Every homeowner could use a little extra cash every now and then. From renovations and repairs to painting and landscaping, it seems like there’s always another project on the horizon. But did you know that you can use a home equity line of credit (HELOC) loan to borrow money when you need it? If you’re interested in leveraging the value of your property to access a steady credit line, here’s everything you need to know about home equity line of credit loans and the HELOC maximum loan amount.

The HELOC maximum loan amount depends on several factors including the overall value of your home, percentage of home value that lenders will let you borrow against, and the remaining loan balance still owed on your mortgage.

Take current home value and multiply by percentage lender allows you to borrow against home equity to get maximum borrowing amount

Subtract remaining first mortgage balance from maximum borrowing amount

Example:
• Home value: $500,000
• First mortgage balance: $300,000
• Lender allows 85% to be borrowed
• $500,000 x 0.85 = $425,000 maximum to borrow
• $425,000 - $300,000 = $125,000 can be borrowed against home equity

A HELOC allows homeowners to borrow against the equity in their home through a revolving line of credit. Unlike a home equity loan with fixed payments, a HELOC typically has variable interest rates and payments.

Key Features:
• Secured loan using your home as collateral
• Typically lower interest rate than other loans
• Interest may be tax deductible
• Revolving line of credit that can be drawn on and repaid over time
• Uses home equity as the basis for loan amount

Consider whether you have:
• Stable income to make payments over the long term
• Funds to cover upfront costs like application fees and appraisal
• A true need for the money rather than just wanting extra cash
• Plans to use the money for recommended purposes

Recommended Uses:
• Home improvements to increase property value
• Debt consolidation

A HELOC should not be used for everyday expenses or luxuries. Carefully evaluate whether it is the right lending option for your situation.

A HELOC loan acts like a credit card with a variable interest rate or fixed interest rate. You borrow what you need and repay the outstanding balance in monthly installments. You can repeatedly take out cash and pay off the outstanding balance, but the time that you can draw funds from your HELOC is limited.

A home equity line of credit loan can be separated into two main timeframes: the draw period and the repayment period.

Draw Period
The draw period is an important component of a HELOC to understand. It is the initial phase of the loan where you can access and use the line of credit.

• Typically 10 years where you can access and borrow money from HELOC
• Borrow through checks, transfers, linked account
• Minimum payments usually interest-only
• Recommended to also pay down principal during this period:
• Lowers credit line balance
• Reduces monthly payments later in repayment period

Knowing how the draw period works, including repayment options, can help you effectively manage your HELOC.

Repayment Period
The repayment period marks the second phase of a HELOC loan where borrowed money must be paid back. This period typically lasts around 20 years.

• No longer able to access or draw from line of credit
• Monthly installments pay back principal plus interest
• Good to pay down as much principal early on as possible
• Avoids large closing costs at end of loan
• As loan end approaches, negotiate term extension or refinancing

Understanding what takes place in the repayment period can help borrowers strategically manage paying back their HELOC.

There’s never been a better time to apply for a home equity line of credit. Right now, the housing market is driving up prices of homes across the country and many homeowners may have extra equity at their disposal. But really, the decision to apply for a HELOC loan depends on your particular goals and financial situation. So, if you’re debating whether or not to apply for a HELOC, talk to the financial experts at Excel.

The value may be secured up to 100% of the loan-to-value amount, which means we can lend up to 100% of the appraised value of your home.

Yes, all home equity lines of credit have a maximum amount that you can withdraw. If your draws reach the credit limit defined by your loan, your HELOC will be maxed out.

Most lenders will allow homeowners to borrow up to 85% of their home’s value in a home equity loan. This number minus the remaining balance on the homeowner’s first mortgage is the maximum amount that can be borrowed.

Qualifying for a HELOC depends on several factors, but in general, most lenders are looking for a credit score of at least 620 or higher.