Can you get a HELOC with a different bank?
If you're having trouble making ends meet, or you want to be prepared for potential cash needs in the future, you might consider opening a home equity line of credit (HELOC).
While you don't necessarily want to replace one financial challenge with another — e.g., taking on more debt via a HELOC in order to pay for unexpected expenses — sometimes HELOCs give homeowners the flexibility they're looking for to improve their overall financial situations.
For example, if you have a credit card balance from past spending that got out of control, you might be struggling to pay that off, especially with interest rates going up recently. So, opening a HELOC could give you access to cash to pay off that credit card debt. And keeping the credit line open could help if you want more access to cash down the road, such as to make home renovations.
The process of applying for a HELOC is relatively straightforward and you'll typically have multiple options to choose from. If you think you could benefit from taking out a HELOC then start exploring your rates and options here now.
Can you get a HELOC with a different bank?
Do you have to open a HELOC with the same bank or lender that you got your mortgage from? Typically, the answer is no.
"Your HELOC provider can be anyone," unless your mortgage provider has unusual loan terms, says Jon Bodan, president and founder of The Perpetual Financial Group and strategic financing advisor at Real Estate Bees. Or, it's possible that another lender wouldn't be willing to act as your HELOC provider, but these are uncommon situations.
Assuming that you can find another lender who's willing to work with you, then generally you're able to have one lender for your mortgage and a different lender for your HELOC. That's not to say that you have to separate these areas, but doing so might enable you to find a better offer.
Check your HELOC offers here now to learn more.
Why would you want to use a different bank for a HELOC?
Working with the same bank might be more convenient, but you also might find that other lending institutions offer more competitive HELOC terms. If you can get a lower interest rate on a HELOC with a bank that's not your mortgage lender, for instance, then you could save money over the course of the HELOC financing.
"Really, it comes down to the terms," says Bodan. "HELOC [rates] can vary substantially from place to place, so be sure you're getting a good deal on it."
It's also possible that your current bank has tightened its credit supply, or perhaps your credit conditions changed. So, maybe you qualified for a mortgage with a bank in the past but you're not eligible for additional funding through them. In that case, your only option for getting a HELOC might be to use a different bank or other types of lending institutions.
"Your credit score is very important," says Bodan. "Most places will not touch a borrower below a 680."
How would a HELOC work with a different bank?
If you got a HELOC from your existing bank, the process could potentially be more streamlined, since you already have a relationship with them. But for the most part, it works the same either way.
"It will really be about the same," says Bodan. "You'll have to do a full loan application, have your credit pulled, verify employment/income, and have some kind of appraisal done on the house — even if that is electronic or a desk appraisal that doesn't require an appraiser to physically visit you."
If you're approved, then your lender would open the HELOC and set up your access to these funds, such as by giving you a HELOC card, which can function like a typical debit card. From there, you might set up repayment, such as by initiating autopay online, much like you would for other types of borrowing.
Instead of having one lender for your mortgage and HELOC, you would have two. You might already be used to similar setups, like making mortgage payments to one bank and car loan payments to another lender.
The bottom line
Overall, getting a HELOC from another lending institution besides your current mortgage provider doesn't have to be too complicated. While it might be slightly less convenient to work with different lenders at times, the general experience is often similar. Plus, if you can find a lender that offers better HELOC terms than your current bank, that could be worth any extra steps you need to take.
That's why it often makes sense to shop around to see what different lenders offer. You might find that your current bank ends up being the best overall option for managing both your mortgage and HELOC, or you might find that you can get a better deal by working with two different lending institutions.
You might even find that other options, like a home equity loan, end up being a better fit. Still, borrowing against your home equity is a significant decision that comes with risk. Take your time exploring different routes to see what makes sense for your situation. Use the table below to explore some local options now.
