Last updated: April 18, 2024

Mortgage Products

What to expect during the home equity loan closing process

Happy father carrying son piggyback at home

Do you remember having to close on your home’s first loan? Well, you’re going to have a closing on a home equity loan too! Let’s talk about how the home equity loan closing process works.

Processing your home equity loan

After you’ve applied for your loan, you will enter a processing period. During the processing period, your lender will conduct all the necessary due diligence required to approve your loan application.

For most lenders, this processing period includes:

  • Verifying your borrowing ability and creditworthiness (this is called “underwriting”)
  • Conducting an appraisal of your home
  • Running a title search to verify any existing liens or debts secured by your property
  • Preparing the home equity loan documents

This processing period usually requires the expertise of licensed appraisers, attorneys, title agents and other support staff. For this reason, most home equity loans also carry fees and closing costs.

Home equity loan closing costs and fees

With lenders that do charge fees and closing costs, you may be able to roll the cost into the loan amount so that you do not have to pay for these expenses upfront.

The largest cost associated with your home equity loan is the interest you pay on the borrowed funds. Your interest rate will vary by lender, and is often based on a combination of your credit score, loan amount, lien position, and combined loan-to-value (CTLV) ratio which is your loan amount plus your current mortgage balance divided by your home value.

Lower CLTVs generally result in lower interest rate offers. It is important that you understand how those rates work and how they affect your monthly payment before you close on your loan. 

Some loans may come with a fixed rate, while others might carry a variable rate. Variable rates usually include a cap that stops the interest rate from going over a specified amount.

LEARN MORE: Home equity loan closing costs & fees

Discover® Home Loans offers low, fixed rates on home equity loans up to 90% CLTV with $0 costs due at closing.  

Navigating the home equity loan closing process

Taking out a home equity loan may open the door to various financial opportunities. However, understanding the details of the home equity loan closing process might feel like trying to decode a complex puzzle while blindfolded. Don’t worry, though! The process can be broken down into clear steps and timelines:

  • Start at the beginning: The home equity loan closing process is like the grand finale of a fireworks show – there’s plenty of anticipation and excitement. This is the stage where all the legal and financial aspects come together, and you officially seal the deal on your loan. It’s the moment where you dot the i’s, cross the t’s, and celebrate because you successfully unlocked the equity in your home.
  • Gather the documents: Before you cross the finish line, you’ll need to gather together several documents. Think W-2 forms, pay stubs, tax returns, mortgage statements, and various other personal financial records. Your lender will let you know what they need to review and when they need it – they will check these records to determine that you’re a responsible borrower who is likely to repay the loan on time.
  • Anticipate an appraisal: Your lender will order an appraisal of your home to determine its current market value. This value is essential for finding your current CLTV ratio and may ultimately impact the interest rates you can qualify for. There are different methods for conducting an appraisal that your lender may use, so be sure to ask what to expect before you apply.
  • Dive into the disclosures: As you continue to wade through the closing process, various disclosures will be sent your way. These documents give you the rundown on all the details lenders are required to provide before you close on your loan. They disclose the terms, conditions, and potential risks associated with your new loan. Make sure to read them carefully, and don’t hesitate to ask questions if something doesn’t add up.
  • Sign on the dotted line: Last but not least, it’s time to sign on the dotted line. This moment is the climax you’ve been waiting for – the lender provides you with a final agreement, and once you’ve reviewed it, agreed to it, and signed it, your home equity loan is officially locked in.

Remember, the home equity loan closing process might seem like a whirlwind of jargon and formalities, but at its core, it’s a journey toward utilizing the equity you’ve built in your home. Take it one step at a time, and celebrate each milestone along the way.

How long it takes to close on a home equity loan

The process of getting a home equity loan will vary depending on homeowner and lender details. With Discover® Home Loans, it typically takes an average of 6-8 weeks from the time you submit an application to when you receive funds from a home equity loan. That time breaks down like this:

  • Getting the basics (around 1-2 weeks). Apply online or over the phone to review your loan options, then upload required documents. We’ll confirm your initial eligibility.
  • Processing your info (around 4 weeks). We’ll gather third-party information about your home and then send your complete application to underwriting for a final decision.
  • Closing you loan (around 1-2 weeks). We’ll contact you to schedule your closing and then arrange for your loan funds to be sent to your accounts.

You can help the process go smoothly by sharing requested information in a timely manner via our secure website.

Closing on your home equity loan

Once the processing period is complete, it is time to close on your home equity loan.

In most cases, a notary will meet you at your home, office, or other convenient location where you will sign your loan documents. In some states, an attorney that we will provide will need to be present as well.

Once the loan is closed, you have three business days to change your mind and cancel the loan, known as the right of rescission. You will typically receive your money on the 4th business day after closing.

If you’ve decided a home equity loan from Discover is the best for your needs, your next step is to apply.

Tap into your equity today

Get the funds you need for home improvements, debt consolidation, or life's next big adventure.

Start your application online or give us a call.

  • Weekdays 8am–Midnight ET
  • Weekends 10am–6pm ET