Can I get a HELOC without telling my mortgage lender?

Now that you’ve reached the point where you need cash for something important to you, it’s smart to explore all of your options before making a move. The power to access the wealth you’ve already built is in your hands, and your privacy concerns are valid.

A home equity line of credit (HELOC) could be a lifeline when you need cash. Even if you’re still paying down your mortgage, you don’t have to let that lender know about your new financial goals or how you plan to reach them.

Let's look at how to get a HELOC when you already have a mortgage. 

Do you need to notify your mortgage lender to get a HELOC?

No, you don't need to notify your lender that you want to apply for a home equity loan or HELOC. You can apply without lender permission. Also, you don't need to pay your existing mortgage off first to get a home equity line of credit. 

You can apply for a HELOC with any lender—it doesn't have to be the one that holds your mortgage currently. If you're approved, you're not obligated to tell your original lender about the line of credit either. 

The HELOC lender will ask about your mortgage when you apply, but that's not unusual. HELOC lenders use details about the loans you already have, along with other factors, to decide what to approve you for. 

Read more: How does a home equity loan work?

How does lien priority work with a HELOC?

A HELOC is a type of mortgage, just like the loan you used to buy your home. When you get a mortgage, it creates a lien against your home. A lien means the lender has a legal claim to the property as long as you owe on the loan. 

You can have more than one mortgage and more than one lien, but they aren't treated equally for repayment. The mortgage you used to buy the home is your first mortgage. Any other home loans you get are second mortgages. There's no real difference between a second mortgage vs. home equity loan: A home equity loan is a type of second mortgage, and it creates a second lien. 

HELOC second lien rules come into play if you sell your home or a financial hardship leads to foreclosure. Here's how mortgage payoff works in those scenarios:

• If your home is sold, either to a private buyer or through foreclosure, the first mortgage gets paid off first.

• Any money left from the sale would go toward the second mortgage lender. 

• If there's still money leftover after both home loans are satisfied, it goes to you.

Can you take a HELOC with you if you sell? No, generally your lender will require you to pay it off from the proceeds of the sale. Once you buy a new home, you can look into your options for a new HELOC. 

Will your mortgage agreement allow a HELOC?

It's uncommon for a mortgage lender to tell you that you can't get a HELOC while you already have a home loan, though it could happen. Your mortgage agreement should say whether there are any rules or requirements you need to follow to get a HELOC. 

How does a HELOC work if you plan to refinance? You could potentially run into trouble if you already have a HELOC and want to replace your first mortgage with a new one. Here's why, and what it might mean for you.

• As soon as you pay off a mortgage (including by using a new mortgage refinance loan), the HELOC gets pushed up the priority ladder for repayment. 

• Your refinance lender might require the HELOC lender to agree to subordination, which means the HELOC gets pushed back into the second lien spot.

• If your HELOC lender won't agree to subordination, that could put a wrinkle in your refinance plans. 

Why would a refinance lender ask this? Because it's a way they manage their risk when granting you a new mortgage loan. If you're interested in a mortgage refinance while you have a HELOC, you'll need to be ready to do some back-and-forth with both lenders to work out all the details. 

What's the risk of taking out a HELOC without understanding the terms?

A HELOC creates a new financial responsibility, so it makes sense to carefully review your loan terms before you sign. If you take out a HELOC and don't understand what you've agreed to, you risk straining your budget with a loan you can't afford. You could also run into complications later if you decide to refinance your current mortgage.

Here's what to review before you sign off on a HELOC:

• Withdrawals. How will you be able to access your credit line? For example, will you get a debit card? Will you need to withdraw your entire credit limit right away, or can you take money out as needed? 

• Draw period. Your draw period is how long you have to withdraw funds from your HELOC. Once it ends, you can’t borrow more. For example, you might have a five-year draw period, followed by a 10- to 20-year repayment term. 

• Interest. HELOC rates may be fixed, which means they don't change, or variable. A variable-rate HELOC could have a higher or lower rate over time, which could affect your payments. 

• Fees. Some HELOC lenders charge fees for a line of credit. For example, you might pay an origination fee to get a HELOC, late payment fees, or prepayment penalties if you pay your line of credit off early. 

Whatever your needs are, a HELOC could help you move forward with your life. Reviewing home equity loan requirements can help you gauge how likely you are to qualify. 

What's next

• Check your HELOC rates and get a quote to find out what you might qualify for, based on your credit scores, home equity, income, and debt. 

• Use a HELOC calculator to estimate what your monthly payments might be for a line of credit, based on your rate quotes. 

• Compare your estimated HELOC payment amount to what you already pay for your mortgage to figure out how easily it will fit into your budget.