How Much Can You Borrow With a Home Equity Loan?
ByKailey Hagen
UpdatedMay 4, 2025
- Home equity lenders typically loan up to 80-85% of your property value.
- The amount you can borrow depends on the appraised value of your property, your mortgage balance, your debt-to-income ratio, your credit history, and the lender’s loan limit.
- There are three types of home equity loans, each with pros and cons.
Table of Contents
If you own a home and you need cash for a financial emergency, or to pay for renovations or consolidate debt, you might turn to a home equity loan to cover these expenses. This lets you borrow against your home's value, often at a lower interest rate compared to other kinds of loans.
Many lenders let you borrow up to 80-85% of your home's appraised value. We’ll walk you through how to calculate loan amounts, how to qualify, home equity loan types, and how much you might qualify to borrow.
How much can you borrow with a home equity loan or line of credit?
Two key factors limit how much you can borrow with a home equity loan. The first is a dollar limit set by the lender. This varies by bank.
Second is the lender’s combined loan-to-value limit (CLTV). Loan-to-value means the amount you owe on your home compared to your home’s value. When you want to borrow against your home equity, the lender looks at your current mortgage balance (if you have one) and the home equity loan you want. They’ll add both loans together and compare the total to your home’s value.
CLTV example
Let’s say the lender’s maximum CLTV is 80%. Your home is worth $500,000, and you still owe $250,000 on your mortgage.
For this lender, your maximum CLTV will be $400,000 because that’s 80% of your home’s value. Since you still owe $250,000 on your mortgage, that means you could apply for a $150,000 home equity loan (or less) and still be under the lender’s maximum CLTV.
| Appraised home value | 80% of value | Mortgage balance | Home equity loan limit |
|---|---|---|---|
| $500,000 | $400,000 | $250,000 | $150,000 |
The lender will verify the value of your home, but you could get an idea by checking online real estate websites.
How do you qualify for a home equity loan?
Appraised value isn’t the only factor your lender will consider. A lender also looks at things like:
Your income. Lenders like to make sure that you have a regular source of income so you'll have a way to pay back the loan. You may need to provide W-2s and pay stubs to prove your income is consistent over time.
Your credit score. Each lender decides what its minimum credit score for a home equity loan will be. A higher score could help you get a lower interest rate, but you might still qualify with a lower score.
Your credit history. Most lenders will be interested in the types of accounts you have open, your payment history, and whether you have any outstanding balances in collections. If you have a lot of outstanding debt, you may not qualify (even with good credit).
Your debt-to-income (DTI) ratio. The percentage of your overall monthly income that goes to paying debt and housing is called your debt-to-income ratio (DTI). A high DTI means there might not be room in your budget for a new loan payment. A DTI at or below 43% could help you get the loan you want, but some lenders allow a higher DTI.
These are just some of the indicators lenders use to assess your ability to repay your loan. They can also look into your employment situation, recent applications for other new credit accounts, and other factors.
What are your home equity loan options?
If you meet the lender’s qualifications, you may qualify for a home equity loan. You could have several possibilities. Here are the three standard home equity loans.
Cash-out refinance loan
With the cash-out refinance method, you pay off your existing mortgage with a new, larger loan. Then you get the difference back in cash that you can spend. Cash-out refi loans replace your current mortgage.
Cash-out refi loans are worth considering if you can qualify for a lower rate than you’re paying on your current mortgage, and you want to borrow extra cash at the same time.
Home equity line of credit (HELOC)
A home equity line of credit (HELOC) is a type of second mortgage. It works much like a credit card. You get a line of credit and can borrow from it whenever you want, up to your loan limit. You control how much you borrow at any given time. If you pay back some of what you've borrowed over time, you replenish your available credit and could borrow more if you need to.
The borrowing period on a HELOC typically lasts for five to 10 years. This is called the draw period. When the draw period ends, you enter the repayment period and can’t borrow more.
The interest rates on HELOCs tend to be lower than the rates on personal loans and credit cards because HELOCs are guaranteed by your home. Like credit card interest rates, many HELOC interest rates are variable and could fluctuate over time.
HELOCs may be a good option if you have several upcoming expenses you need to cover.
Traditional home equity loan
A home equity loan is a one-time lump-sum loan guaranteed by your home. Like HELOCs, home equity loans are second mortgages and tend to have lower interest rates compared to personal loans and credit cards. Many traditional home equity loans carry fixed rates and fixed monthly payments for the life of the loan.
A home equity loan could be a good choice if you need a large amount of cash all at once. Many people use traditional home equity loans to pay off debt, cover a home renovation project, or pay off student loans. It's possible to get a home equity loan with bad credit too, though that's ultimately up to the lender to decide.
The interest you pay on a cash-out refinance loan, HELOC, or home equity loan may be tax deductible. Talk to a qualified tax advisor about your situation.
What fees and other costs will you have to pay?
Similar to your original mortgage, there are fees and closing costs associated with home equity loans. These vary depending on the lender, but could range from 3% to 6% of the total loan amount. You may have to pay for:
Loan origination (a fee the lender charges for making the loan)
Home appraisal
Loan application
Attorney
Title search
Paperwork filed
Credit report
Property tax proof
Flood evaluation certificate (if applicable)
Some lenders may let you roll these costs into the home equity loan itself so you don't have to pay cash out of pocket.
Deciding if a home equity loan is right for you
If you’re asking, “How much can you borrow on a home equity loan?” then you already understand one of the benefits of home ownership. It's not just about having your own space. Home ownership can also give you access to a financial reserve you can draw upon as needed.
Read Next: 5 Smart Ways to Use Your Home Equity
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during November 2024. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Age distribution of debt relief seekers
Debt affects people of all ages, but some age groups are more likely to seek help than others. In November 2024, the average age of people seeking debt relief was 49. The data showed that 17% were over 65, and 18% were between 26-35. Financial hardships can affect anyone, no matter their age, and you can never be too young or too old to seek help.
Credit card debt - average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average credit card debt for those with a balance was $6,021. The percentage of families with credit card debt was 45%. (Note: It used 2022 data).
Unsurprisingly, the level of credit card debt among those seeking debt relief was much higher. According to November 2024 data, 88% of the debt relief seekers had a credit card balance. The average credit card balance was $15,618.
Here's a quick look at the top five states based on average credit card balance.
| State | Average credit card balance | Average # of open credit card tradelines | Average credit limit | Average Credit Utilization |
|---|---|---|---|---|
| District of Columbia | $16,967 | 7 | $24,102 | 121% |
| Arkansas | $12,989 | 9 | $28,791 | 83% |
| Tennessee | $13,822 | 9 | $27,261 | 82% |
| New Mexico | $11,860 | 8 | $25,731 | 82% |
| Kentucky | $12,834 | 8 | $26,156 | 81% |
The statistics are based on all debt relief seekers with a credit card balance over $0.
Are you starting to navigate your finances? Or planning for your retirement? These insights can help you make informed choices. They can help you work toward financial stability and security.
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