As a homeowner, you probably rest easy knowing you can tap into the equity in your home if you’re ever in a financial bind. But if you find yourself needing to access that equity during a time when you’re unemployed or don’t have a steady salary, you might wonder if it’s even possible to get a home equity loan without income.
It’s a tricky gray area. Lenders generally want to see that you can repay the loan, which often means proving financial stability. But don’t worry—there are creative solutions and alternatives that can help you leverage your home’s equity, even without a traditional paycheck.
There’s a wide range of people who fall under this category, including freelancers, self-employed individuals, unemployed, investors, and basically anyone who doesn't have a traditional monthly income to show as proof.
In this article, we'll explore how you can get a home equity loan without income, what to expect, and the steps you can take to make it happen.
Can you get a home equity loan without a job?
Getting a home equity loan without regular income is possible. However, qualifying for one will require jumping through a few more hoops than usual.
Lenders are likely to be much more cautious about approving your loan if you can’t show stable income—but they will be able to consider other aspects of your financial situation. “The lender will evaluate other factors like your credit score, loan-to-value ratio, and down payment amount,” says certified public accountant Russel Rosario.
The same is true for home equity lines of credit (HELOC). For anyone thinking, “can I get a HELOC without a job?” the answer is pretty much the same: Yes, but it depends on how you can demonstrate your ability to repay (we'll get to that shortly).
Home equity loan without income verification: How does it work?
This kind of loan allows you to borrow against your home’s equity without providing proof of a regular income. Instead, lenders may look at your overall financial picture—like savings, investments, or retirement accounts—to gauge your ability to repay the loan.
While you’ll still need to provide details about your home’s equity and credit score, the focus won’t be on proving your monthly income through pay stubs or tax returns. (Though they may ask to see a few years’ worth of tax returns to get a sense of your typical earning potential.)
Instead, you’ll show your ability to repay the loan through other means, such as significant savings or liquid assets. Be prepared to explain your financial situation in detail.
These loans are more common for people with substantial assets or those who may have non-traditional income sources, such as freelancers or retirees. The major con to consider is that lenders who offer no-income verification loans may charge higher interest rates or require you to have significant equity in your home (think 40-50%) to offset the risk.
Pros and cons of a home equity loan with no income
If you’re considering a home equity loan with no income, it’s important to weigh the pros and cons to make an informed decision.
Pros of a home equity loan without income:
- Access to funds: Even if you’re unemployed or without a steady paycheck, a home equity loan allows you to tap into your home’s value for major expenses, like medical bills, home improvements, or debt consolidation.
- No income verification: This can be a viable financing option for those who don’t have a traditional job but still have significant assets or alternative sources of income.
Cons of a home equity loan without income:
- Stricter requirements: Without income verification, you’ll likely face more stringent lending requirements, like needing a higher credit score or more equity in your home.
- Higher interest rates: To offset the risk of lending to someone without a regular income, lenders often charge higher interest rates, which could make your loan way more expensive in the long run.
- Risk of foreclosure: Because home equity loans are secured by your home, failing to make payments can result in losing your home. If you can't stick to a plan for repaying the loan, it's a double loss.
Can you get a home equity loan while unemployed?
Yes, it’s possible to get a home equity loan while unemployed, but you’ll need to provide strong evidence of your ability to repay the loan through non-traditional means. Lenders will be extra cautious, and you’ll likely face higher interest rates or stricter terms if you’re applying without an income.
Types of no-income verification loans
- SISA (Stated Income, Stated Asset): Borrowers state both their income and assets, but lenders do not require detailed documentation to verify either. The lender relies on the borrower’s word, plus other factors like credit score and home equity, to assess the loan. This type of loan is generally riskier for lenders and thus has higher interest rates.
- SIVA (Stated Income, Verified Assets): The borrower states their income without verification but must provide documentation (e.g., bank statements) to prove their assets. Lenders place more emphasis on the assets as proof that the borrower can repay the loan, even if income isn’t verified.
- NOVA (No Income, Verified Assets): In this loan type, borrowers do not need to provide income information but must verify that they have enough assets to support the loan. This is commonly used by people with significant assets but without regular income, such as retirees or investors.
- NINA (No Income, No Asset): The borrower neither states nor verifies income or assets. These loans rely heavily on other factors like the borrower’s credit score and the amount of equity in the property. NINA loans are rare and generally come with higher risks and interest rates.
How to get a home equity loan while unemployed
Not having a stable source of income doesn’t entirely disqualify you from getting a home equity loan or a HELOC. While traditional lenders typically want proof of employment or income, some lenders will consider your application if you can show a strong financial profile in other areas. Here’s what can help:
- Strong credit score: A good credit score (think 680 or above) shows lenders that you’ve managed debt responsibly in the past and increases your chances of approval.
- Significant home equity: Lenders are more likely to approve a loan if you have substantial equity built up in your home. The more equity you have (usually at least 20-30%), the more comfortable a lender will feel about approving the loan.
- Other sources of repayment: Even without a job, you might have other means to repay the loan, such as rental income, retirement accounts, or large savings balances. Demonstrating that you have enough cash flow or assets to cover loan payments can make lenders more confident in your ability to repay. “Be prepared to provide bank statements and tax returns to show a history of large deposits that demonstrate your ability to repay, even without traditional income,” Rosario says.
- Co-signer: If you’re having trouble qualifying alone, bringing in a co-signer with income or good credit can make all the difference. A co-signer agrees to take on responsibility for the loan if you cannot make payments, which reduces the lender’s risk.
- Larger down payment: Putting down a larger down payment—“preferably 20% or more,” Rosario says—can boost your chances of getting a home equity loan by lowering the loan-to-value ratio and showing the lender you’re committed. It also might help you get better loan terms, like a lower interest rate.
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Alternatives to a home equity loan without income
If you’re not confident you can qualify for a home equity loan without income, there are a few alternatives worth exploring:
- Personal loans: If you have good credit and need a smaller amount of money, a personal loan may be a simpler solution. Although the rates are higher, these loans don’t require home equity as collateral, which makes everything more dangerous.
- Cash-out refinance: If interest rates are low, a cash-out refinance could allow you to replace your existing mortgage with a new one at a lower rate while also pulling out some of your home’s equity as cash. However, you’ll still need to prove how you'll repay the new mortgage.
Bottom line
While it’s not impossible to get a home equity loan without income, it requires a strategic approach and may involve higher interest rates or stricter lending requirements. With a solid credit score, significant home equity, or alternative assets to back up your loan application, you can still get your way around, even if you’re temporarily unemployed or lacking a traditional income. Just remember, it’s important to have a repayment plan in place before taking out a loan secured by your home.