How Soon Can You Get a Home Equity Line of Credit After Purchase?

If you put less than 20% down on your home, you probably lack sufficient equity to obtain a home equity line of credit immediately after purchase. 

Picture this: You move into a stunning new home that has everything you’ve ever dreamed of, and you use your nest egg as the downpayment. But two weeks later, the HVAC goes out and you’re getting estimates for $10,000. Now you’re wondering how soon you can get a home equity line of credit (HELOC) after purchase. The good news is, you can secure a HELOC within 30 to 45 days after purchase depending on the lender. Learn more about securing a HELOC quickly after your home purchase.

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Understanding How Quickly You Can Get a HELOC After Buying Your Home

A home equity line of credit (HELOC) is a type of loan. You’ll open a line of credit against the equity in your home. Equity is the home’s value less any outstanding mortgages or loans on the home. You can get a HELOC for up to 85% of the home’s fair market value less your mortgage value.

These loans often have variable interest rates, meaning they’ll change month to month, though you can find some rare fixed interest rate options. Generally, these loans offer the opportunity to withdraw cash from your line of credit for up to 10 years. During that period, you can pay only interest on the loan. For the final 20 years, you then pay back the principal and interest.

You might set up a HELOC after buying your home for a variety of reasons. For example, you might experience surprise expenses, such as health problems. Or you might get a new business opportunity that requires upfront capital but you don’t qualify for small business loans yet.

For a Home Equity Loan 

A home equity loan is often available within 30 to 45 days after purchasing the home. This varies based on the lender and their requirements. 

For a Cash-Out Refinance

Completing a cash-out refinance often requires a six-month waiting period after you’ve moved into your new home. That totals 180 days before you can take cash from your home’s equity. In some cases, this is helpful because it gives your home time to appreciate so there is more equity to draw from because few homebuyers put more than 20% down at purchase, meaning there would not be sufficient equity to pull from your home right away.

How Soon Can You Expect Your Home to Have Equity That You Can Tap Into?

Unless you put more than 20% down when you purchased your home, you likely don’t have enough equity in your home right after purchasing it to take a home equity line of credit out. As you pay your mortgage, you’ll grow equity in your home. But your home will also appreciate at approximately 3% per year depending on where you live.

The average home price nationwide is $217,698. That means that when your home increases by 3%, you’ll have an extra $6,530 of equity in your home each year.

When Should You Consider Getting a HELOC After Buying Your House?

Reasons you might consider getting a HELOC after buying your house include:

• High-interest debt: A HELOC often has a lower interest rate than other types of debt, such as credit card debt. This is a great option to pay off that debt and get into better financial standing.
• Home improvement projects: Take out a HELOC to complete large home improvement projects that will further increase the value of your home. That will help continue building equity in your property while making the home nicer to live in.
• Cover unexpected expenses: New debt right after buying a home can feel daunting. But it’s better than late fees or further penalties for failing to pay your expenses.
• When something goes wrong with the home: If you don’t have a home warranty and something goes wrong with the home, a HELOC can help you complete the repair quickly to avoid additional damage to your home.

When Should You Avoid?

While a HELOC is great for many scenarios, homeowners should avoid taking the loan in a variety of scenarios, including:

• When you’re struggling to make your mortgage payments: If you’re already having a hard time making payments on your home mortgage, you will put your home at risk if you take out additional loans on the home. Failing to pay them will mean you risk losing your home.
• When refinance rates are low: If you can complete a cashout refinance and get lower mortgage rates than you have now, you’re better off with a refinance than with a HELOC.
• When you have the funds to complete home improvements: While you don’t want to deplete your finances entirely to do upkeep and improvements on your home, you also don’t want to pay interest on the improvements if you don’t have to. Try to use your cash slowly over time to make improvements instead of doing one large project that requires a loan.

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Support for Unexpected Expenses Shortly After Moving

Surprise expenses can arise at any time — even right after you move. Moving can strain your finances leaving you with little extra cash for a few months. If something unexpected happens, you could need an additional tool for making ends meet. That’s where a HELOC can be wise.

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