How quickly can you get equity out of your home?
Owning a home can be a great investment. And one of the benefits of homeownership is the equity that builds over time as the home's value appreciates and you pay down your mortgage. If you need funds for a major expense, such as to pay medical bills or make home improvements, you can tap into this equity in a variety of ways, often at rates that are considerably lower than other financing options.
That said, accessing your home equity isn't instantaneous. It takes some time to apply for a home equity product, get approved, complete all paperwork and close. To decide which option is best for you, it can help to know how long each one takes so you can weigh that against how soon you need funds.
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How quickly can you get equity out of your home?
How fast you can pull equity from your home depends on a number of factors, but the following are some general ranges to give you a starting reference point.
Home equity loan
One way to get equity out of your home is by taking out a home equity loan. With this type of loan, you borrow a lump sum of cash based on how much equity you have in your home. You then repay this amount over a specified period — typically five to 30 years — usually at a fixed interest rate.
Getting a home equity loan typically takes between two weeks and two months. But, as with other options on this list, the length of time can vary depending on your lender and how long it takes to submit your information, provide any follow-up documentation, get your home appraised and close.
Home equity line of credit (HELOC)
A home equity line of credit (HELOC) is another option to access your home equity. A HELOC works like a credit card, giving you access to a line of credit you can draw from as needed. You repay only the amount you borrow (typically at a variable rate), and payment doesn't begin until after the draw period, which typically lasts between 10 and 20 years.
Getting a HELOC usually takes two to six weeks.
Cash-out refinance
A cash-out refinance allows you to replace your existing mortgage with a new one that's higher than the amount you owe. The difference is given to you in the form of cash, which you can use for whatever you need. You'll pay the amount back at either a fixed or adjustable rate, depending on the product you choose.
The process of getting a cash-out refinance typically takes anywhere from 30 to 60 days from start to finish.
Reverse mortgage
A reverse mortgage is a loan available to homeowners age 62 or older. It acts like a cash advance — you're able to access your home equity now, and you'll pay it back using the proceeds from the eventual sale of your house. You can get reverse mortgage funds as a lump sum, line of credit or in monthly payments, and you don't need to repay the loan until you move out of the home or pass away.
The process of getting a reverse mortgage usually takes 30 to 60 days.
Selling your home
Finally, you can access your home's equity by selling your home. If you need a large amount of cash and you no longer want to own your property, selling your home may be a viable option.
However, depending on a variety of factors — including current market prices and buyer demand — selling your home can take anywhere from a few weeks to several months from the time you list it to the time you close.
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The bottom line
There are several ways to get equity out of your home, and each option has its pros and cons. The amount of time it takes to get funds is only one factor you should consider.
Whether you choose a home equity loan, HELOC, cash-out refinance, reverse mortgage or home sale, take the time to do your research and weigh all your options carefully. And don't hesitate to consult a financial adviser for guidance customized to your timeline, budget and needs.
