortgage
  • Struggling to pay a mortgage

Borrowers can prequalify for a home equity loan online, view their loan status, upload documents and more through Discover’s secure website.

  • People who want to pay minimal upfront costs for a home equity loan.
  • People who need $200,000 or less in funding.
  • People who prefer a fixed interest rate.

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