Borrowing against equity

How Much of My Equity Can I Actually Borrow?

You cannot borrow all of your equity. Lenders require you to leave a cushion behind, expressed as a maximum combined loan-to-value.

The 80% rule, worked out

Multiply your home's value by 0.80, then subtract every balance secured by the home. That remainder is the usual maximum.

On a $450,000 home with $210,000 of total debt: $360,000 − $210,000 = $150,000 available. That is the figure our calculator reports as borrowable at 80% CLTV.

What moves the cap

  • Credit score — strong files sometimes reach 85% or 90% CLTV.
  • Property type — investment and multi-unit properties get lower caps.
  • Income and debt-to-income ratio, which can limit you well before the equity cap does.

Approved is not the same as advisable

Borrowing to the cap leaves no room for a price correction and no room for the selling costs that come out of your side of the closing statement.

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Frequently asked

The cushion protects the lender against a decline in prices and the cost of a foreclosure sale.

For a HELOC it applies to the full credit limit, even if you never draw the whole line.

Part of The Homeowner's Guide to Home Equity.

More on borrowing against equity

HELOC vs. Home Equity Loan: What's the Difference?

A side-by-side comparison of HELOCs and home equity loans: rates, draw periods, payments, and best uses.

Cash-Out Refinance vs. HELOC: Which Is Right for You?

When it makes sense to replace your mortgage versus adding a second line of credit against your home.

What Credit Score Do You Need for a HELOC?

Typical HELOC credit score minimums, what rates each tier gets, and how to improve your odds.