What is an instant home equity loan and how fast will my application be approved? If you want to utilise your home equity into a loan quickly, you need to hear this first. We’ve discussed everything you need to know about instant home equity loans.

Hold it – what’s home equity?

Homeowners don’t really become the outright owner of their home until they pay off their mortgage. In the meantime, they own a percentage of the home outright whereas the rest of the property is owned by the lender until the mortgage is cleared. The percentage you own outright is known as home equity

You can easily calculate your home equity value by taking your existing mortgage balance away from the property’s current value. For example, a £200,000 home with a £50,000 remaining mortgage would equal £150,000 home equity, usually expressed as a percentage (= 75% equity). 

Home equity loans and HELOCs

Homeowners with home equity can utilise the equity they have built up in a low-interest loan. These are called home equity loans or home equity lines of credit (HELOCs). Many families take out a home equity loan or HELOC to renovate their home, consolidate debts or pay for big expenses, such as a new car. 

We’ve explained how both options work (and differ) just below. 

How does a home equity loan work?

A home equity loan provides the homeowner(s) with a lump sum into their bank account based on their available home equity. The money can be spent when and how the applicant wishes. Repayments on the loan begin straight away, usually the following month. 

These repayments will pay off a proportion of the principal loan amount and the interest added. Repayments will continue until the loan has been fully repaid, which may take up to 20+ years depending on the size of the loan. 

How does a home equity line of credit work?

A home equity line of credit is a little more complex than a home equity loan. The homeowner does not receive all the money at once. Instead, they enter into a draw period where they can draw down on the loan amount over a fixed period, sometimes as long as five years. They access the funds in a similar way to someone using money on a credit card – but there is no credit card. 

During the draw period, only interest payments are made, and after the draw period, the repayments include both a portion of the principal amount and the ongoing interest. Interest rates on a home equity line of credit are usually variable rates. 

Can I borrow 100% of the equity in my home?

You will not be able to borrow 100% of the home equity you have built up, and neither should you want to. By borrowing an amount identical to your home equity, you are at risk of negative equity. If your home value was to decrease then you may be in a position where you owe more on your home than it is even worth, wasting thousands of pounds. 

Lenders calculate how much of your home equity you can borrow against using an array of measurements. In general, you will only be allowed to borrow against a maximum of 80% of your equity. Thus, if you have £50,000 of home equity you would only be able to get a maximum loan amount of £40,000.

How long does it take to get a home equity loan?

The home equity loan application process can take anywhere between two to four weeks on average. Some lenders may be able to get the process completed quicker and others may take longer. The lender must complete extensive checks and administration before making a decision. 

Where can I get a home equity loan fast?

To get a home equity loan quickly, you should search for lenders that offer quick turnarounds on applications. However, these quicker home equity loan processes may not be guaranteed and you may end up disappointed. 

Moreover, some lenders may be faster than others at certain times and vice versa, making it difficult to know exactly where to get a home equity loan quick. 

How fast can I get a home equity loan?

Even at the fastest, the home equity loan application is still likely to take around one week. Therefore, it is a myth to say that you can get an instant home equity loan. 

You might not be able to get an instant home equity loan in the same way you can get super quick unsecured personal loans, but you might be able to get an instant idea of repayments through a home equity loan calculator – or even an instant quote from some lender websites. Remember that these are not 100% accurate. 

Quick home equity loans mistakes

Avoid the mistake of applying for lots of home equity loans and deciding to choose the one that gives you approval first as a way to save time. Making multiple applications at once can damage your credit score and could cause you to not be offered a home equity loan at all. 

Moreover, be extremely cautious of any lender promising to provide an instant home equity loan. As mentioned, these are not likely to be real. The lender may be stating they provide the money into your account instantly, rather than the application process being instant. 

Or even worse, they could be a scam lender. 

Instant home equity loan alternatives

If you need an instant home equity loan but have realised the application process is likely to take a couple of weeks, you may want to consider alternative options, such as:

  1. Unsecured personal loans – some provide credit the same day
  2. Credit cards – you may be approved and have the card in just a couple of working days

However, you should not be prioritising the speed of the application over the repayment terms and affordability for the credit. 
If you are having money problems, consider speaking with a debt charity for immediate support.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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