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How much home equity money can I get?

Piggy bank and house key against white background
You can't necessarily borrow the full amount of your home equity, but in some cases, you can come close. Getty Images

Owning a home not only provides a sense of stability, but in many cases, it also serves as a potential financial resource through home equity. And, right now, many homeowners have a lot of home equity to borrow against, which is due, in large part, to home values rising steadily in many markets over the last few years. 

The nearly $200,000 in tappable home equity that the average homeowner has can be used for any number of purposes, from home renovations to debt consolidations — or even paying for a major life event, like a wedding or a higher education. That said, it's important to understand that you can't necessarily borrow the full amount of equity you've built in your home.

In fact, most leaders will limit borrowers to accessing a percentage of their home's appraised value to strike a balance between financial flexibility and responsible borrowing. So how much home equity money can you actually get — and what does that look like in practical terms?

Start exploring the home equity loan rates you could qualify for here.

How much home equity money can I get?

It's important to understand that every lender has its own rules for how much (or, in some cases, how little) you can borrow from your home equity. In general, though, most lenders will allow you to borrow a maximum of between 80% and 90% of your home equity. Here's how that works.

The 80-90% rule

The loan-to-value (LTV) ratio, expressed as a percentage, is the key metric lenders use to determine your borrowing limits. The 80-90% rule dictates that lenders typically permit borrowing up to 80 to 90% of your home's appraised value. This approach aims to mitigate risks for both lenders and borrowers, ensuring a prudent use of home equity.

Examples of the 80-90% home equity rule

Using this rule, here's the maximum amount you can expect to borrow with different amounts of home equity.

If you have $50,000 in home equity:

  • At 80% LTV, the maximum borrowing amount is $40,000.
  • With a 90% LTV, you can access up to $45,000.

If you have $100,000 in home equity:

  • An 80% LTV allows you to borrow a maximum of $80,000.
  • With a 90% LTV, the borrowing limit extends to $90,000.

If you have $200,000 in home equity:

  • At 80% LTV, you can borrow a maximum of $160,000.
  • With a 90% LTV, the borrowing limit increases to $180,000.

If you have $500,000 in home equity:

  • With an 80% LTV, you can borrow up to $400,000.
  • At 90% LTV, the maximum borrowing amount reaches $450,000.

Find out more about today's top home equity loan rates here.

How is the maximum home equity loan amount determined?

There are a few different factors that can impact the total amount you are approved to borrow by a lender, including:

Appraised home value

The starting point for determining your borrowing limit is the appraised value of your home. Lenders typically hire a professional appraiser to assess the current market value of your property and that appraisal will be the foundation for how much you're allowed to borrow from your home's equity.

Outstanding mortgage balance

The amount you still owe on your mortgage also plays a significant role. Lenders consider the outstanding balance as part of the overall value equation, subtracting it from the appraised value to arrive at your available home equity.

Loan-to-value ratio

The LTV ratio is the key metric in deciding how much home equity you can access. It is calculated by dividing the loan amount by the appraised value of your home. The 80-90% rule comes into play here, with most lenders limiting the borrowing amount to this percentage range.

Credit score and financial history

Your credit score and financial history also play a role in determining your loan limits. A higher credit score may result in more favorable terms, while a lower score might affect your eligibility and/or the interest rates you are offered.

Debt-to-income ratio

Lenders will also assess your debt-to-income ratio, comparing your monthly debt payments to your gross monthly income. A lower ratio indicates a healthier financial profile and may positively influence your borrowing capacity.

Other factors to consider before tapping into home equity

Responsible borrowing goes beyond the percentages. Several factors should also help to influence your decision on borrowing from your home equity, including:

A financial assessment

Evaluate your financial situation to ensure you can comfortably repay the loan without straining your budget.

The loan terms and interest rates

Be sure to explore and compare the terms and interest rates offered by various home equity lenders. A seemingly attractive LTV may be less favorable if accompanied by high interest rates.

The loan purpose

Clearly define the purpose of the loan. Whether it's a home improvement project or debt consolidation, aligning the loan with your financial goals is crucial.

Professional guidance

In some cases, it may also benefit you to consult with financial professionals to gain insights into the best borrowing options tailored to your unique circumstances.

The bottom line

Unlocking your home equity can be a strategic financial move, provided it's approached with careful consideration. Understanding the 80-90% rule offers a realistic framework for assessing your borrowing limits. Remember, though, that responsible borrowing involves a holistic approach, considering your financial capacity, loan terms and the purpose of the loan. By making informed decisions, you can leverage your home equity effectively to enhance your financial well-being.

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