How Do I Get a Loan on a House That Is Paid For?

It’s possible to get a loan on a house that’s fully paid for. Your options include a home equity loan, home equity line of credit (HELOC), and cash-out refinance. Because you own 100% of the equity in your home, lenders may view you as a lower risk, which can increase your chances of securing these types of loans.   

Table of Contents

1. I own my home outright and need a loan; what are my options?
2. Where do I get a loan if I own my house outright?
3. How do I get a loan on a house that is paid for?
4. How to apply for a home equity loan if your house is paid off
5. Pros and cons of taking out a loan on a paid-off house
6. Should you take out a loan on a paid-off house?
7. How we rated our top choices for getting a loan with your home is paid off

I own my home outright and need a loan; what are my options?

Homeowners have several options for accessing their home equity. These include a home equity loan, HELOC, and cash-out refinance. Each offers unique borrowing features, such as when and how you can access your loan funds. 

Use a home equity loan on a paid-off house

A home equity loan gives you a one-time lump-sum payment at closing. The amount you can borrow is based on the amount of home equity you have—in this case, 100%. Compared to homeowners who still have a mortgage, your loan amount may be larger. 

With a home equity loan, repayment looks much like it does on your first mortgage. You’ll pay the loan back—plus interest—monthly until the entire loan is paid off. Typical home equity loan terms range from five to 30 years, depending on the lender.

Interest rates on most home equity loans are fixed, so your rate and payment won’t jump over time. Because they’re secured by collateral (your house), they also tend to have lower rates than other types of loans and credit cards.

Use a HELOC on a paid-off house

A HELOC is a type of mortgage that works like a credit card. It turns your equity into a line of credit, which you can withdraw from as needed over an extended period. These can be solid options if you’re not sure how much money you’ll need or if you have recurring expenses.

Most HELOCs require interest-only payments until your draw period ends—often 10 years. After that, you’ll begin making full interest and principal payments to the lender.

Many HELOCs have variable interest rates, which can fluctuate over time. However, several lenders offer fixed rates.

Keep in mind that some lenders offer HELOCs that work similarly to home equity loans. Figure, for example, requires that you withdraw the full amount of your line of credit, though you can pay it back and keep withdrawing funds during the draw period.   

Use a cash-out refinance on a paid-off house

A cash-out refinance is another way to leverage the equity you have in your house. Typically, you’d use a cash-out refinance to replace your mortgage with a new one at a higher balance and pocket the difference between the two balances at closing.

If you don’t have a mortgage, you can still use a cash-out refinance—and it might even mean a lower interest rate than other financing options. The loan amount will be paid out to you instead of a mortgage lender first. 

However, closing costs tend to be high on cash-out refinances, so make sure you have cash on hand to cover them. According to Freddie Mac, the average closing cost on a refinance is around $5,000.

Where do I get a loan if I own my house outright?

It’s wise to shop around to see what you may qualify for and find the best rates and repayment terms for your situation. To help you make a decision, here are several lenders we recommend. We chose them based on factors such as competitive rates and fees, the ability to apply for a loan online, flexible repayment plans, and rate transparency. Plus, we looked at other benefits that help you as you’re repaying your loan. 

Figure

Best Overall HELOC

4.9 _/5

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About Figure’s HELOC

Figure is a strong choice for homeowners seeking a smaller HELOC, even if their home is fully paid off. 

You must draw the full loan amount at origination, but you can redraw during the five-year draw period if you pay off some of the balance. Aven also offers multiple repayment options. The loan amounts start as low as $5,000, making them suitable for smaller home improvement projects or financial needs without the burden of a large loan.

• Low minimum loan amount of $5,000
• Maximum LTV up to 89%
• Check rates without affecting your credit score
• Flexible repayment terms

Rates (APR)	6.99% – 15.49%
Loan amounts	$5,000 – $250,000
Draw period	5 years
Repayment terms	5, 10, 15, or 30 years
Origination fee	4.90% first-draw fee
Maximum LTV	89%
Minimum credit score	640

Aven

Best for Small HELOCs

4.8 _/5

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About Aven’s HELOC

Aven is a strong choice for homeowners seeking a smaller HELOC, even if their home is fully paid off. 

You must draw the full loan amount at origination, but you can redraw during the five-year draw period if you pay off some of the balance. Aven also offers multiple repayment options. The loan amounts start as low as $5,000, making them suitable for smaller home improvement projects or financial needs without the burden of a large loan.

• Low minimum loan amount of $5,000
• Maximum LTV up to 89%
• Check rates without affecting your credit score
• Flexible repayment terms

Rates (APR)	6.99% – 15.49%
Loan amounts	$5,000 – $250,000
Draw period	5 years
Repayment terms	5, 10, 15, or 30 years
Origination fee	4.90% first-draw fee
Maximum LTV	89%
Minimum credit score	640

FourLeaf Federal Credit Union

Best Credit Union

4.7 _/5

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About FourLeaf’s HELOC

FourLeaf Federal Credit Union is an excellent choice if your home is paid off and you’re looking for a large HELOC to fund significant projects or investments. 

With loan amounts ranging up to $1 million and a competitive introductory rate for high credit scores, FourLeaf offers favorable terms for homeowners with substantial equity. Its 10-year draw period is useful for long-term projects, making it a standout option for high-value properties.

• Loan amounts up to $1 million
• No origination fees
• 10-year draw period provides flexibility
• Competitive 12-month introductory rate for high credit scores
• Repayment terms up to 20 years

Rates (APR)	12-month intro rate of 6.99% for VantageScores of 720 and up; then a variable rate
Loan amounts	$10,000 – $1 million
Draw period	10 years
Repayment terms	20 years
Origination fee	None
Maximum LTV	75% for intro rate
Minimum credit score	670

LendingTree

Best Marketplace

4.5 _/5

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About LendingTree’s HELOC, home equity loan, and cash-out refinance

LendingTree is ideal for homeowners who have paid off their homes and want to explore multiple loan options in one place. 

As a marketplace, LendingTree connects you to a wide range of lenders offering HELOCs, home equity loans, and cash-out refinances. 

With no obligation to choose a lender, LendingTree allows you to compare rates and terms that best suit your financial goals, whether you’re looking for a small or large loan.

• Access to multiple lenders for comparison
• Wide variety of loan types, including HELOCs and cash-out refinances
• Minimum credit score as low as 620
• Customizable loan amounts and terms
• Quick prequalification process without affecting your credit score

Rates (APR)	Starting at 6.99%
Loan amounts	Vary by lender
Minimum credit score	620

How do I get a loan on a house that is paid for?

Lenders look at several factors when determining whether to approve you for a loan on a paid-off house. Lenders will look at your financial profile and see whether you meet the minimum requirements, such as:

• Debt-to-income ratio (DTI): This measures the percentage of your gross income going towards debt payments
• Credit score: Many lenders look at your score and credit history to assess the chances of you paying back your loan on time. 

Your loan-to-value ratio (LTV)—or how much the loans against your house compare to its current value—is also a significant factor in whether you qualify for a home equity loan, HELOC, or cash-out refinance. LTV also helps determine how much you can borrow.

Generally speaking, the lower your LTV is, the less risky you are to lenders, and the easier it is to get approved. Having your home paid off means you don’t have an outstanding balance on a mortgage, and your LTV is likely zero. This is a terrific sign for lenders.

Most lenders allow you to access 80% to 85% of your home’s value—minus any mortgage balance. If you have no balance, you can borrow up to 85% of your home’s total value.

• On a home worth $400,000, that’s a lump sum of $340,000 ($400,000 x 85%).
• If you didn’t have a paid-off house and your mortgage was $150,000, you’d only be able to access $190,000 [($400,000 x 85%) – $150,000].

How to apply for a home equity loan if your house is paid off

You can apply for a home equity loan, HELOC, or cash-out refinance in four general steps.

1. Find a lender

First, shop around for lenders. Apply to banks, credit unions, online lenders, and other options to ensure you get the best deal.

2. Apply and submit the required documentation

Your lender will require various financial documents to prove your income, assets, and debt. This might include W-2s, tax returns, 1099s, bank statements, and more. You’ll also need to agree to a credit check, which allows the lender to evaluate your payment habits and history with debt.

3. Get an appraisal

The lender will order an appraisal of your house to determine its current market value. This is how it calculates your LTV and how much equity you can access.

4. Close on your loan

You’ll attend a closing appointment, where you’ll pay your closing costs and sign your loan paperwork.

If you’re getting a home equity loan or cash-out refinance, you should see the lump sum in your bank account within a few days. With a HELOC, you should get a debit card and a checkbook that allows you to access your credit line.

Pros and cons of taking out a loan on a paid-off house

As with any financial move, consider the advantages and drawbacks of taking out a loan against a paid-off house.

Pros

• Access to large amounts of cash

• Lower interest rates than many other financial products

• Use the funds for any purpose

Cons

• Comes with closing costs and fees

• Could put your home at risk of foreclosure if you default on the loan

• You’ll need to make monthly payments

Should you take out a loan on a paid-off house?

Owning your home in full can make it easy to access cash when you need it without selling your house or paying sky-high interest rates like you would for credit cards. For example, it may be wise if you need a large amount of cash to make home repairs or renovations.

Still, it’s not right for everyone. Closing costs can be high, and the loan will use your house as collateral, so if you’re unsure whether you can make the new monthly payments—or if it would strain your finances—give it plenty of thought. 

For example, if you want to consolidate your credit card debt, consider how you plan to repay your loan while juggling your other financial obligations. If you don’t plan to close your credit cards, ensure you have a strategy in place so you’re not using them and risking further debt. 

If you opt to take out a loan against your home, map out a monthly budget to ensure you have the cash to cover your payments. You should also have enough savings to cover your closing costs—plus a few months of expenses in an emergency fund.

How we rated our top choices for getting a loan with your home is paid off

Since 2018, LendEDU has evaluated home equity companies to help readers find the best home equity loans and HELOCs. Our latest analysis reviewed 850 data points from 34 lenders and financial institutions, with 25 data points collected from each. This information is gathered from company websites, online applications, public disclosures, customer reviews, and direct communication with company representatives.

These star ratings help us determine which companies are best for different situations. We don’t believe two companies can be the best for the same purpose, so we only show each best-for designation once.

Recap of getting a loan on a house that is paid for