Most lenders cap the total debt on your home at a percentage of its value, called the combined loan-to-value ratio (CLTV). A common cap is 80% to 85%. Your possible HELOC limit is that cap minus what you still owe on your mortgage.
HELOC limit = (home value × maximum CLTV) − mortgage balance
Step 1: Estimate your home's value
The lender will order an appraisal or use an automated valuation model, so your own estimate is only a starting point. Recent sale prices of similar homes nearby are a better guide than online estimates. Be conservative: if the appraisal comes in lower, your limit drops.
For this example: $400,000.
Step 2: Apply the lender's CLTV cap
| CLTV cap | Maximum total debt on a $400,000 home |
|---|---|
| 80% | $320,000 |
| 85% | $340,000 |
| 90% | $360,000 |
Caps above 85% exist but are less common, and they usually come with higher rates or stricter credit requirements.
Step 3: Subtract what you owe
With a mortgage balance of $250,000:
| CLTV cap | Maximum total debt | − Mortgage | = Possible HELOC limit |
|---|---|---|---|
| 80% | $320,000 | $250,000 | $70,000 |
| 85% | $340,000 | $250,000 | $90,000 |
| 90% | $360,000 | $250,000 | $110,000 |
Step 4: Check the other limits
Equity is only one test. The lender also looks at:
Credit score. Many lenders want 680 or higher, and the best rates and highest CLTV caps usually go to scores of 740 and up.
Debt-to-income ratio (DTI). Your monthly debt payments, including the new HELOC payment, divided by your gross monthly income. Many lenders prefer 43% or less.
Example: You earn $9,000 a month before tax and pay $2,400 on your mortgage, plus $500 on a car loan. That's a DTI of 32%. A HELOC payment of $600 would bring it to 39%, still under 43%. At $1,100, you would be over.
Line size limits. Each lender sets a minimum and maximum line. A small need, such as $10,000, may fall below some lenders' minimums.
Step 5: Work out the payments
During the draw period, many HELOCs let you pay interest only. The rate is usually variable, so these figures will move with the prime rate.
| Amount drawn | Interest-only at 8.00% | Interest-only at 9.00% |
|---|---|---|
| $25,000 | $167/month | $188/month |
| $50,000 | $333/month | $375/month |
| $90,000 | $600/month | $675/month |
When the draw period ends, you start repaying principal. A $50,000 balance repaid over 20 years at 8.00% costs about $418 a month, compared with $333 interest-only. Plan for that jump from the start.
How to borrow more, or pay less
- Pay down the mortgage first if you have time. Every dollar of principal paid adds a dollar of possible HELOC room.
- Improve your credit score before applying. Paying down card balances to lower your utilization is usually the fastest lever.
- Compare CLTV caps across lenders. The difference between an 80% and an 85% cap on a $400,000 home is $20,000 of borrowing room.
- Ask about rate discounts, such as for autopay or for having a checking account with the lender.
Borrowing less than you're approved for
A lender may approve a larger line than you need. Having it available is not the same as using it: your home secures every dollar drawn, and a variable rate can push payments up. Many borrowers request a line close to their actual project budget plus a margin for overruns.