Discover mortgage review: Home equity loans and refinances with transparent rates

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Discover mortgage loan at a glance

  • Conventional loans: Refinance only
  • FHA loans: No
  • VA loans: No
  • Refinancing: Yes
  • Jumbo loan: No
  • Adjustable rates: No
  • Fixed rates: Yes (10, 15,  20 and 30 years)

Discover Home Loans is a division of Discover, a digital bank and payments services company that’s been around since 1985. It specializes in fixed-rate home loans, including home equity loans and refinances ranging from $35,000 to $300,000. In addition to home loans, Discover offers a variety of other products like credit cards, checking and savings accounts, personal loans and student loans.

Pros

  • Transparent about rates
  • High home equity loan amounts
  • No origination fee

Cons

  • No purchase loans
  • Early payoff penalty
  • Not available in all states

4 things to know about Discover mortgage loans

1. No purchase loans

Unlike other mortgage lenders, Discover doesn’t offer home purchase loans. And you won’t be able to take out a government-backed loan, such as an FHA loan or VA loan, to buy a home. The only mortgage loans Discover offers are home equity loans and refinance loans.

That can be good news if you want to tap into your home equity, but not if you’re looking for a new home. Home equity loans let you borrow money against your home’s equity using the home as collateral.

2. Transparent about rates

You won’t have to wonder what types of rates Discover offers. The lender publishes a range for its fixed-rate home equity loans and refinances on its website. This information can come in handy as you shop around and compare potential options.

3. Early payoff penalty

If you have plans to pay off your home equity loan or refinance before you’ve had it for 36 months, you will be on the hook for a fee. Discover will ask you to reimburse it for some of the closing costs it paid when you initially took out the loan. Fortunately, this penalty won’t cost you more than $500.

4.Waives common fees

Discover mortgage doesn’t charge fees such as application fees, origination fees, appraisal fees and mortgage taxes. Plus, you can move forward with one of its home equity loans or refinances without paying any cash at closing.

Who is a Discover mortgage loan good for?

Since it doesn’t offer purchase loans, Discover will only make sense if you already own a home. It can allow you to tap into your home equity with a home equity loan and consolidate debt, pay for a home improvement project or meet another financial goal. A Discover mortgage may also help you refinance your mortgage so you can lower your interest rate and cut your monthly payments.

How to apply for a Discover mortgage

You can apply for a Discover mortgage online on the lender’s website. You can also go through the application process over the phone.

When you apply, you’ll need to share details about your loan and property. You’ll also be asked for personal details like your name, phone number and total annual income.

Not sure if a Discover mortgage is right for you? Consider these alternatives.

If you want to compare rates with several lenders or your application is denied, keep in mind that you have a window of time where multiple hard credit inquiries by lenders only count as one for your credit scores. You typically have 14 days — though it could be longer depending on the scoring model.

  • Cardinal Financial: If you want to take out a purchase loan, Cardinal Financial might be a better fit since it offers conventional, FHA, VA, USDA and jumbo loan mortgages.
  • PennyMac mortgage: PennyMac mortgage is worth considering if you want a lender that’s transparent about its rates and also offers purchase loans.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.