How much equity do you need for a HELOC or home equity loan?

By Rachel Morgan

Home Equity Editor · Oct 16, 2026 · 6 min read

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You know your home has gone up in value. You know you've been paying down your mortgage. But how much of that equity can you actually borrow against?

The short answer: most lenders want you to keep some equity in your home after you borrow. Many look for you to keep at least 15% to 20%. This guide shows you how lenders run the numbers, how to estimate what you might qualify for, and what else matters besides equity.

What is home equity?

Home equity is the part of your home you own outright. It's your home's current market value minus everything you owe on it.

Equity = Home value minus mortgage balance (and any other loans on the home)

If your home is worth $350,000 and you owe $210,000, you have $140,000 in equity. That's 40% of the home's value.

But you usually can't borrow all of it. Lenders leave a cushion in case home prices fall or you run into trouble.

The number lenders care about: CLTV

When you apply for a HELOC or home equity loan, lenders look at your combined loan-to-value ratio, or CLTV. It's every loan on the home, including the new one, divided by the home's value.

CLTV = (Mortgage balance + New HELOC or loan amount) / Home value

Each lender sets a maximum CLTV. Here's what's common:

These are typical ranges, not guarantees. Limits vary by lender, state, property type, and your credit profile. Texas, for example, generally caps home equity borrowing on a homestead at 80% CLTV.

How to estimate how much you could borrow

You can run a rough estimate in three steps:

1. Estimate your home's value. Use recent sales of similar homes nearby. The lender will usually confirm with an appraisal or an automated valuation.
2. Multiply by the lender's max CLTV. This is the most total debt the lender may allow on the home.
3. Subtract what you owe. The result is the most you might be able to borrow.

Max borrowing = (Home value x Max CLTV) minus Mortgage balance

Worked example: three homeowners

These are hypothetical examples to show the math. They are not offers of credit. Actual limits are set by each lender after reviewing your application and home value.

Homeowner A: plenty of equity

• Home value: $350,000
• Mortgage balance: $210,000
• Current LTV: 60%

At an 80% max CLTV: $350,000 x 0.80 = $280,000. Minus $210,000 = up to about $70,000.

At an 85% max CLTV: $350,000 x 0.85 = $297,500. Minus $210,000 = up to about $87,500.

Homeowner B: some equity

• Home value: $300,000
• Mortgage balance: $240,000
• Current LTV: 80%

At an 80% max CLTV: $300,000 x 0.80 = $240,000. Minus $240,000 = $0. This homeowner has no room at an 80% lender.

At a 90% max CLTV: $300,000 x 0.90 = $270,000. Minus $240,000 = up to about $30,000.

Homeowner C: newer purchase

• Home value: $400,000
• Mortgage balance: $372,000
• Current LTV: 93%

Even at a 90% max CLTV, this homeowner is already over the limit. A HELOC or home equity loan likely isn't an option yet. Paying down the mortgage or waiting for the home's value to grow could change that.

The takeaway: the lender's CLTV limit makes a big difference, especially if you're close to the line. Shopping more than one lender can matter.

HELOC vs. home equity loan: do the equity rules differ?

Both use CLTV. Both often cap out in the same 80% to 90% range. The difference is how you get the money.

• A HELOC is a line of credit. The CLTV is figured on your full credit limit, even if you don't borrow all of it right away.
• A home equity loan is a lump sum with a fixed rate and fixed payments. The CLTV is figured on the loan amount.

Some lenders allow a slightly higher CLTV on one product than the other. Ask.

Equity isn't the only thing that matters

Plenty of equity doesn't guarantee approval. Lenders also look at:

Credit score

Many lenders look for a score somewhere in the 620 to 680 range or higher. A higher score can help you qualify for a higher CLTV and a better rate. Requirements vary by lender.

Debt-to-income ratio (DTI)

DTI is your monthly debt payments divided by your gross monthly income. Many lenders prefer 43% or lower, and some go up to around 50%. The new HELOC or loan payment counts in the math.

Income and employment

You'll usually need to show steady income that can cover the new payment, with pay stubs, W-2s, or tax returns.

Property type and occupancy

Primary homes usually get the best limits. Second homes, rentals, and condos may face lower CLTV caps or tighter rules.

Home value

Your borrowing room depends on the appraised value, which may differ from what you expect. If the appraisal comes in low, your available amount shrinks.

How to build more borrowing room

If you're short on equity, a few things can help over time:

• Pay down your mortgage. Extra principal payments raise your equity directly.
• Improve your credit. A stronger score may qualify you for a higher CLTV.
• Lower your other debts. A better DTI can open the door to a bigger line.
• Compare lenders. One lender's 80% limit is another lender's 90%.
• Give it time. Home values can rise, but they can also fall, so don't count on it.

A word of caution about borrowing to the max

Just because you can borrow up to 85% or 90% doesn't mean you should. A thinner equity cushion leaves less room if home values dip. It can make it harder to sell or refinance later. And your home secures the debt. Borrow what you need for a clear purpose, and make sure the payment fits your budget, including if a variable rate rises.

The bottom line

Most lenders want you to keep at least 10% to 20% of your home's value as equity after you borrow, depending on the lender. To estimate your room, multiply your home's value by the lender's max CLTV and subtract what you owe. Then remember that credit, income, and DTI matter too.

The easiest way to see your real number is to check offers from a few lenders. Many let you see estimated rates and limits with a soft credit inquiry that won't affect your score.

About the author

Rachel Morgan

Home Equity Editor

Rachel edits Cashzilla's home equity coverage, from HELOCs to home equity loans. She focuses on turning lender fine print into clear, side-by-side comparisons.