You're sitting on a gold mine. Literally. If you've owned your home for more than a few years, the surging real estate market has likely handed you a massive gift in the form of equity. But tapping into that cash isn't as simple as withdrawing money from an ATM. When you start wondering how much can you get from a home equity loan, you’re really asking two different questions. First, what is the mathematical limit a bank will allow? Second, what can you actually afford without losing your house if the economy takes a nosedive?
Most people think they can just borrow whatever their house is worth minus their mortgage. It doesn't work that way. Banks are inherently cautious creatures. They want a "cushion." They call this the Loan-to-Value (LTV) ratio, and it is the single most important factor in determining your payout.
The 85% Rule and Why It Varies
Generally speaking, most lenders—think big names like Wells Fargo or Rocket Mortgage—will let you borrow up to 85% of your home's appraised value. This is the "combined" loan-to-value (CLTV). It includes your primary mortgage and the new loan you’re asking for.
Let's look at a real-world scenario. Say your home is worth $500,000. 85% of that is $425,000. If you still owe $300,000 on your first mortgage, the maximum you could potentially walk away with is $125,000.
That’s the "kinda" answer.
In reality, some credit unions might push that to 90% if your credit is sparkling. Conversely, if you’re looking at an investment property or a multi-unit building, that number might drop to 70% or 75%. Lenders see more risk there. They worry you'll walk away from a rental property before you'd walk away from your own bed.
Why your "Zestimate" is probably lying to you
Don't rely on online valuation tools. They’re fun for nosy neighbors but dangerous for financial planning. A lender is going to send a human being—a licensed appraiser—to your house. They’ll look at the crack in the driveway, the age of your HVAC, and whether that "renovated" kitchen was a DIY disaster. If the appraisal comes back lower than you expected, your loan amount shrinks instantly.
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Credit Scores: The Invisible Ceiling
Your credit score doesn't just dictate your interest rate; it dictates the size of the check. If you have a 620 score, you might be lucky to get any loan at all. If you do, the lender might cap your CLTV at 70%. You’re basically being penalized for risk.
To get the maximum amount, you usually need a score of 720 or higher.
Debt-to-income (DTI) is the other silent killer. Lenders look at your monthly gross income and compare it to your monthly debt obligations. Usually, they want your total debt (including the new home equity loan) to be under 43% of your income. Some flexible lenders go to 50%, but that’s pushing it. If you have a massive truck payment or heavy student loans, the answer to how much can you get from a home equity loan might be "not much," regardless of how much equity you have.
Real Costs That Eat Into Your Check
You don't get the full amount. Not really. Home equity loans come with closing costs, just like your first mortgage. We're talking 2% to 5% of the loan amount.
- Appraisal Fees: Usually $400 to $700.
- Origination Fees: What the bank charges just for doing the paperwork.
- Title Search: Ensuring nobody else has a claim to your dirt.
- Notary and Recording Fees: The government wants its cut too.
If you’re borrowing $50,000, you might only see $47,500 after everyone else gets paid. Some banks offer "no-closing-cost" loans, but be careful. They usually just bake those costs into a higher interest rate. You pay for it one way or another. Honestly, if you plan on keeping the loan for ten years, paying the costs upfront is usually cheaper than taking the higher rate.
The Difference Between a Loan and a Line of Credit
People use these terms interchangeably. They shouldn't. A home equity loan is a "HELOAN." It’s a lump sum. You get $100,000 on Tuesday, and you start paying interest on $100,000 on Wednesday. This is great for a specific project with a fixed cost, like a new roof or a massive medical bill.
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A HELOC (Home Equity Line of Credit) is more like a credit card tied to your house. You might be approved for $100,000, but if you only spend $10,000 to fix the deck, you only pay interest on $10,000.
Which one gets you more money? Technically, the limits are the same, but the HELOC offers more flexibility. However, HELOCs usually have variable interest rates. If the Federal Reserve bumps rates, your monthly payment climbs. A home equity loan is fixed. You know exactly what you’re paying until 2036.
Specific Limits from Major Lenders
It helps to look at what the "big guys" are doing right now.
- Bank of America: They typically cap lines of credit at $1,000,000, provided you have the equity and income to back it up.
- Navy Federal Credit Union: Often allows for higher LTVs (sometimes up to 95% or 100% for qualified members), which is rare in the industry.
- Discover Home Loans: They generally offer loans from $35,000 up to $300,000.
These numbers aren't suggestions. They are hard stops. If you need $400,000 but the lender caps out at $300,000, you’re stuck looking for a different product or a different bank.
The Danger of Over-Leveraging
Just because you can take out 85% of your home's value doesn't mean you should. If the housing market dips by 10%, and you’ve borrowed up to 85%, you now have zero "selling equity." If you have to move for work or a family emergency, you might actually have to bring a check to the closing table just to get rid of the house. That’s a nightmare scenario.
Most financial advisors, including the likes of Dave Ramsey (who generally hates debt) or Jean Chatzky, suggest leaving yourself a much larger margin. A 70% or 75% CLTV is much safer. It gives you room to breathe if the economy gets weird.
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How to Calculate Your Potential Loan Amount
Stop guessing. Grab a calculator.
- Estimate Value: Look at recent sales of similar houses in your square mile. Not asking prices—actual sale prices.
- Multiply by 0.80: Let's be conservative and use 80%.
- Subtract Mortgage: Take that number and subtract what you currently owe.
- Check DTI: Ensure the new monthly payment doesn't push your total debts over 43% of your pre-tax income.
Tax Implications You Might Miss
Since the 2017 Tax Cuts and Jobs Act, the rules for deducting interest on home equity loans have changed. You can only deduct the interest if the money is used to "buy, build, or substantially improve" the home that secures the loan.
If you use that $50,000 to pay off credit cards or buy a boat? No tax deduction for you.
This effectively makes the loan "more expensive" for debt consolidation than it is for a kitchen remodel. You have to factor that into the math of how much can you get from a home equity loan. A $500 monthly payment that is tax-deductible feels a lot better than one that isn't.
The "Small Print" Factors
Lenders also look at your "employment stability." If you just started a freelance gig three months ago, they don't care if you have $1 million in equity. They want to see two years of steady income.
The "type" of home matters too.
Manufactured homes or condos often have lower borrowing limits. Some lenders won't touch a home on more than 20 acres because it's hard to find "comparable sales" for the appraisal. Every little detail about your property can shave thousands off your maximum loan amount.
Steps to Maximize Your Payout
If you want the absolute highest number possible, you have to play the game.
- Clean up your credit: Spend three months paying down credit card balances to lower your utilization. This can jump your score 30 points and unlock a higher LTV bracket.
- Document everything: Have your tax returns and pay stubs ready. Friction in the application process makes underwriters nervous.
- Fix the "small" stuff: Before the appraiser comes, fix the leaky faucet and the peeling paint. First impressions matter for the "effective age" of the home.
- Shop local: Sometimes a small community bank knows the local market better than a national lender and will give you a more favorable valuation.
Actionable Next Steps
- Check your current mortgage statement: Get the exact "payoff amount," not just the balance you see on the app.
- Pull your credit report: Use AnnualCreditReport.com to ensure there are no errors dragging your score down.
- Run a "soft" quote: Many lenders now allow you to see potential amounts and rates with a soft credit pull that doesn't hurt your score.
- Define the "Why": If the math says you can get $100,000, but your renovation only costs $60,000, do not take the extra $40,000. The temptation to spend it on "lifestyle" is a trap that leads to 20 years of regret.