How Much Equity Can You Borrow?
The short version
- Lenders limit your total home debt to a percentage of your home's value, called combined loan-to-value (CLTV).
- Many lenders cap CLTV somewhere around 80% to 85%. Some go higher, some lower.
- What you can borrow is roughly that cap, minus what you already owe.
- The lender's valuation and your credit profile decide the real number.
Start with your equity
Equity is your home's current value minus everything you owe against it. If your home is worth $400,000 and your mortgage balance is $220,000, you have $180,000 in equity.
You generally cannot borrow all of it. Lenders want a cushion in case home values fall, so they cap the total of all loans secured by the home.
Combined loan-to-value
Combined loan-to-value adds your current mortgage balance to the new loan or credit line, then divides by the home's value. A lender with an 80% cap will allow total home debt of up to 80% of the value.
Worked example
Home value: $400,000
Lender's CLTV cap: 80%, so the maximum total home debt is $320,000
Current mortgage balance: $220,000
Possible borrowing room: $320,000 − $220,000 = $100,000
With an 85% cap, the same home would allow $340,000 in total debt, or $120,000 of room.
To repeat this with your own numbers: multiply your home's value by the cap, then subtract your mortgage balance and any other loans secured by the home.
What changes the real number
- The valuation. Lenders use their own appraisal or automated valuation, which may differ from an online estimate or what a neighbor's home sold for.
- Your credit profile. Stronger credit can qualify for a higher cap. Weaker credit can mean a lower one.
- Your income and debts. Even with plenty of equity, a lender will limit the amount to what your income can support.
- The property. Second homes and rental properties usually have lower caps than a primary residence.
- Lender limits. Many lenders set minimum and maximum line sizes regardless of equity.
Borrowing less than the maximum
The most you can borrow is not the same as the amount that makes sense. Keeping some equity untouched gives you room if home values dip or if you need to sell. Work out what the payment would be at a higher interest rate than today's, and check that it still fits your budget.
About online estimates
Any figure you see before a lender has reviewed your information, including the estimate shown on our own form, is an illustration based on what you entered and a general loan-to-value assumption. It is not an appraisal, an approval or an offer.
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This guide is general information to help you ask better questions. It is not financial, legal or tax advice, and it is not an offer of credit. Loan terms, eligibility and costs are set by each lender and vary by state and by borrower.