How much can you borrow against your house, and why does each lender give a different number?

Summary

Take your home's value, multiply it by the lender's maximum combined loan-to-value ratio (CLTV), and subtract what you already owe on the house. Lenders set that ratio anywhere from about 65% to 90%, often by credit score, so on a $500,000 home with $250,000 owed the answer runs from $75,000 to $200,000. Loan-amount caps and an income test can lower it further.

The arithmetic, with a HELOC in the picture

Fannie Mae's Selling Guide spells out the arithmetic. CLTV adds up the first mortgage, "the drawn portion (outstanding principal balance) of a HELOC," and any other second loans, then divides by the home's value. A second ratio, HCLTV, counts "the full amount of any HELOCs (whether or not funds have been drawn)."

Say the house is valued at $500,000, the mortgage balance is $250,000, and there is a $100,000 HELOC with $20,000 drawn. CLTV is $270,000 over $500,000, or 54%. HCLTV is $350,000 over $500,000, or 70%. An unused line still takes up room under HCLTV, which is why a large, mostly idle HELOC can get in the way when you later refinance the first mortgage.

Fannie Mae truncates the ratio to two decimals and then rounds up to the next whole percent, so 80.001% counts as 80% but 94.01% counts as 95%.

Five published limits on the same house

With no HELOC and $250,000 owed on a $500,000 home, here is what each ceiling allows.

FourLeaf Federal Credit Union's standard HELOC rate assumes a CLTV of 65% or less, which leaves $75,000. Its FAQ walks through the same kind of house at 70% and gets $100,000, and its introductory rate requires 75% or less, or $125,000. None of these is a hard cap; borrowing past them means a higher rate.

Rocket Mortgage ties the ratio to credit score: "680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%," and 740 for 90%. That is $150,000, $175,000 or $200,000. Spring EQ says "borrow up to 90% of your home's value," also $200,000.

Regions Bank lists 85% for a second mortgage on a primary residence, which gives $175,000, and 80% if the house is a second home. Regions calls this ratio LTV, but its footnote defines it as "the new loan plus all other debt secured by your residence compared to the fair market value." That is a CLTV under another name, and it is a reason to read the definition before comparing percentages across lenders.

Limits that have nothing to do with the house

Each product also has a dollar range. Rocket's home equity loan runs from $45,000 to $500,000, Spring EQ's from $50,000 to $500,000, and Regions' from $10,000 to $500,000. On our example house, the 90% lenders would lend the full $200,000; on a $1.5 million house at 90% with $500,000 owed, the $500,000 product cap would bind before the ratio did.

Then there is income. Rocket's own page gives three debt-to-income limits: "below 43%" in one section, "a maximum debt-to-income (DTI) ratio of 45%" in its FAQ, and "50% or below" in the footnote to its credit tiers. The page does not say which of the three governs a given application.

Sources

Written by Kaz (pen name). Figures are copied from providers' published pages on the dates shown. We have not used these products. Corrections: contact form.