Typically, a good credit score is needed to get approved for a home equity loan or HELOC from a bank. To qualify, you must have at least 20% equity in your home, and the maximum credit limit is 65% of your home’s current market value. It works similarly to other types of credit lines, including credit cards, but a HELOC typically comes with a lower interest rate and higher credit limit because it is secured against your home.Ī HELOC is a type of revolving credit, which means you can borrow money from your home equity, pay it back, and borrow over again, up to your credit limit. Home Equity Line of Credit (HELOC)Ī HELOC is a secured line of credit that lets you borrow up to a certain amount against your home equity. Whether you refinance your home or get a home equity loan, you will likely require an appraisal on your home to help the lender determine its current value. The appraisal will help protect the lender from this risk.Ĭommon Forms Of Equity Financing You’ll Need A Home Appraisal Larger loan amounts usually mean that an appraisal will be required since this puts the lender at a greater risk. Some lenders may also be willing to waive an appraisal if you’re only looking to withdraw a small amount of equity. However, this method of property value assessment is not as accurate or reliable as a traditional appraisal specifically conducted on a particular property and is therefore not accepted by all lenders. For example, the sale price of similar homes in the area that have recently sold. Instead, they may rely on other data to assess the current value of the property. Having said that, not all lenders may require an appraisal for a home equity loan. If the appraisal comes in too low, you may not have enough equity to secure a refinance. That’s because your home equity depends on your home’s current value and the remaining balance on your mortgage. If you’re looking to tap into your home equity, an appraisal will likely be part of the process. For this reason, lenders typically require a home appraisal.

Lenders want to know how much a property is worth according to current market conditions before they approve a mortgage or refinance application. Are Home Appraisals Mandatory When Tapping Into Your Home Equity? This is necessary because the value of your home will affect the amount you can borrow.īut how does a home appraisal work when tapping into your home equity? What are the various factors that an appraisal expert will examine before they can calculate what your home is worth? If you’re a bit confused about the appraisal process, here’s a checklist for home appraisal.

If you’re planning on tapping into your home equity, it’s important to get your home appraised to determine its value. * This post was created in collaboration with Alpine Credits

Home appraisal preparation checklist