How Much Can You Borrow With a HELOC?

What Is the Maximum HELOC Amount?

The maximum HELOC amount varies based on many factors, so it is important to understand how a HELOC works.

The maximum combined loan-to-value (CLTV) is usually the biggest determining factor in setting your loan limit. Most lenders cap the maximum you can borrow at 80% to 85% of what your home is worth. So, as a simple example, on a home worth $100,000, your combined mortgage and equity loan balance limit would be $80,000 or $85,000.

Remember, this combined loan to value ratio includes the new HELOC and your current loan.

Your lender will also consider your financial credentials, including credit and other debts, to determine your qualifying amount.

Maximum HELOC Amount Example

It can be helpful to look at some examples to understand how much your credit line amounts are likely to be if you take out a HELOC.

• If your home is worth $400,000 and your lender has a CLTV of 85%, you would be allowed to borrow a total of $340,000 (85% of $400,000).
• If you already have a $300,000 mortgage, the maximum HELOC amount would be $40,000 ($340,000-$300,000).

You can do this calculation yourself, or your lender can help you understand how much you can borrow.

Factors That Affect How Much You Can Borrow With a HELOC

The specifics on your HELOC limit are determined by your personal financial situation, because the lender follows mortgage guidelines intended to make sure borrowers can afford to repay the loan.

Limits are also based on your home's value and current mortgages because the lender wants to ensure there's enough collateral to secure the home equity line.

Here are the specific factors determining your HELOC limit.

• Your home equity: Since HELOCs are secured loans guaranteed by your home, your home equity is the most important factor.
• Your credit score: Lenders look at your credit score to help determine HELOC limits. A higher credit score may increase the likelihood of qualifying for more favorable interest rates and higher loan amounts.
• Your debt-to-income (DTI) ratio: This ratio compares your current debt payments to income. Most lenders have DTI limits that are dictated by mortgage guidelines designed to verify a borrower's ability to afford mortgage payments.
• Your home appraisal: Lenders will typically require a professional home appraisal to determine your home's current market value. If your home appraises for less than expected, this will affect the amount of equity you have and your loan-to-value ratio, which could reduce the loan limit.

How Much Equity Do You Need for a HELOC?

Lenders look closely at your home's equity when deciding on your maximum HELOC limit because they want to make sure that there's enough equity to cover the costs if you don't pay.

Most lenders require you to keep around 15% to 20% of your home's equity in your home. That's why your total loan value, including your existing mortgage and HELOC, is limited to 80% or 85% of the home's total value.

If your home is foreclosed on for nonpayment, your first mortgage lender gets paid first. HELOC lenders want to confirm there's enough money left over to cover the balance on the HELOC.

How to Estimate How Much HELOC You Can Get

Knowing your credit limit is important when borrowing, so here's how to estimate how large your HELOC could be:

• First, determine how much your home is worth. This involves estimating the fair market value of your house. You can get a rough estimate using online tools.
• Next, determine how much equity you currently have. Do this by subtracting your current mortgage balance from the home's value. If you owe $200,000 and you estimate your home is worth $400,000, the formula looks like this: $400,000 - $200,000 = $200,000. That's your home equity.
• Find out your lender's combined loan-to-value ratio. If your lender allows you to borrow 80% of what your home is worth, your total loans can't be above 80% of $400,000 or $320,000
• Subtract your current balance from the total amount you can borrow, so $320,000 (your CLTV) - $200,000 (existing debt).
• The remaining amount ($120,000) is the maximum HELOC you could borrow (assuming your credit and income meet qualifications).

Just remember, having equity does not always mean you will be approved. Having enough equity is the minimum requirement. You also need solid financial credentials. If a HELOC isn't the right fit or doesn't meet your borrowing needs, a cash-out refinance may be worth exploring.

HELOC Limit FAQs

If you still need to know more, here are the answers to some frequently asked questions about HELOC loan limits.

What Is the Biggest HELOC You Can Get?

Freedom Mortgage offers HELOCS up to $400,000, however the maximum HELOC you can qualify for depends on your equity, current loan balance, and financial credentials.

Most lenders allow your total combined loans against your home (like your mortgage and HELOC) to add up to a maximum of 80% to 85% of what your home is worth.

Can You Borrow All of Your Home Equity With a HELOC?

Lenders do not usually allow you to borrow all of your home equity with a HELOC. You are usually capped at taking 80% to 85% of the total equity out of your home. This limit applies across all loans guaranteed by the house, including the HELOC and any primary mortgage.

Is the Maximum on a HELOC 65% or 80% of Home Value?

The maximum on a HELOC varies depending on your lender's policies and financial credentials. Many lenders allow the maximum combined loan-to-value ratio to go as high as 80% or 85%. However, some lenders may have stricter caps, especially if you don't have solid credit or if your income is lower than mortgage guidelines.

Can You Get a HELOC While Still Having a Mortgage?

You can get a HELOC while still having a mortgage if you can qualify for the new loan. You must have enough equity to guarantee both loans. This means that the combined value of both your mortgage and HELOC usually must be below around 80% of what your home is worth.

Final Thoughts: How Much HELOC Could You Get?

A HELOC can be an excellent way to borrow, but there is a limit on the maximum HELOC you can qualify for. Avoiding too much debt, maintaining a good credit score, and steadily paying down your primary mortgage are key steps toward qualifying for a larger HELOC.

If you're ready to see how much you can borrow, reach out to Freedom Mortgage today to learn about our HELOC, get prequalified, and find out your loan limit.