Can I get a HELOC without appraisal requirements?

Home equity financing is a valuable tool that provides homeowners with an affordable source of funds. However, tapping into the equity in your home is not without its disadvantages – and the slow and sometimes expensive appraisal process is one of them. If you are looking into home equity lines of credit (HELOCs), you may be wondering, “Is there a HELOC without appraisal requirements?”

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We’ll go over everything you need to know about getting a HELOC (without appraisal) and take you through some HELOC alternatives. 

Can you get a HELOC without an appraisal?

Home appraisals are a key part of the HELOC application process for a reason – an appraisal is the most accurate way to determine the market value of your home. An accurate home valuation (together with your current mortgage balance) helps your lender determine the amount of equity you have – and thus, how much they can lend you. 

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Most traditional lenders, such as credit unions and banks, will require an appraisal outside of a few specific situations. However, homeowners today have numerous non-traditional options. Your bank may waive the appraisal requirement in the following circumstances: 

You’ve had a full appraisal performed recently 

If you got your own appraisal done prior to starting the HELOC application process, or had an appraisal done while applying for a different loan, your lender may be able to accept this appraisal instead of ordering a new one. Your appraisal will have to be fresh – no more than 60 to 180 days ago, depending on your lender’s policies. 

You have an excellent credit score 

Borrowers with an excellent credit score (750 to 800, minimum) generally face an easier road when it comes to applying for any kind of financing. HELOCs are no exception. Some lenders may be willing to waive a full appraisal in favor of an automated valuation model (AVM) for borrowers with excellent credit – particularly if the next section also applies. 

You’re looking for a smaller loan amount

Requested loan amounts have a big impact on the utility of a full appraisal. If you live in an area with a strong housing market, have paid off a good chunk of your existing mortgage, and are looking for a HELOC that is under $100,000, your lender may not require a full appraisal. The main purpose of an appraisal is to ensure that you don’t end up underwater on the obligations tied to your home – a smaller loan amount minimizes this concern. 

What types of HELOCs don’t require an appraisal at all?

Some HELOC lenders do not require an appraisal for any of their applicants. Online HELOC lenders, such as Figure, rely entirely on AVMs for all of the homes they evaluate. This allows for a much faster turnaround time, but tends to come with more stringent requirements. If you have a great credit score and plenty of home equity, this could be a good option for you. 

Types of HELOC appraisals

Different lenders require different types of appraisals – from AVMs to full appraisals. Let’s cover the main kinds. 

Full appraisal

A full appraisal is the most traditional – and thorough – appraisal on the market. Many lenders prefer this type of appraisal due to its accuracy. This is the most common type of appraisal. 

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Process

• A licensed, independent appraiser comes to your home to inspect it, inside and out. 
• Using a combination of their findings from the appraisal, home values in your neighborhood, public records about value-adding renovations, and recent sales in the area, the appraiser arrives at an estimate of your home’s value. 

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Accuracy and cost

• This is the most accurate type of appraisal, as it takes your home’s condition, any additions you’ve done over the years, and the particulars of your neighborhood into account. 
• It’s also the most expensive – licensed professionals don’t work for free.
• Appraisal cost varies based on area and current demand, and can range from $350 to $800, which generally comes out of your loan proceeds. 

Drive-by appraisal

A drive-by appraisal is a less-expensive (but less thorough) version of a full appraisal. Some lenders use this type of appraisal to keep costs down and increase efficiency. 

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Process

• The appraiser examines the exterior of your property, evaluating its condition, curb appeal, and any visible damages. 
• This information, combined with public records about your home and recent sales of comperable properties in the area, forms a basis for your home’s valuation. 

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Accuracy and cost

• Because this type of inspection uses less of an appraiser’s time, it is significantly cheaper than a full appraisal – often in the $100 to $150 range. 
• However, a drive-by appraisal will not take the condition of your home’s interior into account – that means your brand new furnace or freshly-redone kitchen cabinets will not count in your favor. 

Hybrid or desktop appraisal

With hybrid and desktop appraisals, the licensed appraiser never has to leave their desk. Most lenders will not accept this type of appraisal. However, lenders may make an exception for remote areas where a licensed appraiser would have to travel too far.

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Process

• The appraiser looks into recent sales for comparable properties and public records about your home to determine your home’s value. 
• With a hybrid appraisal, a representative (such as a real estate agent) takes some photos of the home for the appraiser to include in their desktop appraisal. 
• A full desktop appraisal may not involve any up-to-date photos of your home at all – just what is available on the MLS. 

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Accuracy and cost

• Because this type of appraisal may not include any information about the current condition of your home, it is likely to be far less accurate. 
• These appraisals can cost from $75 to $400 – with full desktop appraisals at the bottom of the range, and hybrid appraisals at the top. 

Automated valuation model (AVM)

AVMs take the human out of the equation and rely on technology to determine the value of your home. This type of appraisal is most often accepted by online lenders such as Figure, rather than traditional banks. If you’ve ever checked your home’s value on Zillow, you’ve already used an AVM. 

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Process

• An algorithm uses inputs about your property and its surrounding properties to determine the value of your home. 
• Factors like cost per square foot in your area and recent sales of comparable homes are taken into account. 

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Accuracy and cost

• This is by far the cheapest option – often completely free to the borrower, or with a marginal cost of $10 to $15. 
• However, an AVM cannot take your property’s condition or any recent improvements you have made into consideration. 
• This can result in your home value coming in too low if you have renovated recently, or coming in too high if there are any maintenance issues with the property. 

No-appraisal financing alternatives

If you are determined to avoid any type of valuation of your property, you may want to consider one of the following financing types instead of a HELOC. 

Contractor financing

If your plan is to use your HELOC for a home renovation project, you can check if your contractor offers direct financing. Make sure to thoroughly understand the terms and requirements of this type of loan, as they can vary greatly. 

FHA Title 1 Home Improvement Loans

If you are a lower-income homeowner, these government-backed loans may be able to help you with your financing needs. FHA loans come with a strict cutoff ($75,000) and may only be used for select purposes. 

Personal loans

A personal loan provides unsecured financing, meaning it has no connection to the value of your home. If you are looking for a smaller loan amount, or a faster turnaround time, a personal loan may be a good option – although the rates tend to be higher than those for a HELOC. 

Credit cards

While credit cards come with high interest, there are circumstances where using a card can make sense. Many credit card companies offer promotional periods with reduced (or even zero) interest. If you have the means and discipline to pay down your balance during the promo, this can be a convenient option.  

Frequently asked questions

Do you need an appraisal for a HELOC?

While most lenders require an appraisal for a HELOC, some lenders may rely on an automated valuation model (AVM) to determine home value. This is generally cheaper and faster than a conventional appraisal. 

What disqualifies you for a HELOC?

In order to qualify for a HELOC, you need a good credit score (680+), a strong income, and sufficient equity in your home. You can check your potential HELOC eligibility using this free calculator.

What is the monthly payment on a $50,000 HELOC?

The monthly payment on a $50,000 HELOC depends on your rate, as well as whether you are in the draw or the repayment phase of your HELOC. You can use this free spreadsheet calculator to estimate your monthly payments. 

How much does it cost to get an appraisal for a HELOC? 

The cost of an appraisal for a HELOC will vary greatly depending on the type of appraisal, the demand for appraisers, and your geographic area. These costs will generally come out of your loan proceeds. Some estimated rangers: 

• ‍Full appraisal: $350 - $800‍
• Drive-by appraisal: $100 - $200 ‍
• Desktop appraisal: $75 - $200‍
• Hybrid appraisal: $250 - $400‍
• Automated valuation model (AVM):  $0 - $10

Final thoughts

Homeowners looking for a HELOC without appraisal requirements have options. However, if you find that a HELOC is not the best fit for your needs, you may wish to consider a Home Equity Investment (HEI) from Point. HEIs have no income requirements and no monthly payments, making them a flexible solution that enables you to optimize your cash-flow. 

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