To get a loan against property you own, you choose a home-secured loan product, prove to a lender that your credit, income, and equity support the borrowing, let the lender appraise the home and search its title, and sign at closing after reviewing the required federal disclosures. The property stays yours and you keep living in it or renting it out, but the lender records a lien against it until the debt is repaid. Because real estate secures the loan, rates run well below unsecured borrowing like personal loans or credit cards.
Pick the Right Product First
Three products let you borrow against the equity in a home you already own, and the right choice depends on how you plan to use the money.
- A home equity loan gives you a fixed lump sum at a fixed rate, repaid in equal monthly installments over a term that usually runs 5 to 30 years. It fits a one-time expense you can size up front.
- A home equity line of credit (HELOC) is a revolving credit line you draw from as needed during a draw period, typically 10 years, usually at a variable rate. When the draw period ends, you enter a repayment period and can no longer borrow.
- A cash-out refinance replaces your existing mortgage with a new, larger one and pays you the difference. You end up with a single payment instead of two loans, but your mortgage terms reset.
The qualification steps below apply to all three, with specifics varying by lender and product.
What Lenders Require to Qualify You
Credit Score
Most lenders set a minimum credit score around 620 for a HELOC and 680 for a home equity loan. Some specialized programs accept scores as low as 550 on less favorable terms. Scores of 760 and above unlock the best pricing. If your score sits near a tier line, a few months of on-time payments and lower card balances before you apply can move you into a cheaper rate bracket.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) is total monthly debt payments divided by gross monthly income. Most home equity lenders want DTI at or below 43%, and some prefer 36% or less. A high DTI is one of the most common reasons applications stall even when the credit score qualifies. Paying down a credit card before applying can make a real difference if you are close to the line.
Equity and Loan-to-Value
Loan-to-value ratio (LTV) measures what you owe on the property against its appraised value. For conventional cash-out refinances and most home equity products, lenders cap LTV at 80% on a primary residence, so you need at least 20% equity. VA-backed cash-out refinances allow LTV up to 90–95%. Jumbo loans are tighter, often 60–70%.
A worked example: if your home appraises at $400,000 and you still owe $250,000, you have $150,000 of equity. At an 80% LTV cap, the lender will allow a maximum combined debt of $320,000, which leaves up to $70,000 available to borrow.
Age and Income
Federal law prohibits lenders from rejecting you or imposing worse terms because of your age, as long as you have legal capacity to contract. The Equal Credit Opportunity Act treats age as a protected class alongside race, sex, and marital status.1Federal Trade Commission. Equal Credit Opportunity Act A lender can weigh age-related factors like how many earning years remain before retirement, but it cannot apply a blanket age cutoff.2eCFR. 12 CFR Part 1002 – Equal Credit Opportunity Act (Regulation B) If a lender tells you you are too old for a mortgage, that is worth reporting to the Consumer Financial Protection Bureau.
There is no fixed income threshold. What matters is whether your income comfortably covers existing debts plus the new payment, which is exactly what DTI measures.
Property Type
Single-family primary residences qualify for the highest LTV ratios and the best rates. Commercial or mixed-use property faces more scrutiny because of market volatility and possible environmental liability. Occupancy also matters: a vacant home with deferred maintenance will face tougher underwriting than an occupied home in good condition.
Documents to Gather Before You Apply
Lenders need to verify who you are, what you earn, and what you own. Expect to produce:
- Government-issued photo identification such as a driver’s license or passport. Federal banking rules require lenders to verify your identity using unexpired government documents.3FDIC. FFIEC BSA/AML Examination Manual – Customer Identification Program
- Proof of your current residential address, usually a recent utility bill.
- Federal tax returns for the last two years, with all schedules and W-2s. Salaried borrowers add recent pay stubs. Self-employed borrowers add two years of business returns, a year-to-date profit and loss statement, and a balance sheet.
- The title deed to the property, recent property tax receipts showing no delinquencies, and a current homeowner’s insurance certificate.
- Floor plans or a land survey if the lender asks, which is more common for larger or irregular parcels.
Names and addresses on the application should match the title deed exactly. Mismatches create delays. If your name has changed since you bought the property, bring the marriage certificate or court order that explains the change.
The Appraisal and Title Search
Once you apply, the lender orders an independent appraisal to establish the home’s current fair market value. A licensed appraiser inspects the property, evaluates the neighborhood, and compares recent sales of similar homes. That value is what the lender uses to calculate LTV and your maximum loan amount. The appraiser also notes structural problems or zoning issues that could affect resale.
Appraisers on federally related transactions follow the Uniform Standards of Professional Appraisal Practice.4The Appraisal Foundation. USPAP – Uniform Standards of Professional Appraisal Practice A standard residential appraisal runs $300 to $500, more for complex or high-value properties. You pay this upfront, and it is yours to cover whether or not the loan closes.
In parallel, a title company or attorney searches public records to verify the ownership chain and surface any existing liens, judgments, or unpaid taxes. The goal is a clear title, with no competing claim that would threaten the lender’s position. Any problems have to be resolved before the loan can proceed.
Most lenders also require you to buy a lender’s title insurance policy, a one-time premium paid at closing that protects the lender if an ownership defect surfaces later.5Consumer Financial Protection Bureau. What Is Lender’s Title Insurance? It does not protect your equity. For that you can buy a separate owner’s policy, which is optional.
Costs You Will Pay
Beyond the interest rate, closing costs add up quickly. Expect:
- An origination fee of roughly 0.5% to 1% of the loan amount, so $500 to $1,000 on a $100,000 loan.
- The appraisal fee, usually $300 to $500.
- Title search costs of $75 to $200, plus the lender’s title insurance premium, which varies with loan size and location.
- County recording fees of about $15 to $50 to officially record the lien.
- A mortgage recording tax in some states, from under 0.1% to over 2% of the loan amount in high-cost areas. Not every state charges it, so check locally.
Some lenders advertise no-closing-cost home equity products. That usually means the fees were rolled into a higher rate or into the loan balance. Compare the total cost of the loan over its full term, not just the cash due at closing.
From Application to Funds in Your Account
You can apply online or at a branch. Online applications involve uploading scanned documents and working through verification screens. Either way, confirm every field matches your supporting paperwork before you submit.
Underwriting then reviews your credit, income, DTI, appraisal, and title report. This typically takes two to four weeks, longer if the file is complex or the appraisal is delayed. The lender may request additional documents during this stage. If approved, you receive a formal offer letter laying out the rate, term, repayment schedule, and all costs. You are not committed until you sign the final loan documents.
At closing you sign the mortgage deed and related papers, and the lender records its lien with the county. On a loan secured by your primary residence, federal law gives you three business days after closing to cancel before any funds are released. Once that window passes, the lender wires the proceeds, usually within one to two business days. From application to money in hand, plan on four to six weeks. Cash-out refinances can run longer because the old mortgage has to be paid off as part of the transaction.
Disclosures and Your Right to Cancel
Federal law requires lenders to hand you specific written disclosures so you can see the true cost before committing. Under the combined Truth in Lending Act and Real Estate Settlement Procedures Act rules, you must receive a Loan Estimate within three business days of applying.6Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure: Guide to the Loan Estimate and Closing Disclosure Forms It breaks down the projected rate, monthly payment, closing costs, and other terms in a standard format that lets you compare offers.
Before closing you receive a Closing Disclosure at least three business days in advance, showing the actual terms and costs. If certain key figures change afterward, such as a meaningful increase in the APR, the lender has to issue a corrected disclosure and restart the three-day waiting period.
On any loan secured by your primary residence that is not a purchase-money mortgage, you have an absolute right to cancel the transaction until midnight of the third business day after closing. The lender must give you two copies of a written notice explaining this right, and no funds can be disbursed until the rescission period expires. To cancel, you send written notice to the lender.7eCFR. 12 CFR 226.23 – Right of Rescission This right covers home equity loans, HELOCs, and cash-out refinances on your primary home. It does not apply to the mortgage you used to buy the home originally, or to loans on a second home or investment property.
Tax Treatment of the Interest
Interest on a loan secured by your home is not automatically deductible. Under the 2017 tax law changes, you can deduct the interest only if you use the borrowed funds to buy, build, or substantially improve the home that secures the loan.8Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction A $100,000 home equity loan spent on a new kitchen produces deductible interest. The same loan used to pay off credit cards or fund a business does not, even though your home secures it.9Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) 2 Split the money between improvements and personal spending, and only the improvement portion qualifies.
For loans taken out after December 15, 2017, the combined mortgage debt eligible for the interest deduction is capped at $750,000, or $375,000 if married filing separately. That cap covers your primary mortgage plus any home equity debt used for qualifying improvements. Keep clear records of how you spend the proceeds in case the IRS asks.
If You Cannot Pay
The most important thing to understand about borrowing against your home: if you stop paying, you can lose it. Unlike unsecured debt, a mortgage or home equity loan gives the lender the right to foreclose and sell the property to recover what you owe.
Federal rules build in some protection. Your servicer cannot start foreclosure until you are more than 120 days delinquent, and during that window it has to evaluate you for alternatives like a loan modification, repayment plan, or forbearance if you submit a complete application for help. Even after foreclosure begins, a complete loss mitigation application filed more than 37 days before a scheduled foreclosure sale forces the servicer to pause and consider your options.10Consumer Financial Protection Bureau. 1024.41 Loss Mitigation Procedures Contact the servicer as soon as you know you will miss a payment. Early engagement keeps more options open; waiting until deep default narrows them and speeds the timeline toward losing the home.