Understanding How Quickly You Can Get a HELOC After Buying Your Home
A home equity line of Credit (HELOC) is a type of loan where you open a line of credit against the equity in your home. Equity is the value of the home minus any outstanding mortgages or Loans. You can usually get a HELOC for up to 85% of the home’s fair Market value minus the mortgage amount.
HELOCs often have variable interest rates, which means they can fluctuate monthly. However, some lenders do offer fixed interest rate options. Typically, you can withdraw Cash from your line of credit for up to 10 years, during which you only pay interest on the loan. For the remaining 20 years, you repay the principal along with the interest.
There are various reasons why you might consider setting up a HELOC after buying your home, such as unexpected expenses like medical bills or seizing a business opportunity that requires upfront capital.
For a Home Equity Loan
A home equity loan is usually available within 30 to 45 days after purchasing a home. However, this timeline can vary depending on the lender and their specific requirements.
For a Cash-Out Refinance
Completing a cash-out refinance typically involves a six-month waiting period after moving into your new home. This waiting period allows the home to appreciate in value, providing more equity to draw from. This is beneficial since most homebuyers put down less than 20% initially, resulting in insufficient equity right after purchase.
How Soon Can You Expect Your Home to Have Equity That You Can Tap Into?
Unless you put down more than 20% when purchasing your home, you probably won't have enough equity in your home immediately after buying it to qualify for a HELOC. As you make mortgage Payments, your equity will grow. Additionally, your home may appreciate at around 3% per year, depending on your location.
The national average home Price is $217,698, meaning a 3% increase could add $6,530 in equity to your home annually.
When Should You Consider Getting a HELOC After Buying Your House?
There are several scenarios where getting a HELOC after purchasing your home might make sense:
- High-interest debt: A HELOC often has lower interest rates than credit card debt, making it a good option for consolidating and paying off high-interest debt.
- Home improvement projects: Use a HELOC to fund substantial home improvement projects that can increase your home's value.
- Cover unexpected expenses: In cases of unforeseen expenses, a HELOC can provide quick access to funds.
- Home repairs: If something goes wrong with your home and you don't have a warranty, a HELOC can help cover the repair costs.
When Should You Avoid?
While a HELOC can be beneficial in many situations, there are instances where it might not be the best option:
- Struggling to make mortgage payments: If you're already having difficulty making mortgage payments, taking out additional loans on your home could put your property at risk.
- Low refinance rates: If you can secure lower mortgage rates through a cash-out refinance, that may be a better option than a HELOC.
- Funds for home improvements: If you have resources to fund home improvements without a loan, it's generally better to avoid taking on debt.
Compare the Best HELOC Lenders from Benzinga’s Top Home Loan Providers
Explore the top HELOC lenders to streamline your loan shopping process and find the best option for your needs.
Support for Unexpected Expenses Shortly After Moving
Unexpected expenses can arise right after a move when finances are tight. A HELOC can provide a helpful financial tool to cover unforeseen costs during this transitional period.
Frequently Asked Questions
- Q: Can I get a HELOC after six months of home purchase?
A: Yes, in most cases, you can qualify for a HELOC after six months if your home has sufficient equity. - Q: How much equity do I need in my home to get a HELOC?
A: You typically need at least 20% equity in your home to qualify for a HELOC. - Q: How long does it take to get approved for a HELOC?
A: Getting approval for a HELOC usually takes two to six weeks. Plan ahead to ensure you have access to funds when needed.
