Home Equity Line of Credit (HELOC)

What Is a HELOC Loan?

A HELOC loan, or home equity line of credit, is a financing option that allows homeowners to borrow a revolving line of credit against their home’s equity.

Unlike a conventional loan, where you receive a lump sum upfront, a HELOC provides a line of credit based on the value of your home’s equity. This means you can borrow as little or as much as you need, up to the loan’s limit.

Key features of a home equity line of credit include:

• Revolving credit line: In practice, a HELOC is similar to using your credit card to make purchases, except your credit limit is determined by the value of your home equity rather than the type of credit card you have.
• Secured by home equity: Since a HELOC is secured by your home equity, you can secure favorable interest rates and terms.
• Draw and repayment periods: Borrowers can use a revolving line of credit during the draw period and then pay back the principal and interest during the repayment period.
• Variable and fixed-rate options available: Griffin Funding offers both variable-rate and fixed-rate HELOC options.
• Flexible use of funds: Use HELOC funds for whatever you’d like, whether it’s funding home renovations, consolidating debt, or making a big purchase.

How Does a HELOC Work?

A HELOC operates similarly to a credit card. You have a pre-approved credit limit and can borrow up to that amount as needed. The major difference is that a HELOC uses your home as collateral, meaning the loan is secured against the equity in your house.

The amount you can borrow typically depends on the value of your home and how much equity you have. If your equity is worth more, then you’ll typically have a higher credit limit and vice versa. Keep in mind that broader market trends—including factors like the OBBB impact on real estate—can influence property values and, in turn, your available equity.

Interest rates for HELOCs are typically variable, meaning they can fluctuate based on market conditions. While you only pay interest on the amount you borrow, it’s essential to be aware that the rates can rise or fall based on market indexes. Griffin Funding also offers a fixed-rate HELOC for those seeking more stability.

HELOC vs HELOAN

There are some key differences that separate a home equity line of credit from a home equity loan. The main difference is that a home equity line of credit provides you with flexible access to funds, whereas a home equity loan provides you with a lump sum.

HELOC

• Typically adjustable rate (fixed-rate option available)
• Draw upon funds as needed
• Only pay interest on the money you use

HELOAN

• Fixed interest rate
• One-time payout
• Pay interest on the full amount borrowed

Who Qualifies for a HELOC?

To secure a HELOC, you’ll have to meet a few basic requirements.

• Equity Value: A significant amount of equity in your home is often required, with many lenders stipulating a minimum of 20% equity for eligibility. While there’s a cap to how much you can borrow, increasing your equity improves your borrowing potential. As a rule of thumb, you’ll need to keep 15% in equity in your primary home after accounting for the home equity line of credit amount and 30% in equity in your second home or investment property.
• Stable Income: Lenders will assess your income to ensure that you’re able to manage repayments. Consistent income is paramount for primary and secondary mortgages, proving your capability to meet monthly obligations.
• Credit Standing: A credit score in the mid to high 600s is generally favored by lenders, as this demonstrates that a borrower can be trusted to repay their debts. The exact score varies among lenders, but enhancing your score can positively influence your loan amount and terms. At a minimum, a 640 FICO is required for a primary residence HELOC and a 680 FICO is required for second homes and investment properties.
• Payment History: Lenders analyze your credit history to gauge your reliability in managing debts. If you’ve consistently honored your existing mortgage payments, especially with the same lender, it bolsters your chances of HELOC approval.
• DTI Ratio: The debt-to-income (DTI) ratio indicates the portion of your income allocated for debt repayments, including mortgages and other loans. Typically, lenders seek a DTI below 43%, but a lower ratio further strengthens your application. At Griffin Funding, we will consider DTI up to 50%.

Can You Get a HELOC Without Appraisal?

Generally speaking, most lenders will require a home appraisal in order to qualify for a HELOC. In some cases, however, lenders will allow no-appraisal HELOCs.

These HELOCs typically use something called an automated valuation model (AVM) to estimate the value of your home. AVMs use a range of information, including similar homes around you that have recently sold, your property details, and information about pricing trends and your location to create these estimates. Think of it as a highly sophisticated home value estimator that can help streamline the approval process.

The AVM will be verified by a Property Condition Report (PCR) to ensure that the property is in good condition. A PCR is not an appraisal and is not performed by an appraiser. It simply provides a property‐condition overview—often used in tandem with an AVM to confirm both value (via the AVM) and condition (via the inspection).

Each lender has their own requirements surrounding no-appraisal HELOCs. Some lenders have quite strenuous criteria to qualify, like high credit scores, significant home equity, and a history of financial stability. They also may have relatively low limits on the amount you can borrow, like under $100,000.

At Griffin Funding, we make no-appraisal HELOCs accessible through our digital HELOCs. Borrowers can secure no-appraisal HELOCs in as little as 5 business days with loan amounts up to $400,000 and credit scores as low as 640.

Home Equity Line of Credit Pros and Cons

Below, we list some of the main pros and cons of a home equity line of credit.

Pros

• Flexibility: Unlike traditional loans, a HELOC provides the flexibility to borrow as needed, meaning it can be used to cover a variety of expenses. This flexibility ensures you only borrow and pay interest on what you need. Whether you’re looking to renovate or remodel your home, cover emergency expenses, or fund other big-ticket projects, a HELOC can offer tailored support. Please note that our fixed-rate HELOC requires that you draw the full amount.
• Potentially Lower Interest Rates: HELOCs often have interest rates lower than credit cards or personal loans, making them a great debt consolidation option in many cases. If you’re considering using a HELOC to consolidate existing debt, a debt consolidation calculator can help you estimate potential savings and compare monthly payments.
• Tax Deductions: Interest payments on a HELOC can be tax-deductible if the funds are used for home improvements. Additionally, for tax years after 2025, HELOC interest may be tax deductible regardless of how the funds are used. Be sure to talk to your accountant or lender to learn more.
• Continued Access to Funds: Even after repaying what you’ve borrowed, the line of credit can remain open, so you can draw more money if you need it.
• Control Over Expenditure: Borrowers can use the funds for virtually any purpose, from home renovations to emergency expenses. You control how you spend the money.

Cons

• Variable Interest Rates: HELOCs typically have variable interest rates, which can add an element of unpredictability to this type of financing. If you aren’t interested in a variable rate, you can opt to apply for our fixed-rate HELOC.
• Risk to Your Home: Since your home is used to secure the HELOC, you run the risk of foreclosure if you default on the loan. Be sure to read the terms and stay on top of the repayment schedule to avoid this.
• Potential for Overspending: The ease of access to funds might tempt some borrowers to overspend, leading to financial strain in the long run. It’s crucial to have a financial plan in place when taking out a HELOC and to be disciplined in how you use it. Download the Griffin Gold app to formulate a personalized financial plan, track your spending, leverage smart budgeting tools, and access valuable home financing resources.

It’s essential to weigh these pros and cons carefully to make an informed decision. Be sure to reach out to an expert if you have additional questions about how a HELOC works.

Griffin Funding Home Equity Line Programs

Griffin Funding offers two different types of home equity lines of credit (HELOCs) options for homeowners looking to tap their equity:

Fixed-Rate Digital HELOC

Fixed-Rate Digital HELOCs are no-appraisal HELOCs with a fixed interest rate throughout the lifetime of the loan. Secure this home equity line of credit without appraisal and get cash out quickly, within 5 business days.

• Pre-approval is available within 5 minutes with only a soft-pull credit check and AVM over the phone (888) 699-3371. Complete everything else online at your convenience.
• Upon approval, funds are wired to your account in less than 5 business days!
• No appraisal is required – meaning no appraisal fees. Value is determined within seconds by an AVM and verified with a PCR.
• No title is required, which means no title fees.
• Loan amounts up to $400,000.
• Credit scores down to 640 for primary homes and 680 for investments.
• Tap equity up to 85% of the value of your home or 70% of the value of your second home or investment property.
• 5, 10, 15, or 30-year fixed terms.
• Draw periods of up to 5 years.
• Fully online and automated – nothing to upload except driver’s license – everything else can be synced.
• Online notary. If you are in a county that allows remote online notaries (RON), you can sign closing docs virtually from the comfort of your home.
• Income verification:
  • Full Documentation: 1 to 2 years of the most recent W-2s or tax returns.
  • Alternative Documentation: Alternative income documentation like the kind used with bank statement loans or DSCR loans is not available on the fixed-rate HELOC program.

In other words, this product is a line of credit secured by your home. It’s a fixed-rate loan with a set term and is fully disbursed, with funding in as few as 5 business days. This digital HELOC product also allows for additional draws over time. This product is not meant for a rainy day fund; the cash is meant to be used right away. However, it is the fastest option to get cash out of your home that we offer.

Apply now for a digital HELOC – you’ll know in minutes if you are approved. If you are not approved, you can apply for other home equity products, such as a traditional variable-rate HELOC, fixed-rate HELOAN, or a cash-out refinance on your first mortgage.

Digital Variable Rate HELOC

A traditional variable-rate HELOC offers variable rates and a 30-year term. These HELOCs may or may not require a home appraisal to qualify. Get up to $1,000,000 with interest-only payments for the first 10 years of your loan.

• Pre-approval within 48 hours.
• Upon approval, funds are wired to your account.
• A licensed appraiser is required to perform a traditional interior and exterior appraisal. An AVM can be used in some cases along with a Property Condition Report (PCR).
• Loan amounts up to $1,000,000 ($400,000 if it is a no-appraisal HELOC).
• Credit scores down to 640 for primary homes and 680 for investments.
• Tap equity up to 95% of the value of your home, 80% of the value of your second home, or 70% of the value of your investment property.
• 30-year adjustable HELOC with a draw period of 3 years. Interest-only payments for the first 10 years.
• Income verification:
  • Full Documentation: 1 to 2 years of the most recent W-2s or tax returns.
  • Alternative Documentation: Bank statement loans for self-employed HELOC borrowers allow you to qualify with 12 months of personal or business bank statement deposits.

The traditional digital HELOC product is also a line of credit secured by your home. It’s a variable-rate loan with a 30-year term and does not have to be fully disbursed at the time of closing.

In some cases, a digital variable rate HELOC can take longer than the digital fixed-rate HELOC because a traditional appraisal can be required depending on the results of the AVM. This traditional HELOC product allows for additional draws of up to three years. This product is less strict than the digital HELOC and allows for more flexibility.

If you are not approved for a fixed-rate digital HELOC, this traditional HELOC could be a good backup plan. You can also apply for a fixed-rate HELOAN, or a cash-out refinance.

Home Equity Line of Credit Alternatives

If a home equity line of credit doesn’t fit your needs, several alternatives can provide financing based on your goals.

Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a new one for a larger amount, giving you the difference in cash. It’s ideal to refinance at a lower interest rate while accessing funds for significant expenses.

For example, if your home is worth $300,000 and you owe $200,000, you could refinance for $250,000 and receive $50,000 in cash. It works best when mortgage rates are low, as it combines financing with cost savings.

Use our free cash-out refinance calculator to see what this loan could look like for you.

Reverse Mortgage

If you’re 62 or older, a reverse mortgage allows you to convert your home equity into cash without monthly repayments while living in your home. Instead, the loan is repaid when you sell the house or move out.

This option is great for retirees needing to supplement income or cover medical expenses. However, it reduces your home equity, so it’s worth considering long-term financial implications.

Private Money Loan

Private money loans are short-term loans funded by private lenders rather than banks. They’re often used for real estate investments, such as flipping houses or purchasing properties. Although they have higher interest rates, they offer fast approval and flexible terms, making them a great option when time is critical.

Personal Loan

A personal loan offers unsecured financing, meaning you don’t use your home as collateral. This makes it a less risky option for minor expenses, like paying off high-interest debt or funding a wedding. While rates are typically higher than those for home equity loans, personal loans are easier to obtain if you don’t have significant home equity. Griffin Funding does not offer personal loans.

See If You Qualify for a HELOC Loan

Whether you’re eyeing home improvements, managing unexpected expenses, or consolidating debt, a home equity line of credit could be the answer. Reach out to Griffin Funding today to speak to mortgage professionals about whether a HELOC is the right option for you.

At Griffin Funding, we offer extensive resources and expertise to guide you through the process. We can help you understand your tappable equity and walk you through the HELOC application process. Contact us today to speak to our team, and let us help you find the perfect loan option for you.