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PenFed Home Equity Loans Review
By Joan Pabón MONEY RESEARCH COLLECTIVE
If you want to tap into the equity of your second home or vacation property, Pentagon Federal Credit Union (PenFed) is a great choice. Not only is PenFed the only financial institution on our list of best home equity loan lenders that offers this option, but it also allows members to get lines of credit of up to $1 million. These features, coupled with PenFed’s great reputation for customer service, make it a top HELOC lender.
Table of contents
- PenFed home equity loans overview
- PenFed’s services
- PenFed’s credentials
- PenFed’s accessibility
- PenFed’s customer satisfaction
- PenFed FAQ
- Summary of PenFed’s home equity loans review
PenFed home equity loans overview
- Offers HELOCs on second homes and vacation properties
- Lines of credit of up to $1 million for qualified borrowers
- Doesn't require HELOCs to be in first lien position
- Accepts credit scores in the "fair" range
- Available nationwide
- Doesn't offer home equity loans, only HELOCs
- $99 annual fee may apply
- Doesn't offer loans on homes that have safety or structural issues
PenFed doesn’t offer home equity loans, only home equity lines of credit (HELOCs). And while lines of credit may not suit every borrower, they do provide great flexibility to homeowners looking to access their home equity to cover ongoing home improvement and other expenses.
PenFed’s HELOC features a 10-year draw period (during which borrowers can make interest-only payments) and a 20-year repayment period. Loan amounts range from $25,000 to a very generous $1 million. It must be noted, however, that loan amounts of up to $1 million are reserved for non-owner-occupied properties. For owner-occupied properties, the maximum loan amount is $500,000 with a CLTV of 90% or less.
Another less common feature of this HELOC product is that borrowers can switch from a variable rate to a fixed one on all or some of their interest payments, which allows for more predictability come time to repay the loan. Borrowers may also take out several HELOCs at a time, provided the total debt doesn’t exceed $1 million.
To qualify for a HELOC with PenFed, borrowers must have the following:
- A 660 credit score, at the very least
- Proof of income in the form of one to two months of paystubs
- W2 forms (at least one year)
- At least 2 months of recent bank statements
- Mortgage statements for all properties owned
- A maximum combined loan-to-value (CLTV) ratio of 90% on owner-occupied properties or 80% for condominiums
- A acceptable debt-to-income (DTI) ratio
- Property insurance
- A fully livable property with no safety issues
Self-employed borrowers may also qualify, provided they can show proof of consistent income through two years of tax returns.
HELOC rates with PenFed are based on the prime rate (the most recent being 5.50%) plus a margin and may change monthly. Nevertheless, the credit union states that APRs on fixed-rate advances will not exceed 18% and will be equal to or greater than 5.75% for primary homes. PenFed does charge a $99 annual fee that can be waived if the borrower paid at least $99 in interest over the preceding 12 months.
As for closing costs, PenFed states these can range between $500 and $8,500 for HELOCs of $500,000. Appraisal and, consequently, appraisal fees will apply for loan amounts of over $400,000. PenFed will cover most other closing costs, including recording, search and flood certification fees. Borrowers who pay off or close their loans within 36 months of closing will have to reimburse PenFed for closing costs, however.
PenFed’s services
Besides home equity lines of credit, PenFed also offers banking services, personal and student loans, credit cards, auto loans and a decent selection of mortgage products, including conventional-fixed rate mortgages, VA loans, FHA loans and jumbo loans.
PedFed also provides a variety of educational resources, including a first-time homebuyer’s guide, and a power buyer certification program that allows prospective homeowners to compete with cash offers by getting up-front approval and locking in the lowest interest rate while they shop.
What’s offered
- Home equity lines of credit (HELOCs)
- VA loans and VA streamlined refinance loans
- FHA loans
- Jumbo loans
- Conventional fixed-rate loans
- Mortgage refinance
What’s not offered
- Home equity loans
- New construction loans
- Home improvement loans
- USDA loans
PenFed’s credentials
Founded in 1935 and headquartered in McLean, Virginia, Pentagon Federal Credit Union is the third-largest credit union in the United States with $31 million in assets and 2.5 million members around the globe.
While the institution used to limit membership to government workers and those who were affiliated with national defense organizations, as of 2018 it accepts all applicants who can provide a $5 initial deposit to open a PenFed checking account.
Licenses and registrations
PenFed is insured by the National Credit Union Administration (NCUA) and is an equal opportunity lender. It’s also registered with the Nationwide Multistate Licensing System and Registry (NMLS) and its ID number is 401822.
Third-party ratings
PenFed doesn’t appear to be rated by third-party financial rating agencies like Standard & Poor’s or Moody’s. It does, however, publish an annual report that includes professionally-audited financial statements. Members and non-members alike are free to access these reports.
In 2021, PenFed had a mortgage volume of $18.9 billion and a home equity origination volume of $1.2 billion. This represents an annual growth of 128% and may be an indicator of the institution’s short-term financial stability.
Regulatory or legal actions
PenFed’s primary regulator is the NCUA, which doesn’t appear to have taken action against the credit union in recent years. And while there have been some civil lawsuits filed against PenFed since 2017, none of them have been related to the institution’s personal or home equity products.
PenFed’s accessibility
PenFed serves over 2.5 million members across all 50 states, D.C., Guam, Puerto Rico and Okinawa. It has a network of over 5,000 fee-free Allpoint and co-op ATMs and provides 24/7 customer service via online form and chat.
Availability
PenFed serves members across the nation and has branches in Washington, D.C, Maryland, Virginia, California, Florida, Georgia, Hawaii, Nebraska, New Jersey, New Mexico, New York, North Carolina Guam, Japan, Portugal and Puerto Rico. It also operates call centers in Nebraska, Oregon and Texas.
Contact information
For information about PenFed’s home equity products, contact a mortgage expert at (833) 680-1987.
For general member services, customers may also contact PenFed at any of the following:
- Toll-free: 1-800-247-5626
- U.S. main: 724-473-6333
- TTY (for the hearing impaired)1-800-225-6378/ 541-225-6801
Customer support is available from 7 am to 11 pm EST from Monday through Friday, 8 a.m. to 11 p.m. on Saturdays and 9 a.m. to 5:30 p.m. on Sundays. Live chat support is available 24/7.
Limitations
While PenFed’s live chat feature is available 24 hours a day, support over the phone is limited to regular service hours. Additionally, PenFed doesn’t have a dedicated Spanish line for home equity or mortgage products and the information on its site is only available in English.
To get a home equity loan or line of credit from PenFed, customers must complete an online form and wait to be contacted by a mortgage specialist. Alternatively, members can call PenFed’s mortgage line directly. This is in contrast to other HELOC lenders, which allow customers to complete an online application and close on their loan without having to speak with an agent.
PenFed’s customer satisfaction
PenFed Credit Union has a good reputation for customer service based on third-party ratings for its personal loan products. And while it is not accredited by the Better Business Bureau (BBB), it does reply to customer complaints on that platform.
Customer complaints
Again, PenFed is not BBB-accredited and has a rating of 1.19 out of 5 on that platform based on 186 customer reviews. It has also received several complaints (510 over the last three years), most of which deal with issues with its products and services. It appears that PenFed has addressed most of the recent complaints, closing about half of them over the past 12 months.
Over the past three years, PenFed has received a total of 23 complaints regarding its home equity loan products through the CFPB.
On the consumer review platform Trustpilot, PenFed has a very positive rating of 4.6 out of 5 based on 928 reviews.
Third-party ratings
PenFed received an above-average rating (743 on a 1,000-point scale) in the latest J.D. Power U.S. Consumer Lending Satisfaction Study. In fact, PenFed ranked just slightly lower than Discover and higher than retail banking giant Wells Fargo.
J.D. Power’s Consumer Lending Study takes into account factors such as loan application, management, shopping and terms.
PenFed FAQ
What credit score is needed for a PenFed loan?
Minimum credit score requirements vary by loan type. For example, PenFed requires a FICO credit score of 620 for VA loans, 650 for conventional fixed-rate loans and 660 for home equity lines of credit.
What is PenFed's minimum loan requirement?
Again, minimum loan requirements vary by loan type. For home equity loans, PenFed requires the following:
- A minimum credit score of 660
- A maximum combined loan-to-value (LTV) ratio of 90% for owner-occupied properties and 80% for condominiums
- One to two months of pay stubs or two years of tax returns
- Two months of recent bank statements
- One year of W2s
- An acceptable DTI ratio (most lenders will accept up to 43%)
- Mortgage statement for property(s) owned
- A fully livable property with no safety issues
What are the PenFed home equity loan rates?
PenFed doesn't specify its HELOC rates but states they are based on the prime rate plus a margin. At the time of this review, the prime rate was 5.50%.
How much does a PenFed home equity line of credit cost?
The cost of your line of credit will depend on your interest rate, which will be based on your details (credit score, income and debts) and the loan amount for which you apply. In addition to paying interest, HELOC customers may also have to pay a $99 annual fee. The fee, however, can be waived if the borrower has paid at least $99 in interest over the preceding 12 months.
PenFed will cover most closing costs (which range between $500 and $8,500 for credit lines of $500,000), but if the loan is paid off within 36 months from the closing date, the borrower will have to reimburse PenFed for these costs. Those applying for a line of credit over $400,000 will also have to cover an appraisal fee, which may cost between $550 and $850, sometimes more. No origination fees are listed on the lender's website.
How does a PenFed home equity loan work?
PenFed's home equity line of credit has a 10-year draw period during which you utilize your line of credit as needed and make low interest-only payments or repay what you borrow in full. The 10-year draw period is then followed by a 20-year repayment period during which time you must pay both principal and interest on your HELOC.
As with all HELOCs, your rate is adjustable and your payment amount can go up or down. However, PenFed does offer the option to convert all or part of HELOC to a fixed interest rate, so you can have the flexibility of a line of credit with the predictability of fixed monthly payments.
How we evaluated PenFed home equity loans
To review PenFed Credit Union, we accessed the following:
- Product details and annual financial reports from the institution’s website
- The NMLS consumer database and NCUA credit union research tool
- Reviews about the credit union posted on online consumer review platforms
- Financial strength and customer satisfaction ratings from third-party rating agencies
Summary of PenFed’s home equity loans review
PenFed Credit Union‘s home equity line of credit has several attractive features. First of all, the financial institution is available all across the United States and several territories, making it a much more accessible bank than other options on our list of best home equity loan lenders. Another advantage to working with PenFed is that, unlike other banks, it allows borrowers to convert all or part of their line of credit into a fixed rate, allowing for predictable monthly payments.
Additionally, and unlike other banks, PenFed doesn’t limit HELOC eligibility by lien position or property occupancy, making it an option for those who have an existing lien on their home or want to tap into the equity of a rental property or second home. And, of course, borrowers don’t necessarily need good credit to qualify for a home equity loan with PenFed, as it accepts scores as low as 660.
PenFed isn’t for all borrowers, however. Those who want to use their home equity to make vital home improvements to their homes such as structural updates will find they don’t qualify for a HELOC with PenFed, as the credit union will not issue loans on houses with safety issues. And those who want to open a line of credit as an emergency fund may have to pay a $99 fee if they haven’t used their HELOC in 12 months.
Joan is a professional translator, writer and editor with a special interest in personal finance and insurance topics. She has been a contributing author and independent researcher at ConsumersAdvocate.org since 2017 and an editor at Money since 2019. Her work has been featured in MSN Money and Apple News.