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Discover Home Loans Review: Refinance and Home Equity Loans With Zero Closing Costs

Review Updated
Kimberly Rotter, AFC®
By: Kimberly Rotter, AFC®
Kimberly Rotter, AFC®
Kimberly Rotter, AFC®
Accredited Financial Counselor®

Kimberly is a career writer and editor with more than 30 years' experience. She's a bankruptcy survivor, small business owner, and homeschool parent. In addition to writing for The Motley Fool, she offers content strategy to financial technology startups, owns and manages a 350-writer content agency, and offers pro-bono financial counseling.

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Our Mortgage Expert

Eric McWhinnie
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Eric McWhinnie
Eric McWhinnie

Eric McWhinnie has been writing and editing digital content since 2010. He specializes in personal finance and investing. He also holds a bachelor’s degree in Finance.

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You may only know Discover® for its consumer-friendly credit cards, but it also offers home loans to borrowers looking for a refinance mortgage or a home equity loan. That short list of offerings makes Discover's program more limited than other lenders', but the price is right. Take a look at our full Discover Home Loans review to find out if this is the best mortgage lender for you.

Ratings Methodology
Discover Home Loans

Discover Home Loans

Rating image, 3.0 out of 5 stars.
3.0/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
 = Best
= Excellent
= Good
= Fair
= Poor

Bottom Line

Check out Discover Home Loans if you want to borrow against your primary residence, you want to minimize your out-of-pocket costs, and you need less than $300,000.

Min. Credit Score

  • 680

Min. Down Payment

  • N/A

Key Features

  • Great customer service
  • Good online application experience
  • No closing costs

Loan Types

  • Conventional

Fixed Rate Terms

  • 30y, 20y, 15y, 10y

Adjustable Rate Terms

  • N/A

Top Mortgage Lender

It's important to consider multiple mortgage lenders to find a good fit for you. We've listed one of our favorite lenders below so you can compare your options:

Lender Min. Down Payment Credit Score Next Steps
  • 3%
  • 580
Circle with letter I in it. 580 FHA 620 Conventional 680 Jumbo
Apply Now for Better

Full Discover Home Loans review

This mortgage lender is a good fit for: Borrowers who want to borrow against the equity in their home and pay no out-of-pocket costs at closing.

Pros

  • Low costs
  • Great reputation
  • Digital application

Cons

  • No purchase loans or HELOCS
  • Low dollar limit on loans
  • No government-backed loans

Top perks

No closing costs

You can get a mortgage with Discover Home Loans with zero cash due at closing. There is no origination fee, which could represent significant savings. When lenders do charge this fee, it typically ranges from 0.5% to 1.5% of the loan amount.

Discover Home Loans also picks up the appraisal fee, which saves you another few hundred dollars in out-of-pocket costs.

Home equity loans

Not all mortgage lenders offer home equity loans. A home equity loan is a second mortgage. You can borrow against your home's value while leaving your original mortgage intact.

Reputation

Discover Home Loans has an A+ rating with the Better Business Bureau.

Digital application

Discover Home Loans offers technology that makes it easy to navigate the mortgage application process online.

High loan-to-value allowed

Subject to its dollar limits, Discover Home Loans will allow you to borrow up to 90% of your home's value using its home equity loan or refinance loan. Many other lenders cap your home debt to 80% of the home's value.

What could be improved

No government-backed loans

Discover Home Loans does not currently offer FHA loans, VA loans, or USDA loans, including the refinance versions of any of those loans.

Low loan limits

Discover Home Loans only offers loans between $35,000 and $300,000. If you need to borrow more, you will have to look elsewhere.

No purchase loans or HELOCs

If you're shopping for a home, you can't buy it with a Discover Home Loans mortgage. The company only offers refinance loans and home equity loans.

A home equity loan is different from a HELOC (home equity line of credit). With a HELOC, you can access the money you need, up to your limit, at any time while the HELOC is open. Repayment starts while the HELOC is open, and your payments get bigger if you take more money out. With a home equity loan, you borrow a set amount all at one time.

Hard sell for questionable borrowing

Discover Home Loans takes a hard-sell stance on debt, encouraging consumers to borrow for any major expense, including a wedding. But this isn't always a wise decision.

Some reasons to borrow are perfectly appropriate -- like home improvements. If you're increasing the value of your home, borrowing against it makes sense. Also, using the money to improve your home is the only way you can legally take the mortgage interest tax deduction with a home equity loan.

It's not a great idea to borrow for a luxury expense like a wedding or other big party.

How to qualify

You can only borrow against your primary residence, which can't be a manufactured home, and the loan must be between $35,000 and $300,000.

Discover Home Loans requires a 680 credit score. That score won't get you the best rate, though. Discover Home Loans offers a range of mortgage interest rates, and only the strongest applicants will qualify for the lowest rate. Lenders typically offer at least three to five different interest rates to applicants depending on their credit score. You can save money for the life of your loan if you can get your credit score into the next-higher tier before you apply.

To get the lowest interest rate at Discover Home Loans, you'll also need to borrow at least $50,000 on a first-lien loan or second-lien loan.

You must have a score of 680 to qualify for a loan above $150,000.

Your debt-to-income ratio should be under 43% to qualify. That means all of your required minimum monthly payments on debts, including your total housing payment, must add up to no more than 43% of your gross (before tax) income. Your total housing payment includes your mortgage principal and interest payment, property taxes, homeowners insurance, and any homeowners association dues that you are required to pay.

For example, if you earn a salary of $60,000 per year, your monthly gross income is $5,000. To qualify with Discover Home Loans, your total debt payments cannot exceed $2,150 per month.

Last, you need sufficient equity in your home. Discover Home Loans will loan a maximum of 80% to 89.99% of your home's market value. The limit depends on your loan amount and your credit score.

How are Discover Home Loans' refinance rates?

Discover Home Loans' mortgage refinance rates are competitive. Most no-closing-cost loans are associated with higher interest rates, but Discover Home Loans remains right in line with national averages for refinance loans.

Home equity borrowers who already have a first mortgage will pay a higher rate because the home equity loan will be in the second lien position behind the primary mortgage. That equates to more risk for the lender, so it charges more. Even so, the interest rate on a home equity loan is still very low compared to the alternatives (personal loans, credit cards, and so on).

How are Discover Home Loans' rates compared to the national average?

As a major national lender, Discover Home Loans offers very competitive mortgage interest rates. Discover Home Loans' mortgage rates trend lower than the national average.

There are no adjustable-rate mortgages here with low teaser rates. Discover Home Loans only offers fixed-rate loans.

Discover Home Loans is right for you if:

Check out Discover Home Loans if you want to borrow against your primary residence, you want to minimize your out-of-pocket costs, and you need less than $300,000.

FAQs

  • Discover Home Loans' mortgage interest rates are about the same or a little lower than the national average.

  • Yes, if you are borrowing against your primary residence. You can't get a Discover Home Loans mortgage to purchase a home.

  • Discover Home Loans is a great choice for refinancing because you can get a loan with zero cash at closing. Closing costs are often thousands of dollars, so this is a significant advantage.

  • You'll need a 680 credit score and a debt-to-income ratio under 43%. You also need sufficient equity in your home. The most you can borrow is 80% to 89.99% of your home's value, and that includes your primary mortgage if you have one. The limit depends on your loan amount and credit score. You may not borrow from Discover Home Loans against a manufactured home. The minimum loan amount for a first-lien loan (a refinance mortgage that replaces your old loan) or a second-lien loan (a home equity loan when you already have a primary mortgage) is $35,000.

  • Discover Home Loans only offers two kinds of mortgages: home equity loans and refinance loans.