At the year’s end, it’s fun to pick out the best innovations to appear during the past 12 months. What about the role of artificial intelligence in home lending?
More people might take out home equity lines of credit (HELOCs) to put their home equity to work — if only it weren’t such a drawn-out process. The typical HELOC setup takes five weeks. What if the HELOC application process could be completed in just five days? What if getting approved could be as fast as signing up for a credit card?
In 2023, two companies pooled their resources and proved it possible.
Can AI Build a Better HELOC?
The AI company Upstart Holdings, Inc., through its subsidiary Upstart Mortgage, is rolling out HELOCs. Dave Girouard, CEO of the California-based loan tech company, says these credit lines can now be:
- Approved in just ten minutes, by validating applicants and their property details immediately.
- Funded and ready to use in just five days.
- Done without the need to order an appraisal.
Girouard expects Upstart’s HELOCs to be a commercial success, too, with outstanding rates of repayment. How? Through the predictive powers of artificial intelligence.
The company rolled AI-powered HELOCs out in Colorado and Michigan first, and the pilot was successful. HELOCs are now among Upstart’s regular loan offerings.
Two Companies, Focused on Automation for Good
Vesta is a software company. It’s collaborating with Upstart Mortgage on the new AI-powered HELOC. Both firms, Vesta and Upstart, are well versed in complex financial regulations — particularly Upstart, which has been around for more than a decade. The two companies’ expertise complemented each other perfectly in the innovation they unveiled in 2023.
- Upstart (founded in 2012): This company has been working with lending institutions for the past several years, applying artificial intelligence to personal loans and vehicle loans. Its technology enables precision pricing, by accurately assessing risk. Upstart’s focus on automation reduces the need for manual review of documents.
- Vesta (founded in 2020): This company provides state-of-the-art loan origination software. Vesta’s platform lets customers easily enter information, ensuring a positive experience for borrowers.
Together, the two groups reworked the HELOC approval and lending process from application to closing. With Vesta’s task software, Upstart could pinpoint the rare questionable document, and redirect it for review. The vast majority of steps were successfully automated.
The AI HELOC’s Time Has Come
Buy a home, and you’re on a path to wealth-building. Especially in recent years, when home values have skyrocketed. Many owners have plenty of untapped home value. These homeowners might want to open a credit line and tap into that value — for goals like taking courses, renovating their homes, or…founding AI-based software companies?
Anyway, they might hesitate because of the tremendous inconvenience of:
- Gathering personal tax and financial records.
- Having personal credit information vetted by a lender.
- Waiting for a loan to be approved and funded.
- Preparing for a new home appraisal and possible new insurance requirements.
The reward for surviving the torment? A homeowner can get five, ten, even 20 years to draw on a line of credit. HELOCs free up as much as 85% of a home’s value for immediate uses. The loan interest is tax-deductible for those who opt to itemize deductions.
Does a HELOC get filed in the official deed records? Read up on How a HELOC Affects a Home’s Title.
And now, AI can automate most if not all of the approval and funding processes, turning a hair-raising paper chase into a straightforward matter.
In 2023, the world of HELOCs took a big step forward. It’ll be exciting to see how this unfolds in 2024.
Please note: Deeds.com is not a financial adviser. Nor are we affiliated with the companies or products discussed in this article. We offer this article to our readers for general information only, and not as financial guidance.
Supporting References
S&P Capital IQ via MarketScreener.com: Upstart Announces Successful Launch of New Home Equity Line of Credit Product (Nov. 2, 2023).
Paul Hughes for Home Equity Lending News: Upstart Debuts HELOCs, CEO Comments on AI (Sep. 6, 2023).
More on topics: Interest rates on HELOCs, HEL versus HELOC
Photo credit: Epic Top 10, via Flickr.com (CC-BY 2.0 Generic).