EchoBay Expert: What's the maximum amount of money a lender will give me with a home equity loan?
Loyal Reader: The maximum amount you'll qualify for when applying for a home equity loan will be determined by a combination of factors, first and foremost being the amount of equity you have in your home. You credit history will also play an important factor, but the amount of your home's value is the primary consideration.
Generally, lenders will require you to borrow at least $10,000, so if you only have a couple thousand dollars equity in your home, a home equity loan isn't a viable option for you. You can usually borrow up to 80 or 90 percent of the equity in your home.
For example, if your home is worth $150,000 and you still owe $100,000 on it, you'd have $50,000 in equity. If your lender approved you to borrow 80 percent of your total equity, you'd be able to get a home equity loan for $40,000.
While some home equity loans allow you to borrow more than 100 percent of the equity in your home, this isn't always a good idea.
If you were to sell the home and still owed more on it than it was worth, you'd need to come up with the difference at closing, and that can be quite a large chunk of money. It's a good idea to try to keep the total debt of your home to less than 90 percent of its value.