Direct lender loanDepot has launched a so-called “Digital HELOC” to help homeowners tap into their massive amounts of home equity.
The Southern California-based company cited the fact that the average homeowner now has roughly $300,000 in home equity, per a CoreLogic report from September.
While they might not have as much today, thanks to recent pressure on home prices, millions of Americans do have home equity that is ripe to be tapped.
This is especially true if they need cash and hold a low fixed-rate mortgage in the 2-4% range.
With first mortgage rates now above 7%, a second mortgage such as HELOC could make a lot more sense than a refinance.
How the loanDepot Digital HELOC Works
As the name suggests, the Digital HELOC from loanDepot is a paperless, 100% digital application process for a home equity line of credit (HELOC).
Instead of requiring meetings, phone calls, and trips to the bank, the company says you can apply for their HELOC from the comfort of your couch.
Potential customers can obtain no-obligation quotes without impacting their credit scores, and go from quote to close in as little as seven days.
Once you submit an application, a hard inquiry to one or more of the consumer reporting agencies will land on your credit report.
And like a first mortgage, the company will still need to perform income, asset, and employment verification.
But thanks to new technology, much of this can be done paperlessly and digitally, by linking accounts and plugging in data sources.
loanDepot also notes that funding timelines could be extended if additional time is needed to perform a desktop appraisal.
But all in all, the underwriting process is expected to be fast. And there are no third-party fees and no prepayment penalty.
loanDepot Digital HELOC Allows Loan Amounts as High as $250,000
With regard to the HELOC itself, homeowners can access between $50,000 and $250,000 of their home equity.
The line is repaid via a 10-year interest-only period followed by a 20-year variable repayment term.
During the initial 10-year interest-only period, you can make additional draws if needed as you pay down your original line.
A minimum of 75% of the requested line amount (minus the origination fee) must be drawn at the time of funding.
For example, if you get a $100,000 line, you must initially take…