Before a bank will approve you for a HELOC or a Fixed-Rate Home Equity Loan, they look at how much “equity” you have in your home.

Equity is simply:

Home Value – What You Still Owe = Your Equity

Example:

* Current home value: $300,000
* Balance on 1st mortgage: $150,000
* Equity in the home: $150,000

But here’s the catch: banks don’t let you borrow all of your equity.

Most lenders will allow you to borrow up to 80–90% of your home’s value, minus what you already owe on your mortgage.

Example…Step-by-Step Calculation (at 80% loan-to-value):

1. $300,000 (home value) × 80% = $240,000 lendable equity
2. Subtract $150,000 (your current mortgage) = $90,000 available

So, in this case, you could qualify for up to a $90,000 HELOC or home equity loan (based on bank requirements and your qualifications).

Key Points to Remember:

• Home value matters. The higher your appraisal, the more you may qualify for.
• Mortgage balance reduces available equity. The more you owe, the less you can borrow.
• Banks set limits. Most won’t go above 80–90% of your home’s current value. You need to shop around for a bank that fits your needs.

Smart With Debt Tip: Think of it like a pie. The bank lets you use only a slice of the pie (up to 80–90%) and your mortgage already takes up part of that slice. The remaining piece is what’s left for a HELOC or home equity loan.