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We are considering taking out a home equity loan for construction before our permit application is approved. It's almost guaranteed at this point but there is always chance it may not be approved. Since the loan application takes 30-40 days, we want to start the loan application now. At what point during the wait can we cancel the loan application, if we need to, without any issues, financial penalties, etc. I.e. basically walk away from the paperwork?

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    Have you asked your bank? – Philipp Apr 24 at 15:05
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Ask the potential lenders about the relationship between the timing of the loan application and the events linked to getting the building permits. They should be able to explain their timelines, and what happens if the permit is denied or delayed.

I know you said home equity loan, but make sure you understand if it is a loan or a line of credit. The difference can be one where they loan you a lump sum, and the other where you make multiple withdraws up to the approved limit. Depending on the timeline of the construction one may be better than the other. A bathroom remodel can take a few days, adding an addition can take months. You might not need all the money at once, and you don't want to pay interest for money that is sitting in your bank account. They also might have a minimum amount that has to be withdrawn at loan origination.

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