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When you’ve recently completed a cash-out refinance, you might think your access to home equity ends there—at least for a while. However, a Home Equity Line of Credit (HELOC) may still be an option, depending on several factors. One of the key considerations is the cooling-off period, a lender-imposed waiting time before you can apply for another home equity product. In this article, we break down how soon you can get a HELOC after a cash-out refinance, what impacts your eligibility, and what alternatives may be available.
What Is a Cooling-Off Period?
A cooling-off period is a timeframe imposed by lenders (or sometimes by state law) that must pass before you can apply for a new credit product after significant refinancing activity. While there’s no federal rule preventing you from taking out a HELOC shortly after a cash-out refinance, many lenders use a cooling-off period of 6–12 months to manage risk and ensure the equity evaluation is stable.
Why Lenders Require Cooling-Off Periods
- Risk Management: A cooling-off period helps lenders assess how well you’ve managed the new debt from the cash-out refinance before allowing further borrowing.
- Home Value Volatility: It gives time for the real estate market to stabilize in case of recent home appraisals.
- Regulatory Oversight: Some states have laws around successive home equity transactions to protect consumers from overleveraging.
How Soon Can You Get a HELOC After a Cash-Out Refinance?
It largely depends on the lender’s policy, your credit profile, and how much equity remains in your home.
Typical Requirements:
- Waiting period: Most lenders impose a 6-month to 1-year wait after a cash-out refinance.
- Loan-to-Value (LTV) ratio: Your total debt against the home’s value generally must be below 85%.
- Strong credit: A higher credit score and stable income may accelerate eligibility.
- No recent mortgage lates: A clean payment history is critical to qualify.
State-Specific Cooling-Off Periods
While there is no universal federal mandate, certain states like Texas have unique regulations around multiple home equity loans. For example, Texas law mandates a 12-month waiting period before you can apply for a second equity loan after a cash-out refinance.
Be sure to check local lending laws or speak to a knowledgeable mortgage professional.
Alternatives to a HELOC During the Cooling-Off Period
If you need funds during the cooling-off period, you might consider:
- Personal loans: These aren’t tied to your home and may offer faster access.
- Credit cards: Best for small, short-term needs—but be wary of high interest.
- Bridge loans: If you’re selling one home and buying another, this could help.
Does a Recent Cash-Out Refi Hurt Your HELOC Approval Chances?
It can, depending on how much equity you’ve already tapped. If your new loan significantly increased your LTV, lenders may see you as higher risk. However, with good income, low debt-to-income (DTI) ratio, and stable home value, you might still qualify.
Tips to Boost Your HELOC Eligibility
- Wait out the cooling period: Time can work in your favor.
- Make extra mortgage payments: Reduce your principal balance.
- Improve your credit score: Pay off revolving debts and avoid late payments.
- Update your home appraisal: Higher home values improve equity ratios.
FAQs
Is there a legal waiting period between a cash-out refinance and a HELOC?
Not federally, but lenders often impose one, and some states (like Texas) legally require it.
Can I get a HELOC right after refinancing if I still have equity?
Possibly, but only if your lender allows it and your financial profile is strong.
What happens if I try to apply before the cooling-off period ends?
Your application will likely be denied or delayed, depending on lender policy
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Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
