How much HELOC can I get? What homeowners should know

Home equity lines of credit (HELOCs) are tremendously popular with homeowners because they offer a lot of control and flexibility when you need to borrow money over an extended period of time. No one knows what the future holds, after all, and having a HELOC in your back pocket can provide a lot of security. 

However, that also means you can’t always accurately predict how much you’ll need to borrow in advance. A major question many homeowners have is how much they can borrow with a HELOC. Lenders vary, but in most cases, you can borrow around 85% of your home’s value, minus any other home debts. Let’s see exactly how it works. 

How much HELOC can I get?

The maximum amount you can borrow using a HELOC depends on two main factors: how much credit a lender is willing to extend, and how much home equity you have. It’s not difficult to calculate how much HELOC you can potentially get, as long as you know three numbers:

• Your current home value: You’ll pay for an appraisal out of the HELOC closing costs, but in the meantime, you can get a rough estimate by taking an average from three different real estate websites, such as Zillow, Redfin, and Realtor.com.
• Your current mortgage balance: You can easily get this number from your most recent mortgage statement. 
• Your lender’s maximum CLTV ratio: A theoretical cap on the combined amount of all home debts — mortgage, home equity loans, and lines of credit included — compared to your home’s value. This ensures you’re not borrowing more than your home is worth.

Once you have these three numbers, it’s easy to calculate how much you can borrow with a HELOC using two simple formulas: 

Potential HELOC limit = (current home value) ✕ (lender CLTV ratio)

Maximum allowable HELOC limit = potential HELOC limit — current mortgage balance

The first calculation tells you what a lender could theoretically offer you, while the second tells you what they might actually offer you based on your other home debts. Here are a few examples:

Let’s see how you might calculate this in practice. 

Step 1: Estimate your current home value

Lenders use different appraisal methods to calculate your home's value, such as a computer-based automated valuation model (AVM) or a full in-person appraisal. The final appraised value is the actual number that lenders use when calculating your HELOC loan amounts, but you can get a pretty close approximation on your own by gathering at least three estimates online and taking the average. 

For example, let’s say you visit Zillow, Realtor.com, and Redfin to get three different home value estimates:

• Realtor.com: $555,000
• Redfin: $531,900
• Zillow: $564,900

You can get an average estimate by adding all three of these numbers up, and then dividing by three:

$555,000 + $531,900 + $564,900 = $1,651,800

$1,651,800 ÷ 3 = $550,600

In this example, $550,600 is your average estimated home value, which you can use to calculate your potential HELOC amount. Keep in mind, though, the actual number your lender uses may differ slightly after an appraisal of your home. 

Step 2: Calculate your potential HELOC limit

It’s important to make sure your home debts never exceed your home’s actual value, if at all possible. This ensures you won’t ever owe more than your home is worth, in case you ever need to part ways with it. 

Home values rise and fall over time, though, and that’s why lenders offer a built-in safety cap in the form of a combined loan-to-value (CLTV) ratio. This ensures that all of your home debts together — mortgage and HELOC combined — don’t exceed a certain amount at the start. Commonly, lenders set a maximum CLTV ratio of 85%, which essentially gives you a 15% buffer in case home values decline in the future. 

Aside from protecting you against owing too much on your HELOC, this CLTV ratio is also useful because it tells you how much you can potentially borrow with a HELOC. All you have to do is multiply your home’s current value by a lender’s stated CLTV ratio. Each lender differs, and they might use different wording, such as “borrow up to 95% of your home’s value,” or something similar. 

Let’s continue our example, and assume that you found a lender that offers HELOCs with a maximum CLTV ratio of 90%:

$550,600 ✕ 0.90 = $495,540

In this case, your lender may be willing to extend a line of credit up to $495,540 — but that’s without taking any other home debts into account. 

Step 3: Subtract your current mortgage balance

Any other debts tied to your home, such as a mortgage or tax lien, will reduce your potential HELOC limit. Again, this is to make sure you're not overleveraging your home, so you won’t owe additional money if you sell your home or a lender has to foreclose. 

You’ve already calculated your potential maximum HELOC limit. To find your actual HELOC limit, you’ll need to subtract the current balance of any other home debts. 

For example, let’s say you check your most recent mortgage statement, and you still owe $200,000 on your home. In that case, your actual HELOC limit would look like this:

$495,540 — $200,000 = $295,540

Your lender, in this case, may be willing to offer you a HELOC line of up to $295,540, given their own limitations on how much credit they can offer, and your own constraints for how much you can afford to borrow. 

Factors lenders use to determine HELOC amount

We’ve covered some of the factors that lenders use to calculate how much you can borrow with a HELOC. Lenders can also use other HELOC requirements, too, to determine whether you’re approved, how much you can borrow, and how much you pay in financing costs:

Alternatives to HELOCs

A HELOC can be a great boon to your finances, but it’s not your only choice when it comes to borrowing money. It’s important to consider the reasons why you want to borrow money and your ability to repay the debt, so that you can assess whether another option might be better. 

For example, many people choose a HELOC because the draw period often only requires interest-only payments. That can be a big help if you’re facing short-term cash flow issues, until you enter the repayment period. In other cases, you might prefer something different:

• Credit cards: These also offer an open-ended way to borrow money at a variable rate and can be good for smaller expenses. Credit cards aren’t secured by your home, which reduces the risk of borrowing, but it also means paying higher interest rates. 
• Cash savings: Experts recommend keeping at least three to six months’ worth of cash in your checking or savings account as an emergency fund, which can help reduce the need to borrow money in the first place. 
• Home equity loan: If you need to borrow for a specific purpose and don’t want the hassle of ongoing annual fees, a home equity loan may be a better choice. These fixed-rate loans charge an even smaller margin over the prime rate than a HELOC.
• Home equity investment: These allow you to borrow money with no fixed monthly payments or interest until you repay the funds in 30 years, along with a slice of your home’s future growth in value. Home equity investments are not considered debt.