Understanding the HELOC: Do I Need an Appraisal?

A major part of qualifying for a home equity line of credit is understanding the value of your home, which in turn helps lenders know how much you can borrow. The way you can know the value is by getting an appraisal.

The appraisal is a fair estimate of your home’s value and is based on:

  • Its unique characteristics (square footage, bedrooms and baths, age, etc.)
  • Sales of similar properties
  • The home’s condition
  • Your property’s location

Appraisals are conducted by licensed and highly trained professionals who provide an unbiased assessment of your home and produce a full report that compares your property to other recently sold properties in your area.

But I just bought the home. Do I need an appraisal?

If you’ve recently purchased your home, you might be wondering, “can’t I just use my recent mortgage appraisal instead?” It’s a legitimate question. However, in the majority of cases, a separate appraisal is required in order to obtain a HELOC – and that’s a good thing. Lenders with strict requirements may require a full appraisal, while smaller HELOC loans may allow a drive-by appraisal, which uses available data and exterior photography to help determine a value.

Current automations aren’t bad, per se, but they can often pull from data in your market area and take into account different kinds of properties that may or may not be similar to yours – leading to an erroneous home value. For that reason, an up-to-date appraisal ensures you get a fair market value for your home verses an automated estimation.

How long you’ve owned the home can make a difference.

The next thing you need to consider is how long you’ve owned your home. Most lenders will not grant a HELOC if you’ve just purchased your home a few months ago. There are exceptions, most notably in the case of first-lien HELOCs. In addition, details about your financial situation matter. In some cases, people who have paid cash for their home or have a purchased a home as an investment property may have different options. That’s why working with a HELOC expert can significantly help you determine the right timeline and approach.

Once you have an appraisal, you can calculate your lender’s loan-to-value (LTV) percentage, which tells you how much money you can borrow against your home.

Click here to learn more about how much you can borrow

So, what’s the bottom line?

A fresh appraisal for a home equity line of credit protects the lender and you – the borrower. Getting a full appraisal, while expensive, allows you to get full market value for your home and access to the equity you need to make your financial goals a reality.


Control Your Equity, a service of Reliant Bank, is happy to answer your questions and help you understand your options. Our home equity specialists can help you identify and put into place the right approach to help you achieve your financial goals.

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This information will help our experts talk more specifically about your individual financial situation and help you more effectively.