How long does it take to cash out your home equity?

"How long does a home equity loan take? How long does it take to get a HELOC approved?" These questions often linger in the minds of homeowners interested in tapping their home's wealth. If you're in the market for a home equity option, you may be wondering how long it will take to meet your goals.

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This post will explore various products, help you recognize the stages of the application process, and strategies to expedite each step so you can streamline your way to funding. 

Home equity application timelines

Unlike a personal loan, home equity financing takes a few weeks rather than days. However, longer repayment terms, higher loan amounts, and more competitive rates are worth the wait.

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Whether you're considering a HELOC or home equity loan, the process of tapping into your home's wealth works similarly across the various equity solutions. After submitting your loan application, you'll go through the underwriting process, where a lender will assess your eligibility. The approval process involves verifying your income, evaluating your creditworthiness, and completing an appraisal of your home's value.

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Despite this, timelines for getting your cash in hand can vary greatly. The range typically depends on the lender's workload, the requested loan amount, and the complexity of your application. Here's an overview of funding timelines for each financial tool:

Home equity loan

A home equity loan allows you to borrow a lump sum of cash upfront. Repayment involves regular monthly payments over a set term, 5-30 years, often with a fixed interest rate. ‍

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Requirements to qualify for a home equity loan:

• A combined loan-to-value ratio (CLTV) of 80-85% or lower.
• A credit score of 620 or higher.
• A debt-to-income (DTI) ratio of 43% or lower.

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How long does a home equity loan take?

From starting your home equity loan application to getting funded, it typically takes two to four weeks.  

Home equity line of credit

A home equity line of credit (HELOC) is a more flexible form of borrowing that gives you access to a revolving line of credit. You can borrow as much as you'd like during the draw period, typically 5-10 years.  

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Once the draw period ends, the repayment period begins, and your balance turns into a principal-plus-interest loan. You'll have monthly payments over what is typically a 20-year term, with variable interest rates.

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Requirements to qualify for a HELOC:

• A CLTV no higher than 80-85%.
• A credit score of 680 is usually preferred.
• A debt-to-income ratio of 43% or less

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How long does it take to get a HELOC?

From applying for a HELOC to HELOC funding, you can expect a two to six-week wait.

Cash-out refinance

A cash-out refinance replaces your existing mortgage with a new, larger loan, letting you pocket the difference in cash. Refinancing typically results in a new mortgage with a new interest rate and repayment terms. Your financial health and current market conditions determine the rate. 

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Requirements to qualify for a refinance: 

• A CLTV of 80% or less.
• A credit score of 620 is usually preferred. 
• A debt-to-income ratio of 45% or less

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How long does a refinance take?

The typical time frame from application to funding is six to eight weeks.

Home Equity Investment

A Home Equity Investment (HEI) allows you to access a lump sum of cash in exchange for a share of your home’s future appreciation. HEIs offer 30-year repayment terms. Instead of monthly payments, your investment is due at the end of the term — though you can buy back your equity at any time. 

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Requirements to qualify for an HEI:

• A maximum LTV of 70%. 
• A credit score above 500. 
• The required debt-to-income ratio varies by individual FICO score.

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How long does a Home Equity Investment take?

Timelines can vary from provider to provider, but it can take anywhere from four to eight weeks. 

Tips to speed up the process

Whether you're going through the home equity loan process or any other financing process, you can help your lender streamline your application. By implementing these tips, you can maximize efficiency and accelerate the home equity application process — bringing you one step closer to achieving your financial goals.

Have your documents organized and ready

Ensure you have all the documents you'll need — plus any you think you’ll need — before submitting your application. For example, if your income is on the lower end but you freelance on the side, you’ll likely want to provide proof to increase your chances of approval.

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Having these documents readily available will facilitate a smoother application and help you avoid delays. While specific requirements may vary depending on the lender, here's a general overview of the records commonly requested:

• Proof of income: This typically includes recent pay stubs, W-2 forms, or tax returns if you're self-employed.
• Property documents: You'll need to provide documents such as a property deed, a recent mortgage statement, and proof of sufficient homeowners insurance.
• Identification: A government-issued ID such as a driver's license or passport is usually required.
• Debt information: Details on existing debts, such as credit cards, auto loans, or other mortgages, may be required.

Revisit your finances

From teetering on the brink of eligibility or poor credit history to a home home title with liens, some situations can make your home equity application more complex. These scenarios cause lenders to spend more time reviewing your case. You can reduce speedbumps by ensuring your financial health is in good order.

• Credit score: Maintain a healthy credit score by paying bills on time, keeping credit card balances low, and monitoring your credit report for any errors. If needed, take steps to boost your credit score prior to applying.
• Debt-to-income ratio (DTI): Lower your DTI by paying off existing debts — even smaller accounts are good wins. If you hope to use equity financing to consolidate debt, this may be harder to accomplish. Instead, consider increasing your income, even if for a short time.
• Loan-to-value ratio: Improving your LTV ratio can make you a more attractive borrower. You can boost your equity (and LTV) by paying down more of your mortgage or exploring budget-friendly renovations. It's also important to have a well-maintained home to ensure your home appraisal returns favorably.  

Compare lenders

Take the time to research and compare lenders — balancing factors such as loan terms and fees with time to funding. It’s completely within your right to ask for more information about the time to fund and your unique situation.

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Although banks and credit unions are traditional lenders, you should also consider taking advantage of online lenders. The online process typically allows faster document submission, automated verification processes, and quicker responses. So, in addition to eliminating the need for in-person visits or paperwork delays, you can also enjoy the convenience of applying from the comfort of your home.  

Respond to requests from your lender promptly

You have the power to move your application process along faster by providing any information and documents your lender requests in a timely fashion. Monitor your email inbox for messages from your representative or MLO, and make sure you always provide the correct documents using the correct upload method.

Final thoughts

You've worked hard to build up the equity in your home, and you deserve to leverage it for your next big dream or renovation project. If you're on a tight timeline, while patience is a virtue, proactive preparation can help you streamline your way to funding. Whether you're going through the HELOC process or with another financing option, stay communicative.

If you're looking to access funds without the burden of monthly payments, consider Point’s Home Equity Investment. There are no income requirements or need for perfect credit. Prequalify today. 

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