If you want to home equity line of credit with no income, but you don’t want to do anything that requires any work, like providing proof of income, guess what? You’re in luck!
Second mortgages have been around for a long time, but they’ve changed quite a bit. You had to have the income to get approved for one, and now it’s not so much the case. How is this possible? Why would banks be willing to lend out money without ensuring that you can pay it back? Let’s talk about that.
What an Income Has To Do With It
It’s good to know how your income affects the approval process for a second mortgage.
Income, in general, is a strong indicator of the borrower’s ability to repay a loan. Also, the higher the credit score and income, the lower the interest rate on a loan.
The exact impact of income on getting approved for a second mortgage depends on several factors:
The lender’s policies and guidelines
Each lender has its criteria for approving loans. They may also have minimum income requirements that may exclude some borrowers. Some lenders need only proof of income, while others also require an appraisal or certificate of occupancy (for new construction).
The ratio of debt to income
When determining whether you can afford additional payments, lenders look at your other debts and housing costs. If you have too much debt relative to pay, this can reduce your chance to get home equity line of credit, even if it’s a small loan.
The loan amount relative to home value
In most cases, if you have some equity in your home, your lender will give you a loan up to 100% of the value of your home (called a cash-out refinance). However, there are limits to how much equity you can have in a home. You can get a cash-out to refinance with as little as 10% equity in your home. But the more equity you have, the higher the maximum loan amount lenders will let you borrow.
Can You Get a Home Equity Loan with No Income?
You may be able to get a home equity loan with no income at all by using other sources of income or assets as collateral for the loan. If you have little or no income coming in, lenders will allow you to use assets to qualify for a home equity loan.
However, lenders never want a risk. They fear giving out money and not getting it back, so they have so many rules and regulations surrounding loans. Generally speaking, your income will dictate how much you can borrow, but there are ways around that if you don’t have enough income.
One option is to borrow against the equity in your home with a home equity loan, sometimes referred to as a second mortgage. Home equity loans allow you to borrow against the value of your home minus what’s owed on any mortgages. You can generally borrow up to 80% of your home’s value minus any mortgages owed on the property.
In this blog, we’ve made the case that you can get a second mortgage without showing income—but only if you have a high enough credit score to make it worth the lender’s while. We’ve also explained how you can use a HELOC to improve your life, even though it may take a few years of higher payments to pay off.
There’s no doubt that getting a home equity line of credit is a big decision, but we hope this blog has helped you make yours.