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Cash-out refinancing was all the rage during the low-rate environment of the pandemic, but with the current mortgage rates well past 5%, home equity lines of credit are now taking their turn in the spotlight.
A home equity line of credit, or HELOC, is a type of loan that lets you borrow against your home equity without touching your primary mortgage — which is why it’s commonly known as a second mortgage.
Compared to other ways of tapping into home equity, such as cash-out refinancing or home equity loans, HELOCs can offer relatively low rates and additional flexibility that many homeowners love. Because of this, they’re a good option for those who are seeking low-cost financing secured by their house, says Vikram Gupta, executive vice president and head of home equity at PNC Bank.
Be sure to compare quotes from multiple lenders to get the best HELOC rate.
The process to apply for and get approved for a HELOC can take a few weeks to a few months, but if you have sufficient equity in your home and good credit, it may be easier than you think. And while how much home equity you’ve built up will limit whether you can get a HELOC and how much you can borrow, there’s no strict time limit regarding how soon you can open a HELOC after you’ve closed on your new mortgage — so long as you’re prepared for the debt.
Here’s what to know about how long it takes to get a HELOC, and how to decide if you should get one.
How Soon Can You Get a HELOC After Buying Your Home?
If you’re looking to get a HELOC on your new house, you might not have to wait as long as you think.
“You can take out a home equity line of credit at the same time you take out your mortgage,” says Gupta. It’s called a “piggyback loan,” and can help extend your borrowing capacity. For example, a bank might be willing to lend up to 80% of the value of your home on a mortgage, and then lend another 10% in value at the same time in the form of a HELOC.
More commonly, borrowers look at HELOCs after they’ve already taken out their primary mortgage. But as long …….