Flagstar Bank: 2022 Home Equity Review

Competitive interest rates and no closing costs make this bank worth consideration.

Flagstar Bank has been around since 1987, and the company has grown into one of the biggest mortgage origination companies in the country. While Flagstar Bank's network of bank branches is limited to five states -- Michigan, Indiana, California, Ohio and Wisconsin -- the company's lending business has a wider in-person presence with 79 loan locations in 28 states. As more homeowners look to tap into their home equity, the Michigan-headquartered bank offers two options: Home equity line of credit and home equity loan. 

Flagstar Bank: At a glance

Types of home equity loans Home equity line of credit and home equity loan
APR range Variable 6.99% to 21% for HELOCs (5.49% six-month introductory offer); 7.79% for home equity loans (both rates reflect autopay discount for Flagstar Bank customers)
Loan amounts $10,000 to $1 million
Credit score requirements Not specified
Repayment terms 10-year draw period and 20-year repayment period for HELOCs; 10-, 15- and 20-year options for home equity loans
Fees $75 annual fee for HELOCs, waived the first year; no bank-imposed closing costs for home equity loans

Flagstar Bank's home equity loan products are best if you already do your banking at the institution due to the bank's autopay discount offer. This is not a good option if you live in Texas, as the bank's home equity products are not available there.

No home equity lender is perfect. If you're thinking about using Flagstar Bank to access a portion of your home equity, consider these big pros and cons before applying.

What we like

  • Extra savings opportunities: Offers a discount for setting up automatic payments from a Flagstar account (0.5% discount on HELOCs and 0.25% discount on home equity loans).
  • Wide range of loan amounts available: $10,000 to $1 million.
  • No extra closing costs: No bank-imposed closing costs on home equity loans.

What we don't like

  • Limited availability: Home equity loans are only available through a physical retail branch.
  • Scarce details: Limited information available online about borrower requirements.
  • Promo option isn't for everyone: Low introductory HELOC rate is only available on loans of at least $50,000.

Home equity loan product options

If you're an existing Flagstar Bank customer with a checking account, you can set up autopay to secure a discount on your rate. In both the breakdowns below, the APR figures include the discount.

Home equity line of credit: Flagstar Bank's HELOC gives you the flexibility to borrow as much as you need when you need it, and you'll pay a variable interest rate between 6.99% and 21% after a six-month promo rate of 5.49%. Loan amounts are flexible, ranging from just $10,000 to $1 million. If you borrow more than $500,000, you will need to pay for a title insurance policy for the lender. 

As long as you keep the account open for at least 36 months, you won't pay any closing costs. However, after the first year, you'll pay a $75 fee each year.

Home equity loan: If you apply for a home equity loan at Flagstar Bank, you will get one lump sum of money, and you'll have three options for repaying it: 10-, 15- and 20-year terms. You can borrow between $10,000 and $1 million, provided that you maintain a combined loan-to-value ratio of 80% or lower.

Fees

There are no closing fees as long as you keep your account open for at least 36 months. For HELOCs, Flagstar Bank charges an annual fee of $75, although it's waived in the first year. If you borrow more than $500,000, you will need to pay for lender's title insurance. 

Outside of fees, it's important to pay close attention to the APR attached to loan products at Flagstar Bank. On a HELOC, the bank charges between 6.99% and 21%, depending on your creditworthiness. Home equity loans have a fixed rate of 7.79% -- more than half a point higher than average interest rates on Bankrate, CNET's sister site. However, there are no closing costs.

How to qualify

While Flagstar Bank does not disclose specific credit score requirements for its home equity loan products, there are some key considerations the bank makes when reviewing applications. If you're applying for a HELOC, the property must either be a 1-to-4 unit owner-occupied building or a 1-unit second home, and your combined loan-to-value ratio cannot exceed 89.99% with the new line of credit added to your existing mortgage.

If you're applying for a home equity loan, it will need to be on your primary residence (second homes are not allowed), and the combined loan-to-value ratio cannot exceed 80% with your existing mortgage.

Flagstar Bank's home equity products are not available in Texas.

Getting started

To figure out if you're eligible for one of Flagstar Bank's home equity loan options, it's best to allow the company's website to use your location. Based on your ZIP code, the bank will tell you whether you can apply for a HELOC and a home equity loan. HELOCs are widely available, but home equity loans are much more limited. 

You can start your application online. If you do, you will need to share a range of information about your primary mortgage -- the original amount, the remaining balance, your rate and monthly payment -- along with your driver's license information and details about your personal finances. If you don't want to get started online, you can call 888-686-1454 to speak with a loan adviser.

Customer service

While Flagstar Bank offers a convenient online application, there are a variety of ways to get in touch with a real person. You can call 888-686-1454 to connect with a loan adviser over the phone. Representatives are available Monday through Friday between 7:30 a.m. ET and Saturday between 7:30 a.m. and 4:00 p.m. If you do decide to take out a loan with the bank and need assistance with your payments, the company has a 24-hour loan servicing number: 800-968-7700.