Home Equity: Can You Borrow Against Your Home?

Last Updated Jul 7, 2009 1:32 PM EDT

"Home-equity lines are available if you go to a credit union or a big lender like Bank of America, J.P. Morgan Chase, or Wells Fargo," says Randy Johnson, a mortgage expert with Credit.com. But even there, you may be limited to a credit line that keeps your total mortgage debt (first mortgage plus HELOC) under 70 percent of the value of your home.

Here’s a guide to today’s market for home-equity lines of credit:

Credit Availability

Tight. Lenders are much tougher about approving HELOCs than mortgages or refinancings.

What It Takes to Get Approved

  • A decent amount of equity: You’ll need well over 20 percent.
  • A good credit score: It should be at least 680 (on the FICO scale of 300 to 850)
  • Steady income: You’ll need to prove it. If you’re an employee, you’ll have to present two years’ worth of tax returns and a current month’s pay stubs. If you’re self-employed, you may need documentation of a reliable income, such as a letter from your accountant.

What You’ll Pay

The average rate on a $30,000 to $50,000 HELOC is about 5.9 percent. That markup over the prime rate (now 3.25 percentage points) is much higher than normal. In recent years, creditworthy borrowers could get a HELOC at the prime rate or at prime plus a bit less than a percentage point.


If your credit score is under 680, work to raise it by paying off your credit cards and keeping those charges below 30 percent of the cards’ limits.

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