Home Equity Loans Qualifications

3 Replies

How much equity do you have to have in your home in order to be eligible for a home-equity loan? Is it a minimum of 20%, and for example if you have a home worth $200,000 and you owe $160,000 but have $40,000 in equity, is that $40,000 useable towards your next home loan if you choose to put it down? Also, do you have a better chance qualifying for a second home mortgage if you put your first home as collateral with whatever equity you have in it? Or in order to place it as collateral do you have to have most of it paid off?
Thank you in advance.

Arthur Voskanyan

@Arthur Voskanyan

I have seen that most lenders will offer a maximum of 80%-90% LTV on such a loan, with a few going over 90%. So if you have a home that is valued at 200k, the most they will lend is 160k-180k.

For the 40k you'd have in equity, yes you'd be able to use it towards the down payment on another home.

To get a home equity loan or HELOC, you'd have to use your home as collateral regardless. The home is used as security for the debt. You don't have to have most of you home paid off, you just need to have the right amount of equity in it. When getting a HELoan or HELOC, you are putting your house up as collateral should you default and that lender takes a junior lien position to your current mortgage and property taxes.

I believe that if your property is worth 200k you and borrow up to 80% LTV in most cases, some lenders will allow 90% LTV minus what you owe on your first mortgage. Which means you can borrow 20k on a 90% LTV loan.

@Tarcisio Mora is right, in my case it was a conservative 75% LTV from my equity . So for example in your case would be 200k - 160k= 40k x 0.75= 30k that you can borrow.
In HELOc your house is always your collateral

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