What is the maximum HELOC loan amount?
A home equity line of credit, or HELOC, allows homeowners to access cash by borrowing against the equity they have in their homes.
The maximum HELOC amount you can borrow will depend on the value of your home, what you own on your current mortgage, and what percentage of the home value your lender will let you cash out. Most lenders let you borrow up to 85% but some will go higher — up to 90% or even 100%.
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HELOC loan limits
Lenders determine the loan limit on a HELOC by offering a portion of your home’s value as your credit limit.
The maximum HELOC amount is shown as a percentage (usually 85%) which represents the amount you can borrow against your home in total — including your HELOC and anything you own on your existing home loan. This is known as your combined loan-to-value (CLTV).
Lender guidelines vary, but the average HELOC limit offered by most lenders is 80%-85%. That means your HELOC amount and your current mortgage balance, when combined, can’t exceed 80%-85% of the home’s appraised value. Some lenders allow up to 90%, and some even as high as 100%. The higher the LTV, the higher your interest rate.
Typically, HELOCs that exceed 90% of the home’s value are only offered by lenders that issue memberships (i.e. credit unions).
Lenders can impose dollar limits on HELOCs as well as CLTV limits. Dollar limits vary by lender; $10,000 to $25,000 are “normal” lower limits often borrowed, while higher HELOC limits can range as high as $1,000,000.
How your maximum HELOC amount is determined
The maximum loan amount for a home equity line of credit varies by lender. The amount you can borrow also depends on:
- The amount of equity you have in your home
- Your credit scores
- Lender guidelines
If your house is worth $350,000 and you owe $175,000 on your existing mortgage, your loan-to-value ratio is 50% ($175,000 / $350,000 = .50 or 50%.) Many lenders offer HELOCs to a maximum of 85% loan-to-value.
Using the same scenario as above, here’s how a lender may determine how much you could borrow:
|Current Mortgage Balance||$175,000|
|Maximum LTV||85% (0.85)|
|Maximum Total Balance (Mortgage + HELOC)||$297,500 ($350,000 x 0.85)|
|Maximum HELOC Amount (Total Balance - Mortgage)||$122,500|
Numbers are for example purposes only. Your own loan amount will be different.
Factors that impact your max HELOC amount
Besides your home’s value, current mortgage balance, and lender guidelines, other factors may affect your maximum HELOC amount.
Your credit score
The higher your credit score, the more likely you are to qualify for a low interest rate on your HELOC. A low rate helps increase your borrowing power. On the flip side, a poor credit score may hurt your chance of qualifying, or it could mean a higher interest rate and a lower loan amount if you do qualify. Most lenders require credit scores of 660 to 700 for a HELOC.
The interest rate
Interest rates on HELOCs vary depending on your credit, your financial situation, and what the economy is doing at the time. Rates for second mortgages (HELOCs and home equity loans) are usually slightly higher than the rate you’d pay on a primary mortgage.
Your debt-to-income ratio
Your debt-to-income ratio (DTI) will determine just how much you can afford to borrow when qualifying for a HELOC. Debts included in your DTI include your existing mortgage payment, credit card minimum payments, and payments on other installment loans like student or car loans. Child support and alimony payments are also included.
The less money you spend on other existing debts each month, the more you can borrow on a HELOC. The lender will require proof of employment and income in order to calculate your DTI. Typically, a HELOC requires a lower DTI than a traditional mortgage.
New home appraisal
When you apply for a HELOC, your lender may require a new home appraisal. Your home’s appraised value is important because it’s used to calculate the amount of equity in your home. The higher your home’s appraised value, the easier it will be to borrow money based on your home equity.
HELOC loan limits FAQ
While many lenders cap their loan-to-value limits at 80%-85%, some lenders allow you to borrow up to 90% of your home’s value using a HELOC. Keep in mind that the maximum HELOC limit includes both your HELOC amount and any existing mortgage balance(s) on the home. Your current loan amount will be subtracted from your maximum borrowing limit to determine your HELOC amount.
Most lenders offer HELOCs up to 85%. Some credit unions offer high-LTV HELOCs up to 100% of your home’s value, but these are far less common.
The impact a HELOC can have on your credit score typically relies on the amount of credit actually utilized, not the unused portion. Further, an unused home equity line of credit can actually have a positive impact your credit score, as it increases your overall available credit and thus reduces credit utilization.
Although the minimum HELOC payment on your credit report represents the interest-only payment due, that payment does impact your DTI. This may impact your ability to borrow additional funds for other means.
Most lenders do not allow borrowers to increase a HELOC within 12 months of establishing the loan. To increase your line of credit, contact your lender and request to modify the terms of your current HELOC.
Yes. You can open a home equity line of credit and leave it unused. If your HELOC has a zero balance it may help improve your credit score, too.
Your next steps
A home equity line of credit is a great way to leverage the value of your home and ensure you have funds available when you need them. And, the interest-only payment option means you have the option of making lower payments if needed.
If you need money due to a layoff or furlough, to make home repairs or renovations, or simply to consolidate high-interest credit card debt, a HELOC can be an easy and inexpensive way to access cash. Many lenders offer HELOCs so be sure to shop around and compare costs, rates, and terms offered.