Home » Home Savings » Why Homeowners With 660 Credit Score Need to Move Quick to Close on Their Home Equity Loan

Home Equity

Why Homeowners With 660 Credit Score Need to Move Quick to Close on Their Home Equity Loan

homeowner couple talking advisor about the best to cash out before your their credit score drops


  • Consolidating debt with a home loan is a financially prudent path if you can afford the monthly payments, especially if your debt is in a high-interest account like credit cards or personal loans
  • If your credit score is dropping and reaching 660 or lower, act fast before it’s too late. Almost all home loan lenders will reject your home loan application at a credit score of 640 or below.
  • Using House Numbers, you can check your credit score (soft credit check) and access your home equity all from the comfort of your home. There are 5 ways to access your home equity: home equity loans, HELOCs, cash-out refinancing, HEIs, and reverse mortgages.
  • ⚠️ Caution: If you fail to make your home loan payments after receiving the funds, you risk losing your home to foreclosure so make sure the new monthly payment is manageable!

If you’re a homeowner struggling to manage your debt payments, cashing out on your home equity sooner rather than later could save you money in the long run. A common way of doing this is using a home equity loan for debt consolidation. These loans can offer some of the lowest interest rates but often require a credit score of 640 to qualify. If your score is too low, you may have to consider more expensive alternatives. 

Credit scores tend to be more negatively impacted for borrowers carrying higher amounts of debt. If your loan balances have been increasing, it’s best to cash out before your score drops too low to get approved for a home equity loan. Credit scores also tend to impact the rate you get on a loan, so cashing out while you have a higher score can help you get a more competitive interest rate.

With House Numbers, we can help you figure out just how much you can cash out based on the characteristics of your property. You can use our free online tool to see just how much money you can save each month without negatively impacting your credit score. 

Homespring Icon

What are the different ways you can cash out home equity?

To convert your home equity into cash, you can utilize one of several methods. We’ve listed common methods below, provided descriptions of each, and highlighted the items most likely to impact you as a borrower, such as rates and fees. 

Cash-out methodTypical estimated APRTypical credit score requiredTypical repayment termTypical funding speedTypical closing costs
Home equity loan (HEL)8% to 13%64010 to 15 years14 to 30 days$0 to $500
Home equity line of credit (HELOC)8% to 13%64010 to 30 years14 to 30 days$0 to $500
Cash-out refinance8% to 10%6207 to 30 years30 to 60 days2% to 4% of the loan amount
Home equity investment (HEI)20%+50010 to 15 years30 to 60 days1% to 5% of the loan amount
Reverse mortgage (RM)9% to 14%NoneVaries30 to 60 days2% to 5% of the loan amount

What is the best way to cash out home equity?

Home equity loans and HELOCs are generally the best options for borrowers who need funds quickly. You’ll typically need a credit score of 640 and above to qualify as part of the underwriting process, but if you’re eligible, they can offer the lowest rates, fastest funding speeds, and lowest closing costs. 

With that being said, we also recognize that the best option may vary depending on your unique circumstances. As such, we’ve summarized who should consider each of the five ways to cash out your home equity

  1. Home equity loan: Best for borrowers who want a single lump sum of cash 
  2. Home equity line of credit: Best for borrowers who want the flexibility to draw funds on an as-needed basis
  3. Cash-out refinance: Best for borrowers who want to replace their existing mortgage with a new loan 
  4. Home equity investment: Best for borrowers who don’t want to make monthly payments
  5. Reverse mortgage: Best for borrowers age 55 and older who want to supplement monthly income without needing to make monthly payments

Home equity loan

With a home equity loan, you’ll get a single lump sum of funds issued to you. This makes it a great choice if you know exactly how much money you need and do not anticipate any recurring need for more funding. A home equity loan is a second mortgage, so it will be an additional payment on top of your existing first mortgage loan. 

Home equity line of credit (HELOC)

A home equity line of credit, or HELOC, is similar to a home equity loan. The main difference, however, is that a HELOC gives you the flexibility to draw funds up to a specified credit limit continuously. In other words, as you pay down the balance on the loan, you will have the ability to draw additional funds. 

In exchange for this flexibility, HELOCs sometimes have slightly higher interest rates or are structured with a variable interest rate rather than a fixed interest rate. 

Cash-out refinance

A cash-out refinance is a mortgage loan that replaces your existing first mortgage and gives you additional funds to be used for other purposes. This can be a good option to choose if interest rates are low, you want to replace the terms of your first mortgage entirely, or you don’t want to deal with a second mortgage payment. 

Home equity investment

Also sometimes known as a home equity agreement, this method of taking cash out of your home allows you to get a lump sum of money in exchange for a percentage of your home’s future increase in value. Home equity investments do not require any monthly repayments and can be easier to get approved for compared to a traditional loan. 

As an example of how this might work, let’s say your home is currently worth $500,000, and you agree to give the home equity investment company 20% of your home’s increase in value after 10 years in exchange for $50,000 today. In 10 years, if your home is worth $1 million, you would be required to pay the home equity investment company $100,000 (calculated as 20% of the $500,000 increase in value) in addition to the original amount of $50,000 you received. 

Reverse mortgage

With a reverse mortgage, a lending company pays you monthly installments of income in exchange for your home equity. You won’t need to make any monthly loan repayments, but because you’re giving up the equity in your property, this could be an ideal fit for those who aren’t concerned about passing on the home to other family members. 

Find the best way to unlock home equity

What can I do with the money I get from cashing out my home equity?

Unless specifically prohibited by your lender, you’ll be able to use the funds for nearly any purpose. We recommend considering it for debt consolidation and paying off higher interest-rate debt. Doing so will help you move from bad debt to good debt and can allow you to save money in the long run, give you more affordable monthly payments, and allow you to manage your debt better. 

What is the difference in rates between home equity loans and other debt?

Home equity loans typically have more competitive interest rates compared to many other types of consumer debt. For this reason, it can be beneficial to use a home equity loan to pay off and consolidate higher interest-rate debt. 

Type of DebtTypical Interest Rate (as of Q1, 2024)
Home equity loan8% to 13%
Student loan6% to 14%
Auto loan7% to 20%
Line of credit10% and up
Credit card30% and up

How can I improve my credit score?

Although building a good credit score or repairing bad credit can take time, there are some things you can do in the short term to impact your score positively. Making sure you have the minimum credit score for a home equity loan will truly open your financing options.

  • Hold off on unnecessary applications for credit: The more loans you apply for, the greater the risk you’ll appear to be. This will be reflected in the form of a lower credit score.  
  • Minimize the amount of the credit limit you’re using for each of your accounts: If you carry a balance on multiple revolving accounts, we recommend utilizing no more than 30% of each account’s available credit limit. If you can adjust your spending to get the balances to 10% or less of your available credit, your credit score should be even more positively affected. 
  • Reduce the number of accounts you have with a balance: In addition to the amount of the credit limits being utilized on your accounts, the number of accounts you have with a balance can impact your score. If possible, we recommend limiting spending to no more than 3 to 5 different credit cards and other loans. 
  • Don’t miss any payments: Missing a payment is one of the worst things you can do to your credit score. Continue making timely payments to show lenders that you are at low risk of defaulting on a loan, as this can improve your odds of getting approved. 
  • If you have missed payments, ask your lender for a goodwill removal: Some lenders may remove late payments from your credit report if you have an otherwise spotless payment record or a strong relationship with the bank. 

Following the tips above can help you maintain your credit score above the 640 threshold that most lenders require in order to issue a home equity loan approval. However, even if your score is above 640, raising it even higher can help you qualify for a more competitive interest rate. 

How do I cash out on my home equity?

If cashing out your home equity is the right move for you, the next step will be to find a lender that offers the type of financing you’re looking for. You can consider local banks, credit unions, online lenders, and business loan brokers. We recommend shopping rates with several companies so that you can choose the best financing option available. To help you choose the best one, we also recommend considering what is most important to you in a lender. Below is a list of some items you can consider:

  • Interest rates and loan fees
  • Flexibility of qualification requirements
  • Ease of loan application process
  • Loan approval and funding speeds
  • Number and location of office locations
  • Customer service hours of operation
  • Customer reviews and ratings

What are the risks of cashing out home equity?

Cashing out your home equity can be a good way to get your loan balances under control so that you can stop the cycle of debt. However, it’s important that you not consider your home equity as additional money. Rather, the funds should be used as a starting point for eliminating your debt payments. If you fail to do this and continue to let your debt increase, you could risk losing your home to foreclosure if you’re no longer able to make the minimum loan payments. 

How you can benefit from cashing out your home equity now

By cashing out your home equity, you can pay off higher interest-rate debt, lower your monthly payments, and start using your home to build wealth. The best methods of doing so often involve getting a home equity loan, and many lenders require you to have a credit score of 640 or above to get approved. Without this score, you’ll find it challenging to get a home equity loan and may need to resort to more expensive financing options. If you’re currently struggling with your debt payments, you should consider cashing out before your credit score drops below this threshold.

Find the best way to unlock home equity

Disclaimer: The above is provided for informational purposes only and should not be considered tax, savings, financial, or legal advice. All information shown here is for illustrative purpose only and the author is not making a recommendation of any particular product over another. All views and opinions expressed in this post belong to the author.

Andrew Wan

Written By Andrew Wan

With a decade of experience as a mortgage underwriter and a licensed California real estate broker since 2018, Andrew Wan use his expertise and experience to share insights on the housing industry. He covers a wide variety of topics, from buying a home to what the home loan process entails, and enjoy sharing tips to help better prepare you for how to make it all a seamless experience.