Home Equity

HELOC Process: How Long Does It Take to Get a HELOC Loan?

July 27, 2023

Looking to enlarge a master suite, pay off high-interest credit card debt, or fund medical needs? A home equity line of credit (HELOC) is a flexible loan option to cash in on equity for homeowners who need a substantial line of credit.

While you can sign up for a new credit card with a single form, however, HELOCs involve a few more steps before you’ve got a pool of funds you can draw from. This includes an understanding of your monthly payment, the loan amount, and potential closing costs associated with the HELOC.

So how long does it take to get a HELOC loan? And if your financial need is urgent, do you have time to make it through the HELOC process? Let’s break it down.

What is a HELOC?

So, what is a HELOC, and how does a HELOC work? A home equity line of credit is a secured credit pool with a set loan amount where you can draw on the amount you need and pay back only what you actually borrowed. The functionality is similar to a credit card, except that with a HELOC, you have a specific draw period (usually five to 15 years, though 10 is most common), rather than an ongoing line of credit.¹

Another difference between credit card accounts and HELOCs is that the latter are secured debts. A company will offer you a credit card with a limit and an interest rate relative to your credit history and demographic information. A HELOC, on the other hand, is a loan backed by your property (like a traditional home equity loan).

Your HELOC lender will evaluate your DTI ratio (debt-to-income ratio) as well as your credit history. Remember, even if you have been denied a HELOC in the past due to poor credit, it’s still possible to get a HELOC with bad credit, although the HELOC rate might be higher.

So, is a HELOC a good idea? What you need to know:

HELOCs are secured by property—so you risk foreclosure if you don’t pay it back
Their interest rates tend to be lower than credit cards and personal loans
You don’t start repaying the debt principal until the draw period is done
HELOCs are typically variable-rate loans with slightly higher rates than home equity loans
You can usually borrow up to 85% of equity (current value minus remaining mortgage)²

The Timeline for Getting a HELOC

An expedited HELOC process can be as little as a week to 10 days, but that is out of the norm.³ Most borrowers wait between two to six weeks after submitting their application for an active HELOC.⁴

To get to the application stage, follow these steps:

Determine the amount of credit to secure
Check your credit score and clean up any credit report errors
Shop around to compare interest rates and terms
Gather your property, mortgage, and income records
Apply for a HELOC with your chosen lender

Once your application is submitted, the HELOC lender will review your information and:

A loan officer will reach out and request documents to verify your income
An underwriter will complete an initial credit decision and offer
The lender will arrange for an independent appraisal

Once this is complete:

Your lender will send you a final determination, offer, and closing time
Review, sign, and return the documents to close on the HELOC

How to Speed Up the HELOC Process

Need to get it done faster? There is some prep work and key decisions along the HELOC process that can pare down the time:

Work with a lender such as a credit union that you have an established relationship with
Let your loan officer know if you’re on tight schedule and ask for their help
Prepare all necessary documents in advance
Choose a lender that doesn’t require a home appraisal
Have the co-owner with the best credit apply individually instead of applying jointly
Be available to schedule the first appraisal time available

Alternatives to HELOCs

A home equity line of credit isn’t the only option in town. Whether you’ve already leveraged your equity, have a challenging credit history, or want to reduce rather than grow your debt load, consider these options:

Credit card
Personal loan (either unsecured, or secured by property other than your home)
Cash-out refinance
Traditional home equity loan (AKA second mortgage)
Sale-leaseback program—a debt-free alternative

Choosing the Right Solution for Your Needs

Converting equity to cash is one of the best advantages of homeownership. It can help you pay less in interest on loans and obtain cash for critical and strategic needs that benefit your ability to build wealth and avoid predatory lending schemes.

Before you commit to a specific course of action, be sure to start by defining your needs, goals, and resources.

If you want to make your equity work for you while remaining in your home, a sale-leaseback program, also known as a rent-back agreement, is a viable alternative to taking on new debt. There are many sale-leaseback benefits to know about. It combines a home sale with a lease agreement that locks in an affordable monthly payment and limits on future rent increases. Plus, it frees you up from the cost of homeowners insurance, property tax, and covered repairs and maintenance.

Key Takeaways

You can expect a two- to six-week timeframe to close on a standard HELOC.⁴ To speed up the process, make sure your paperwork is in order and consider selecting a lender that doesn’t require an appraisal.

Before you get the ball rolling, back up and consider all the loan-based and debt-free options for leveraging your home equity, and decide what will best help you reach your goals.

This article is published for educational and informational purposes only. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process.

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