PennyMac Home Equity Loan March 2024

PennyMac is a top-rated mortgage lender in the U.S., with more than $527 billion in loans serviced. Founded in 2008, this Westlake, California-based mortgage lender offers a variety of loan products, including conventional loans, adjustable rate mortgages (ARMs), jumbo loans, government-backed loans, and property investment loans.

Does PennyMac Offer Home Equity Loans or HELOCs?

As mentioned, PennyMac offers a variety of home-loan products. Borrowers can choose from:

• Conventional mortgage loans
• Jumbo loans
• ARMs
• FHA loans
• USDA loans
• VA loans
• Property-investment loans

Any of these options could be used to purchase a home. PennyMac also offers refinance loans for current homeowners. 

Unfortunately, there is no option to get a PennyMac home equity loan or PennyMac home equity line of credit (HELOC). While PennyMac did venture into the home equity lending market in 2019, that program has since been discontinued. So homeowners will have to look elsewhere for a home equity loan or line of credit. 

There is, however, an alternative. PennyMac offers cash-out refinance loans for homeowners who would like to tap into their equity. A cash-out “refi” can provide homeowners with cash to consolidate debt, fund home improvements, or simply get caught up on bills while potentially receiving more favorable mortgage terms. 

It’s important to note that cash-out refinancing can be expensive, as cash-out fees apply to the entire loan amount, not just to the amount of equity that’s withdrawn. As such, cash-out refinancing may not make sense unless the borrower can get substantially better mortgage terms and is looking to withdraw a sizable amount of cash. 

Taking out a personal loan is another alternative to home equity loans, HELOCs, and cash-out refinancing. With a personal loan, borrowers can get a lump sum of money that they can use for virtually any purpose. Those funds are then paid back to the lender with interest, typically over a period of 12 to 60 months. 

Personal loans may be an attractive option if the interest rate is comparable to what could be obtained with a home equity loan. Borrowers will generally need a solid credit score to qualify for the lowest rates with a personal loan. 

When shopping for personal loans, it’s important to consider if the loan is secured or unsecured. A secured loan is secured by some form of collateral. For example, a home equity loan is secured by the home itself. Unsecured loans don’t require collateral. 

If someone is taking out a secured personal loan that uses their home as collateral, then it’s really a home equity loan. Understanding that reality is important, as failing to repay a home equity loan could risk the loss of the property to foreclosure. 

Home Equity Loans vs. HELOCs

Is there a difference between a home equity loan and a HELOC? The short answer: yes. Even though a home equity loan and HELOC both allow homeowners to tap into their home equity, these two forms of borrowing work in different ways. 

Home equity loan

A home equity loan provides borrowers with a lump sum of money. The amount a homeowner is eligible to borrow can depend on how much equity they’ve accumulated in the home. (Equity just means the difference between what the home is valued at and what’s owed on the mortgage.) 

Home equity loans tend to have fixed interest rates and set repayment terms. The length of home equity loans can vary: some loans may run only five years, while others may extend to 20 years.

A home equity loan is secured by the borrower’s home, so defaulting could risk having the home foreclosed. Borrowers who are comfortable with that risk, though, can use a home equity loan to potentially borrow a large amount of money. Fixed rates offer predictability when paying back the loan. 

Home equity line of credit (HELOC)

A home equity line of credit is a revolving credit line that’s similar to a credit card. Rather than borrowing one large amount all at once, homeowners can get a line of credit they can draw against as needed. 

During the draw period, the homeowner may pay nothing toward the HELOC or make interest-only payments. Once the draw period ends, the homeowner is responsible for paying the HELOC back. (The homeowner only pays interest on the amount of the credit line that is used.)

HELOCs typically have variable interest rates, meaning the rate can go up or down over time following the movement of a benchmark rate. That could make a HELOC more expensive than a home equity loan if rates rise during the repayment term. 

PennyMac Cash Out Refinance Loan

Here are the details for PennyMac cash-out refinance loans:

• Maximum loan-to-value (LTV) is 70% to 80% for conventional and FHA loans; borrowers may qualify with an LTV of up to 90% for VA refinance loans.
• Interest rates range from 6.00% to 6.75% and the rate a borrower is approved for will depend on the type of cash-out refinance loan they’re interested in, as well as their credit, income, and overall financial situation.
• Minimum credit score for cash-out refinance is typically 620, though a higher credit score is recommended to qualify for the lowest rates. 
• Maximum and minimum loan amounts are not disclosed for PennyMac cash-out refinancing.
• Loan terms can range from 15 to 30 years, depending on the loan product a borrower chooses.

How to Apply for PennyMac Cash-Out Refinance Loans

Borrowers can apply for cash-out refinancing through PennyMac online. The first step is getting an instant rate quote. 

There’s some information PennyMac needs to create a quote, including:

• Current mortgage amount
• Estimated home value
• Zip code where the home is located
• Desired cash-out amount
• Estimated credit rating

After entering those details, borrowers get quotes that include the loan term, monthly payment, interest rate, annual percentage rate (APR), and estimated monthly payment. From there, borrowers can start the application process online or call PennyMac to discuss the quote details over the phone.

Some of the information needed to apply for cash-out refinancing include:

• Social Security number
• Household income documentation
• Information about the existing mortgage
• Estimated home equity

When the initial application is submitted, PennyMac may request additional documents such as tax returns, pay stubs, copies of property tax bills, homeowner’s insurance policies, and a professional appraisal. 

PennyMac Expert and Consumer Ratings

The 2021 JD Power U.S. Primary Mortgage Origination Survey gave PennyMac a customer satisfaction rating of 827 on a scale of 1,000 points. That puts it below the industry average rating of 851.

We compared ratings and reviews for PennyMac online to get an idea of how the company measures up against the competition. Our star ratings are based on both expert and consumer ratings selected from 10 different sources. 

According to our analysis, we determined that PennyMac has an average rating of 4.0 stars (out of five). While this rating is not an exact science, it does offer a snapshot look of what borrowers can expect from PennyMac. 

Pros of PennyMac

• PennyMac offers a variety of mortgage loan products, including purchase loans and refinance loans. 
• PennyMac makes applying for a loan online as easy as possible; it’s even possible to see custom quotes before applying. 
• Overall, PennyMac has a strong 4-star rating among both expert and consumer reviews, suggesting that it has a good reputation among mortgage lenders overall.

Cons of PennyMac

• PennyMac no longer offers HELOCs, though homeowners can still apply for a cash-out refinance loan. 
• PennyMac does not offer mortgage loans to New York residents. 

PennyMac Alternatives

Don’t see what you want here? Other lenders offer home equity products that might be better for you. Remember to compare programs and pricing to get a good deal.