A home equity line of credit—better known as a HELOC—can be a smart way to tap into the value of your home. It works like a revolving credit line, similar to a credit card, but it’s secured by your home’s equity. One of the first questions most homeowners ask is: How much can I actually borrow with a HELOC?
The answer depends on a few key factors.
1. How Lenders Calculate Your Borrowing Limit
Most lenders allow you to borrow up to 75%–85% of your home’s value, minus the balance you still owe on your mortgage. This is called your combined loan-to-value ratio (CLTV).
Example:
- Home value: $400,000
- Mortgage balance: $250,000
- 80% of home value: $320,000
- Subtract mortgage balance ($250,000)
- HELOC credit line available: $70,000
This calculation gives lenders confidence that you still have equity in your home after borrowing.
2. Your Credit Score and Debt-to-Income Ratio
While your home’s value plays the biggest role, your credit score and debt-to-income ratio (DTI) also matter. A strong credit score (typically 680 or higher) and manageable debt levels may qualify you for a larger line of credit and better interest rates.
3. Income and Employment Verification
Since a HELOC is a loan, lenders want to ensure you can make payments. Stable income and employment history strengthen your application and can influence your borrowing power.
4. Lender Rules and Market Conditions
Every lender sets its own policies, and borrowing limits may change with interest rate trends, housing market shifts, or local regulations. Some may cap HELOCs at a certain dollar amount regardless of your home’s equity.
5. Remember: You Don’t Have to Use the Full Amount
Even if you qualify for a $70,000 line, you don’t have to draw it all at once—or at all. A HELOC gives you flexibility: you can borrow only what you need, when you need it, and you’ll pay interest only on the amount you actually use.
The amount you can borrow with a HELOC depends on your home’s value, how much you owe on your mortgage, and your financial profile. In most cases, you can access up to 75%–85% of your home’s value, minus your mortgage balance.
A HELOC can be a powerful financial tool, but it’s important to borrow wisely and consider how it fits into your long-term goals.
By: Jon Iacono