How Self-Employed Home Equity Loans Work

The path to getting a home equity loan can be more difficult if you’re self-employed. However, there are several home equity loan options that allow self-employed professionals to tap into their equity and achieve their goals. Whether you’re consolidating debt, financing renovations, investing in your business, or making a big purchase, a self-employed home equity loan can help you get the cash you need.

Can You Get a Home Equity Loan If You’re Self-Employed?

For many self-employed individuals, there are several challenges that stand in the way of qualifying for a traditional home equity loan. One common challenge is income documentation. Traditional home equity lenders may rely on tax returns to evaluate self-employed income, while bank statement programs use deposit history instead.

For many self-employed homeowners, legitimate business deductions can reduce taxable income relative to business cash flow. Business owners, freelancers, and contractors may also have uneven or seasonal income, which can make traditional income documentation more complex.

Nevertheless, self-employed individuals can secure a home equity loan with the right type of financing. Self-employed home equity loans offer an alternative path to approval, allowing borrowers more flexibility when it comes to providing proof of income.

What Is a Self-Employed Home Equity Loan?

Home equity loans, also known as HELOANs or second mortgages, can be a great way for self-employed borrowers to pull cash out of their property and use it for a variety of purposes, such as consolidating debt, making home improvements, or funding a business venture. However, for self-employed borrowers, the process of qualifying for a second mortgage can be more challenging than for those who have a traditional job and a steady paycheck.

A HELOAN provides a lump sum that is repaid in installments, while a HELOC is a revolving credit line that can be drawn from as needed. Outstanding HELOC balances totaled $459 billion in the second quarter of 2026, according to the Federal Reserve Bank of New York. This was $142 billion above their first-quarter 2022 low.

One way self-employed borrowers can qualify for a second mortgage is by taking out a bank statement home equity loan, which allows borrowers to use their bank statements to prove their income. Bank statements give lenders another way to evaluate cash flow when tax returns show taxable income after business deductions. By providing bank statements, self-employed borrowers can demonstrate to lenders that they have a consistent income and can afford to repay the loan.

At the end of the second quarter of 2026, U.S. households held approximately $35.8 trillion in real estate equity, equal to 71.9% of household real estate value, according to Federal Reserve data.

Pros and Cons of Self-Employed Home Equity Loans

A self-employed second mortgage can be a great solution for self-employed homeowners looking to tap into their equity and increase cash flow. However, this type of financing may not be the right option for everyone. Below we go into more detail about the benefits and drawbacks of self-employed home equity loans.

Pros

• No tax returns required: With a self-employed home equity loan, you can qualify using a series of bank statements rather than tax returns.

• Improve cash flow: A home equity loan provides you with an infusion of cash and increases the amount of money you have on hand.

• Flexible credit requirements: You can qualify for a bank statement home equity loan even if your credit isn’t perfect.

• Competitive interest rates: Home equity loans may offer lower rates than some personal loans or credit cards, depending on the borrower, lender, and market. Compare the APR, fees, and total repayment cost before choosing a loan.

• Flexible use of funds: You can generally use the funds for debt consolidation, renovations, business expenses, or other major costs, subject to the loan agreement.
• Leave your first mortgage locked in: A home equity loan generally adds a second lien and separate monthly payment instead of replacing the existing first mortgage. This lets you keep the first mortgage’s current rate and terms, but your home secures both loans.

This can be especially valuable for borrowers with below-market first-mortgage rates. As of the second quarter of 2026, about 78% of outstanding single-family mortgages had rates below 6%, including about 49% below 4% and 19% below 3%, according to the Federal Housing Finance Agency’s National Mortgage Database. Freddie Mac’s Primary Mortgage Market Survey put the average 30-year fixed rate at about 7.24% in late October 2026.

If your first mortgage rate is already close to current rates, keeping that loan may offer less of an advantage. In one recent Griffin funded file, a Massachusetts homeowner had a first mortgage rate between 6% and 7%. They considered a line of credit, but their credit score fell short of the minimum for this specific program. The loan officer worked with the borrower and determined that a cash-out refinance made more sense for them. Our digital HELOCs require a minimum score of 600, and traditional HELOCs and home equity loans start at 660. See our home equity loan requirements to compare your options.

Cons

• Risk of foreclosure: Since a home equity loan is secured by your home, you run the risk of facing foreclosure if you default on the loan.

• Increase your combined loan balance: A home equity loan adds another balance secured by the property. CLTV compares the total balance of all loans secured by the home with its current value. For example, a $300,000 first mortgage plus a $100,000 home equity loan on a $500,000 home results in an 80% CLTV.

• Higher rates than full-documentation loans: While bank statement home equity loans may offer rates that are lower than other lending alternatives, they often come with higher rates when compared with full-documentation home equity loans or first mortgages.

• Increase debt burden: A home equity loan adds a separate monthly payment and may include upfront fees or closing costs. Make sure the new payment and total borrowing cost fit your budget.

Self-Employed Home Equity Loan Requirements

In order to qualify for a self-employed home equity loan, you’ll need to meet our requirements:

• Self-employed: We generally ask for at least two years of self-employment, although one year can qualify if you worked in the same line of work before.
• Home equity: Requirements vary by program, property type, credit profile, and existing lien balances. Most lenders require borrowers to retain 10%–20% equity after borrowing, which corresponds to an 80%–90% maximum CLTV. Our home equity loan allows up to 90% CLTV on a primary residence, 85% on a second home, and 80% on an investment property with a 700+ credit score.
• Credit score: Bank statement borrowers need a minimum credit score of 660 for our traditional HELOC and home equity loan, and 680 for our digital HELOC. As of July 2026, Griffin Funding Loan Officer Kristi Manion (NMLS #1314037) says the bank statement borrowers she closes “typically have credit scores in the high 700s,” though she sees scores from the mid-600s to the low 800s. Those are scores of borrowers who closed, not the minimum to qualify. A score below 700 may still work. See how our program compares in our roundup of the best bank statement loan lenders.
• Bank statements: Our bank statement program uses 12 or 24 months of personal or business bank statements, depending on the program, to evaluate deposit history and qualifying income.
• Loan amount: Self-employed borrowers can access up to $1,000,000 on primary residences and up to $750,000 on second homes and investment properties through our bank statement program. Loans start at $25,000 on our digital HELOCs and $100,000 on our traditional HELOC and home equity loan.
• Debt-to-income ratio: We allow a debt-to-income ratio up to 50%.

If you’re not sure whether you qualify for a self-employed second mortgage or if this option is right for you, feel free to reach out. You can call us directly or download the Griffin Gold app to get personalized chat support and access financial planning tools, smart calculators, and loan comparison features.

Apply for a Self-Employed Home Equity Loan Today

A self-employed home equity loan can be a great option for self-employed borrowers looking to pull cash out of their property and use it for a variety of purposes. By providing bank statements and other documentation, self-employed borrowers can demonstrate to lenders that they have a consistent income and can afford to repay the loan. 

Fill out an application today and take the first step towards getting a self-employed home equity loan or home equity line of credit.

Home Equity Loans: Boost Cash Flow Without Touching Your First Mortgage!

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 25 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list six times in its 13 years in business. Follow his updates on LinkedIn.