How to get a HELOC

If you're in need of some extra cash there are multiple options to choose from, from credit cards to personal loans to cashing out your existing life insurance policy. For homeowners, the best resource they may have is the home they already live in. 

Homes with just minimum equity can be effectively utilized as cash. And it usually comes with much lower interest rates than other traditional forms of credit. Homeowners can turn to cash-out refinancing or reverse mortgages. They can also consider a home equity loan or a home equity line of credit (simply known as a HELOC).

If you think you could benefit from taking out a HELOC then start exploring your options here now or use the table below to check your eligibility.

How to get a HELOC

Obtaining a HELOC is relatively simple. Here's how the process traditionally works.

Build as much equity as possible

While you generally need at least 15% equity in your home, the more you have the more you can potentially withdraw. Most lenders will cap a home equity line of credit at 80% of your home's equity but some lenders may go above that figure. 

If you know that you will eventually want to borrow from your home then start building as much equity as you can as soon as possible. This may mean making additional mortgage payments (switch to paying bi-weekly) or using extra funds (like a tax refund) to pay down your mortgage principal quicker. It can also mean striking while the iron is hot and taking out a HELOC when home values are high and your equity has grown with it.

You can check your HELOC eligibility here now or use the table below to get started.

Improve your credit score

As with almost all financial products and services, the best terms and rates will be reserved for those with the highest credit scores. So, if your score could use some help don't delay and get working on improving it now. Pay close attention to any outstanding debts that you can potentially pay off or pay down. And make sure you're making payments to existing loans on time. Do your best to also limit hard credit inquiries and keep your debt-to-income ratio as low as possible. 

Shop for lenders

While you may think you have to use the lender you already have your mortgage with, that's not always the case with a HELOC. It may be easiest to keep your business under one umbrella but don't hesitate to first shop around. Different lenders and institutions offer different rates and options so do your homework before signing on the dotted line. It's possible that you'll get the lowest interest rate with your current bank but it's also possible that you may find a better offer somewhere else. Use the table below to start shopping HELOC options by zip code today.

Pick the lender

Once you've done your research on lenders and rates you'll have to pick a lender. Understand that the process will look different if you elect to remain with your current lender versus proceeding with a new one. That doesn't mean that you shouldn't still go with the best option, just know that it may be a bit more of a process than if you got a HELOC with the same bank that initially approved your mortgage.

Complete the application

If you remember the mortgage application process then you already know what to expect with a HELOC. While not as arduous as getting your first home loan, you'll still be expected to provide all of the following (if not more):

• Your full name, address and Social Security number
• Government-issued ID (a valid driver's license or other state-issued identification)
• Employment details (annual income, employer name, etc.)
• Credit score and history (you'll be expected to sign off on a credit check)

Don't forget

While HELOCs may be advantageous compared to other forms of credit, it's still credit that you're taking out. So be smart about it and use it carefully. Read the terms and conditions so you know exactly what you're getting into. Fortunately, with a HELOC, you don't need to use the precise amount you're approved for so don't feel obligated to max it out. And if you use it for IRS-approved home repairs and renovations, you may be able to deduct it from your taxes once tax season comes around.