Well, it’s official, there’s a new mortgage player in town, and they go by a familiar name, “Discover Home Loans.”
You may have heard a while back that the credit card issuer was getting into the mortgage game, and now their operations are officially live.
And despite a brief exit from the mortgage space back in 2015, they continue to offer both mortgage refinance loans and home equity loans.
Even better, they don’t charge an application fee, origination fee, or appraisal fee, and $0 is due at closing.
What Does Discover Home Loans Offer?
- Rate and term refinances
- Cash out refinances
- Home equity loans
- Terms of 10, 15, 20, and 30 years
- Loan amounts range from $35,000 to $300,000
Discover Home Loans offers both mortgage refinances and home equity loans.
As far as the refinance option goes, it can be either a rate and term refinance and cash-out refinance, the latter allowing you to tap home equity. And they allow you to borrow up to 90% of your property value.
Their home equity loans can be in the first lien or second position, meaning you can take one out if you have a property that is free and clear. Or you can add one behind your first mortgage as a second mortgage.
They do not offer home equity lines of credit (HELOCs), which differ from home equity loans for a variety of reasons.
The main distinction is a HELOC is a line of credit and a home equity loan is a lump sum you receive at closing.
And while they have a limited loan menu, they do offer a variety of loan terms, including 10, 15, 20, and 30 years.
So if you want to pay off your mortgage earlier to avoid interest, it’s an option. Or if you want to slow repayment to keep monthly payments lower, it’s also an option.
You’re looking at run-of-the-mill conventional mortgages, along with home equity loans only. The good news is these are the most common types of loans available.
Loan amounts are limited to $300,000, meaning they also do not offer jumbo loans.
What Makes Discover Home Loans Unique?
Well, they claim to have a streamlined application process, meaning it should be easy to apply and get approved for your mortgage.
You can start the process online by putting in some basic information, and then a Discover “mortgage banker” will call you back. That same mortgage banker will be with you from start to finish.
Additionally, they allow you to securely upload documents and check the status of your loan 24/7, via their home loan lending website.
They also consider themselves the top home equity loan lender in the U.S., based on total dollar amount and number of loans, per 2022 HMDA data.
Another perk is that they don’t charge any fees, including $0 application fee, $0 origination fee, and even $0 appraisal fee. We’re talking nothing due at closing.
However, if you pay off your loan balance in full within 36 months of loan closing, you will be required to reimburse Discover for some of the closing costs paid on your behalf, not to exceed $500.
This can include title and recording fees, and mortgage transfer taxes. But if you reside in Connecticut, Minnesota, New York, North Carolina, Oklahoma, or Texas, you’re exempt.
Simply put, Discover isn’t going to change the mortgage world as we know it. Nor do they seem interested in becoming one of the top players beyond the home equity loan space.
Note: If you aren’t charged closing costs, the fees might be baked into the interest rate. In other words, the rate could be higher to compensate. So be sure to shop around and compare both rate AND fees.
Discover Home Loans Rates
The all-important question…and really the only one most people care about, their mortgage rates.
I took a look at their rates online, and they’re currently advertising fixed rates starting at 7.24% APR for first liens and 8.24% APR for second liens.
But the APR can range between 7.24% APR and 11.44% APR for first liens and 8.24% APR and 13.99% APR, depending on loan scenario specifics.
For example, those with lower credit scores and/or higher loan-to-value ratio (LTVs) may be offered higher rates.
Conversely, the lowest APRs may be offered to borrowers requesting at least $50,000 for a second lien or $35,000 for a first lien, assuming excellent credit.
So be sure to test out different loan amounts to see how it might affect the interest rate offered.
As noted, they don’t charge fees but you need to pay special attention to the rate to ensure it isn’t higher to compensate for that lack of fees.
Many home equity lenders do not charge closing costs. But still take the time to gather a few quotes as rates can vary considerably.
Where Does Discover Home Loans Do Business?
Currently, they appear to offer mortgages and home equity loans in 48 states, along with the District of Columbia. In the past, they weren’t available in New York or Utah.
Now they don’t appear to offer home lending services in the states of Iowa or Maryland.
Last year, Discover Home Loans originated about $2 billion in mortgages and home equity loans, with an average loan amount of about $100,000.
They were most active in the states of California, Florida, and Texas.
The company is headquartered in Lake Zurich, Illinois and relies upon a 100% U.S.-based customer service team.
Additionally, they are available seven days a week to help process and fund loan applications. Hours are weekdays from 8am–Midnight ET, and weekends from 10am–6pm ET.
This compares to the typical mortgage company that generally only operates Monday through Friday from 8-5pm.
Discover Home Loans Reviews
Now let’s talk about customer service. While they pride themselves on being easy to use and available day and night, the customer experience seems to leave a bit to be desired.
On the Better Business Bureau (BBB) website their parent company has a rather poor 1.18/5-star rating from about 350 customer reviews. However, this may include their credit card business as well.
And despite the poor reviews, they still maintain an ‘A+’ BBB rating based on customer complaint history.
They also have a 1.1/5 rating over at ConsumerAffairs from just over 20 reviews. Not a large sample size, but not a great score either.
Of course, YMMV. I have been a Discover credit card customer for years and they have always provided excellent customer service.
So hopefully that extends to their mortgage/home equity business as well. Though mortgages do tend to be more complicated than credit cards, meaning expectations may need to be adjusted lower.
To summarize, Discover Home Loans is mostly focused on home equity loans and refinances and is best served for borrowers with straightforward loan scenarios. In other words W-2 borrowers with owner-occupied, single-family homes.
They seem to be easy to work with, though their customer reviews warrant some questions.
If you are self-employed, a real estate investor, or have a more complex financial situation, you might be better-suited going elsewhere for your mortgage needs.
Discover Home Loans Pros and Cons
- Do not charge any lender fees
- $0 due at closing
- Advertise their mortgage rates on their website
- Allow CLTVs up to 90% of property value
- Can apply for a loan online or by phone
- Free mortgage calculators, how-to guides, and glossary online
- U.S. based customer service available seven days a week with extended hours
- No physical branches
- Limited loan menu (mortgage refinances and home equity loans only)
- Do not offer home purchase loans
- Loan amounts limited to $300,000
- Minimum FICO score of 620
- Aren’t available in Iowa or Maryland
- May charge up to $500 in recouped fees if loan paid off within 36 months