Best Home Equity Loans & HELOCs for Self-Employed

Home equity loans and home equity lines of credit (HELOCs) are based on the equity you have in your home—that is, the difference between your home’s value and how much you owe on your mortgage. Many borrowers use them to pay for home renovations, consolidate debt, or cover other significant expenses. 

Without a consistent paycheck, self-employed borrowers may have trouble meeting the requirements for a HELOC or home equity loan. Still, if you’re self-employed, you may be able to access one.

Continue reading to find the best home equity loan or HELOC for self-employed borrowers and understand how to qualify.

In this guide:

• Best home equity loans or HELOCs for self-employed borrowers
• How to choose the best home equity loan or HELOC
• Alternatives to HELOC or home equity loan for a self-employed borrower

Best home equity loans or HELOCs for self-employed borrowers

Getting a HELOC or home equity loan for self-employed borrowers is often more difficult, but it’s not impossible. Be prepared to provide certain documents and information to prove you’re a reliable borrower. 

You can use home equity loans and HELOCs for similar purposes, but they’re different in several key ways: 

Home equity loan	HELOC
Provides a lump sum	Access to a revolving credit line to borrow from as needed
Consistent, immediate monthly payments	Interest-only payments for the first several years are common
Fixed interest rates are common	Variable interest rates are common

Home equity loans are beneficial if you need to access a large sum at once, but HELOCs provide more flexibility. For self-employed borrowers with variable incomes, HELOCs might be a safer option. 

Many borrowers can share their W-2s and pay stubs with a lender, but self-employed individuals don’t have this documentation. Instead, you might need the following:  

• Recent bank statements (at least several months’ worth)
• Several years of business and personal tax returns or tax transcripts
• A statement from your accountant verifying your business’s health

Once you have your documentation, begin researching lenders and loan products to find the best home equity loan or HELOC for your needs. We’ve researched three top lenders to consider.

Figure

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HELOC

• Entire application process is online.
• If you qualify, receive funding in as little as 5 days.
• Accessible to self-employed borrowers with bank account details and tax documents. 

Figure has a reputation for providing loans in a short time. If you apply and qualify, get initial approval within minutes and—pending verification—access your line of credit in a matter of days. 

You don’t need to step into a bank to work with Figure. The entire process happens online with an online notary notarizing your documents. Depending on your comfort with technology, this could be a pro or a con. 

Figure lends up to $400,000 and charges few fees—no late fees, prepayment fees, or annual fees—but you will pay an origination fee. 

• Interest rates (APR): Fixed rates of 6.55% – 15.54% 
• Minimum credit score: 640
• Maximum LTV: 85%
• Draw period: 5 years
• Repayment period: 5, 10, 15, or 30 years
• Discounts: Automatic payment discount 
• Fees: Origination fee (up to 4.99%), subordination fee ($300), and release recording fee (up to $220)

PenFed

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HELOC

• Borrow up to $500,000 over a 10-year draw period.
• Self-employed borrowers can apply for a HELOC with two years of tax returns.
• Switch from a variable interest rate to a fixed rate during repayment.       

PenFed, or Pentagon Federal Credit Union, is the second-largest credit union in the country. Its HELOC offers a 10-year draw period and a 20-year repayment period for up to $500,000. A single borrower can qualify for multiple PenFed HELOCs and equity loans.

PenFed HELOCs are available in all 50 states, but you can’t apply online and must be a credit union member. Membership is easy to get and open to everyone. 

PenFed will cover most of the closing costs associated with a HELOC and waive its annual fee if the borrower makes interest payments equal to or greater than the annual fee over the previous 12 months.

• Interest rates (APR): Starting at 7.875% (Can switch from variable to fixed rate on all or some interest payments)
• Minimum credit score: 680
• Maximum LTV: 85% (80% in Texas)
• Draw period: 10 years
• Repayment period: 20 years
• Discounts: Not disclosed
• Fees: Annual fee of $99 if $99 is not paid in interest in the preceding 12 months

Spring EQ

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Home equity loan

• Borrow a lump sum of up to $500,000.
• Get funding in as few as 11 days.
• Minimum credit score to qualify is lower than comparable products.

Spring EQ was founded in 2016 and provides loans to borrowers in 40 states plus the District of Columbia. Its goal is to make the lending process painless—and it does so with an online application process and excellent customer service. 

Spring EQ’s home equity loan allows you to borrow up to 95% of your home’s equity to finance home improvement projects or other expenses. 

With same-day approval, get access to your loan within a couple of weeks. Spring EQ home equity loans offer flexible repayment terms between five and 30 years.  

• Interest rates (APR): Not disclosed
• Minimum credit score: 620
• Maximum LTV: 95%
• Draw period: N/A
• Repayment period: 5 to 30 years
• Discounts: Not disclosed
• Fees: Loan administration fee ($799) plus various third-party fees

How to choose the best home equity loan or HELOC

HELOCs and home equity loans can be solid options to borrow against your home equity. HELOCs can make more sense if you have variable expenses, and home equity loans offer access to a large lump sum. Repayment is often a fixed amount over a specified time.

If your self-employment income is variable, you might feel more secure with the flexibility of a HELOC. 

Once you decide on a product, shop around for a lender. Lenders and products will vary in many ways, including: 

• Interest rates
• Fee structures
• Processing times
• Loan terms
• Potential discounts

It pays to research and find a lender you want to work with. Before choosing a lender, check customer reviews to ensure it will meet your needs.

After settling on a lender, you’ll gather your information for your application. This often includes personal information, financial information, and your home’s estimated value. After the lender reviews your application, you’ll provide verification documents such as bank statements and tax transcripts. 

Then you’ll need to get your home appraised (your lender will arrange this), and it will complete a “hard” credit check.

Check out our research on the best home equity loans and best HELOCs.

Alternatives to HELOC or home equity loan for a self-employed borrower

If you’re concerned about your chances of approval—or if you applied for a loan and were denied—you may be able to secure the following funding options.

Cash-out refinance 

A cash-out refinance gives you quick access to more cash by replacing your mortgage with a bigger one. You’ll repay a new, larger mortgage in exchange for more money in your pocket. 

You can often find a lower interest rate with a cash-out refinance than a home equity loan or HELOC.

Home equity sharing agreement

A home equity sharing agreement, or home equity investment, gives an investment company a portion of your equity in exchange for a lump sum. 

Unlike HELOCs and home equity loans, a home equity shared agreement isn’t a form of debt, so it can be easier to qualify. 

Home-sale leaseback

A home-sale leaseback transaction involves a property owner selling their home and then leasing or renting it from the new owner. This option gives those struggling to qualify for a loan access to immediate cash without moving out of their home.