I'm running into some trouble securing a Home Equity Line of Credit (HELOC). My credit union told me it's basically a no-go because I can't pull out enough equity. They're looking at the 'state equalized value,' which is significantly lower than what I paid for my property back in 2021.
Now, I'm considering two options: contacting another credit union or spending $500 for an appraisal and hoping for the best. Has anyone else faced similar issues? Just to be clear, this isn't a must-have HELOC; it's for something optional that I want to buy.
5 Answers
When I took out a HELOC last year, I had to pay $400 for an appraisal, but it was easy—a quick automated process where I took pictures of my house through an online link. Just remember, the amount you can borrow is typically capped at 80% of the home’s appraised value minus your current mortgage balance.
Banks often don't know your home's actual value; they mostly rely on appraisals. If you just bought your home recently, they might be using your original appraisal value. If your house has increased in value since then, getting a new appraisal could help boost your chances for a loan. Just keep in mind that while this might get you more equity, it could also raise your property taxes.
It sounds like you'll likely need a full interior appraisal, which can actually cost more than $500. The standard, cheaper options are usually just a drive-by type of evaluation and won't give you the value you need for your HELOC.
If you're open to it, you might want to consider a home equity loan instead of a HELOC. They often have better terms. A HELOC does have flexibility since it's like having a credit card—you only pay interest on what you use.
There's definitely a difference between the state equalized value (SEV) and the market value of your home. It sounds like you're not upside down on your mortgage if you're in a modest area. Just be cautious about borrowing against a property if it’s not essential!