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Cash-out refinancing, all the rage in 2021, is out of the limelight this year as rising interest rates render them an unpopular choice among borrowers. In its place, the star borrowing option in 2022 is the home equity line of credit, or HELOC for short. HELOCs may be an option for homeowners seeking a lump sum of cash at relatively low interest rates.
Unfortunately, getting approved for a HELOC can be a weekslong process. If you can't wait that long, exploring other ways to borrow might be best. Let's dive deeper to understand how long it takes to get a HELOC and how you may be able to speed up the process.
How Quickly Can You Borrow a HELOC?
Generally, it takes about two to six weeks to borrow a HELOC, from submitting your application to receiving your funding. Of course, your time frame may be shorter or longer, depending on how quickly you can provide your lender with the required information and documents.
Your lender's underwriting and processing time frame will also significantly affect how fast you can finalize your HELOC. For example, Navy Federal Credit Union estimates it could take 60 to 75 days to close on a HELOC due to heavy application volume.
As a general reference, your time frame for obtaining a HELOC loan may look something like this:
1. Gather Your Documents.
The application process may go smoother if you have the following information on hand:
- Driver's license or state ID
- Social Security card
- Banking and investment statements
- Income amount, including pay stubs, W-2s/1099s and tax returns
- Bank and investment statements
- Mortgage statements
- Home appraisal
- Home purchase date and price
- Date home was built
- Current property tax information
- Homeowners association dues
- Insurance information
- Information on any liens
While you can gather most of this information fairly quickly, some documents may require more time. For example, you may need to schedule a certified appraiser to inspect your home and provide an estimated property value. While an appraiser can inspect your entire home in a few hours, it could take another one to two weeks for your appraiser to research comparable properties and prepare a detailed report. Not all lenders require a home appraisal, so check with your lender to make sure you understand their requirements.
Estimated completion time: 14 days
2. Submit Your Application
With your information and documents from the previous step readily available, you should be able to complete your application within one day. Once complete, a lender representative may contact you to discuss your application within three business days.
Your lender may advise you which documents they need, and you should send them immediately to ensure the process proceeds smoothly.
Estimated completion time: Three days
3. Underwrite Loan
Next, the underwriting process begins, which simply means the lender will review your creditworthiness to determine your eligibility for a HELOC. Your eligibility will depend on several factors, such as your income, credit score, and debt-to-income (DTI) ratio. Be aware that the underwriting process could take up to a month to complete.
Estimated completion time: 30 days
4. Close on Your Loan
Once underwriting is complete, it's time to close your loan. You'll meet with your lender, sign loan documents, and schedule the funding of your loan. Your loan should close within one week.
Estimated completion time: Five business days
In this example, your loan would close in 52 days, or roughly seven and a half weeks.
It's worth noting, the day after you close on your HELOC loan, you'll have a three-day rescission or "cooling off" period, during which you can cancel your loan if you change your mind. After the rescission period ends, the account will be active and funds will be available to you four days after closing your loan.
What Can You Do to Speed Up the HELOC Process?
If you need faster access to a HELOC, consider taking the following steps to accelerate the HELOC process:
- Shop HELOC lenders for faster timelines. Since underwriting and processing times vary by lender, shop and compare multiple lenders to find a lender with a faster timeline. Of course, you'll want to ensure you're also getting a low interest rate with a low monthly payment. Remember, HELOCs come with variable interest rates so your rate can increase over time.
- Look for a lender that doesn't require a home appraisal. As mentioned, a home appraisal from a certified appraiser could take weeks to complete. Fortunately, many lenders use an automatic valuation model (AVM) that can use algorithms that analyze the market. An AVM can instantly produce an estimated home value, saving you considerable time. As you shop HELOC lenders, look to see which ones offer an AVM before you apply.
- Don't apply with a co-applicant. If time is a priority, you might consider applying for a HELOC in your name instead of co-borrowing with a spouse. With another person on the loan, the lender will need additional time for underwriting and processing.
- Have your documents in order. Lenders need time to check documents that support the information you enter on your application. For example, they'll want to see recent pay stubs to confirm your earnings. You could speed up the process by scanning your documents and attaching them to your online application rather than sending them via regular mail.
What Are Faster Borrowing Options?
If you don't want to take out a HELOC, or if the time frame to obtain one is too long, you might consider faster borrowing options. Cash-out refinances and home equity loans have their benefits, but with interest rates rising, they may not be your best options.
Personal loans and credit cards can give you faster access to funds, but they may not come with the same perks as a HELOC. Review the chart below to see how a HELOC compares with personal loans and credit cards as a borrowing option.
| HELOCS | Personal Loans | Credit Cards | |
|---|---|---|---|
| Function | Offers a line of revolving credit with potentially large limit. | Offers a lump sum upfront that is repaid in monthly installments. | Offers access to revolving credit with a credit limit. |
| Interest rate | Low but variable interest rates that can rise | Fixed or variable interest rates. The current average interest rate is 8.73% for a 24-month loan. | Nearly all credit cards offer variable interest rates. Current interest rates average 16.65%. |
| Collateral requirement | Secured by home | No collateral needed | Unsecured and secured |
| Typical purposes | Often used for large purchases or home renovation projects. | Often used for large purchases or to consolidate credit card debt. | Often used for shopping, everyday shopping and rewards. |
| Borrowing limits | 60% to 85% of home's value, minus mortgage balance | Range from $100 to $100,000 | Varies. The average credit card limit was $30,365 in 2020. |
| Funding timeline | Line of credit available after two to six weeks or longer | Loan approval and funding between one and six business days | Can take up to 14 days to receive credit card |
Check Your Credit for Better Borrowing Options
Whether you decide to get a HELOC or an alternative option, your credit can impact your odds of approval as well as the interest rates you'll receive. You can check your Experian credit report and credit score for free to see where your credit currently stands and what actions you might take to improve it.