How long does it take to get a home equity loan?

It can take anywhere from 14 to 28 days for a lender to process and approve your application for a home equity loan. But keep in mind that the exact amount of time it takes varies depending on the lender, your financial situation and how quickly you can get the paperwork together.

Home equity loans and HELOCs are both ways to obtain cash while borrowing against the value of your home. But while HELOCs open up a line of credit for ongoing use, home equity loans offer a lump sum of cash — and tend to be approved more quickly.

What affects my approval time?

Several factors can affect the time it takes you to receive your funds, including:

• The application. Most applications require a copy of your current mortgage statement, property tax bill and proof of income. Keep these documents handy throughout the process.
• Verification. The lender takes time to verify the information you’ve provided, including your source of income. It’ll also probably check out:
  • Your credit score. If your credit score is weak, that could delay the process.
  • Your debt-to income ratio. To ensure you’ll be able to pay back the loan without hardship.
  • Property debt. It’ll likely run a title search to check for existing debt on the property.
• Home valuation. You’ll need an appraisal to verify what your home is worth. The lender typically assists with this.
• Closing. A notary will meet with you to sign, seal and deliver the documents. Some states require an attorney to be present for this part.

Can my credit score affect timing?

A low credit score could slow down the underwriting process, which is when lenders determine whether or not you’re eligible for a loan. If your credit score is between 620 and 700 on the FICO scale, it could signal that a more in-depth review of your financial history is required. A credit score lower than 620 may outright exclude you from being approved.

What documentation will I need?

Staying organized throughout the process will help speed things up. Documentation you might need to provide includes:

• Copy of the property’s deed
• Most recent pay stub
• Tax returns from the last two years

• Mortgage statement
• Trust agreement documents, if applicable

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How soon after approval can I receive funding?

Exactly how long it’ll take to get your money after approval depends on the lender. However, when your home is on the line as collateral, federal law allows you to cancel the loan within three days after signing the credit contract. So, typical turnaround time for the cash to hit your account is about four days.

Bottom line

Getting a home equity loan can take anywhere from two to four weeks, depending on a number of factors. And since your home is on the line, the process shouldn’t be rushed. Take some time to shop the market first to find the best fit for your situation.

Frequently asked questions

• Is a home equity loan tax deductible?

  Yes, the interest on a home equity loan is tax deductible — as long as you’re using the loan to fund home-related renovations. Couples can deduct interest on up to $750,000 of mortgage-related loans, while single people can deduct interest on up to $375,000.

  Be sure to keep your receipts along the way so you can prove your deductions were valid, in case of an audit.

• What are the benefits of a home equity loan?

  A home equity loan can be a good way to access cash for a major expense. Benefits include:

  • Long repayment terms. Most home equity loans have a repayment period of five to 10 years.
  • Lower rates. Depending on your financial situation, the annual interest rates can be lower for home equity loans than other types of loans.
  • Fixed rate. Compared to credit cards, whose rates can fluctuate heavily, home equity loans usually offer fixed rates so you can budget accordingly.
  • Lump sum. You can get a specific amount of cash all at once and make strategic plans for repayment.
  • Tax savings. The interest you pay on a home equity loan is usually tax deductible.

• What’s the difference between a home equity loan and a HELOC?

  While a home equity loan issues a lump sum payment into your bank account, a home equity line of credit (HELOC) lets you borrow against the value of your home as needed up to a certain amount.

  Compare the pros and cons of HELOCs and home equity loans before signing any dotted lines.

• How much does it cost to close a home equity loan?

  Typically, a lender will charge between 2% and 5% to close, which helps cover attorney fees and the costs associated with filing, preparation and valuation.

  If your loan is for $75,000, for example, you could end up paying $1,500 to $3,750 in closing fees.