How to Get Your Home Equity Line of Credit

How to Get Your Home Equity Line of Credit
  • Opening Intro -

    A home equity line of credit (HELOC) can provide much needed funds for homeowners, providing cash to update their homes and take on other important projects.


This type of financing was popular before the markets plunged in 2008, with countless numbers of homeowners “cashing out” their equity to sometimes purchase frivolous items.

The global financial collapse of 2008 made obtaining a new HELOC a challenge as banks tightened up their lending standards and restricted issuing new credit. Three years later lenders appear to be in a better mood to offer HELOCs provided that you have very good credit and a job.

The following are some steps to take if you are considering obtaining a home equity line of credit:

Contact your bank — Your current bank knows you and may be willing to extend a HELOC to you and at favorable terms. You may be able to negotiate a slightly lower rate based on your history with them and if you agree to have your checking out debited monthly for outstanding balances.

Shop around — Besides your bank, check with local competitors including community banks and credit unions. You may be able to obtain a lower rate or close on a loan with no closing costs.

Examine your terms — Credit lines may look the same, but there could be important differences. HELOCs have what is known as a “draw period” where borrowers can tap these funds for a certain amount of years. You’ll also have a certain number of years to repay your loan which typically goes for several years after the draw period comes to an end.

Supply documentation — Creditors will pull your consumer credit reports to determine your creditworthiness. You’ll also be expected to supply recent pay stubs (W-2) forms, copies of your 1040 federal tax returns, a copy of your current mortgage and other documentation including proof of homeowner’s insurance, property taxes and more. If you are dealing with the same lender as your mortgage company, then you’ll have less paperwork to furnish and your closing costs should be lower.

Worth Noting

If you never use your HELOC, you won’t be charged for having a credit line; you can allow your HELOC to expire at no cost to you. Be careful — if you default on your HELOC, you risk having your home foreclosed. Your HELOC lender has secondary rights to you home with your mortgage company being your primary lender.

Resources Using Your Home Equity for Emergency Needs 10-Step Success Plan


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Categories: Home Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".