How Much Home Equity Do You Need for a Loan?

Last updated 03/12/2026 by

Edited by

Summary:

Most lenders want you to leave at least 15%–20% equity in your home after taking a home equity loan. In practice, that means keeping your combined loan-to-value (CLTV) at or below 80%–85%. Calculate CLTV by dividing all mortgage balances (plus the new HEL) by your home’s current market value.

Compare Home Equity Lines of Credit

Compare rates from multiple HELOC lenders. Discover your lowest eligible rate.

Compare HELOC Rates

What “Equity” Means—and How CLTV Works

Equity is your home’s value minus what you owe on mortgages and liens. Lenders approve home equity loans based on combined loan-to-value (CLTV):

CLTV = (Existing mortgage balance + Proposed HEL) ÷ Current home value
Target range: ≤ 80%–85% CLTV after closing

How Much Equity Do You Need? (Rules of Thumb)

Minimum cushion: Leave 15%–20% equity after closing (i.e., CLTV ≤ 80%–85%).
Conservative borrowers: Aim for ≤ 75%–80% CLTV to keep flexibility if values dip.
Second homes/investments: Lenders often set lower CLTV caps and higher credit standards.

CLTV Examples You Can Copy

Home Value	Current Mortgage	Desired CLTV	Max Total Debt	Indicative Max HEL	Equity Left
$350,000	$210,000	80%	$280,000	$70,000	$70,000 (20%)
$500,000	$275,000	85%	$425,000	$150,000	$75,000 (15%)
$600,000	$360,000	75%	$450,000	$90,000	$150,000 (25%)

Tip: If your appraisal comes in lower than expected, your max HEL will drop to keep CLTV within limits.

How Appraisals Affect Your Available Equity

Lenders typically verify value with a full appraisal, desktop appraisal, or AVM (automated valuation model). A lower valuation raises CLTV and may reduce your approval amount. If the value seems off, ask your lender about a reconsideration of value and provide recent comparable sales.

Credit, DTI, and Term Also Matter

Even with sufficient equity, lenders evaluate your credit score, debt-to-income (DTI), and requested loan term:

Credit: Higher scores can qualify for higher CLTV caps and better rates.
DTI: Many lenders prefer ≤ ~43% including the new HEL payment.
Term: Longer terms lower the payment (helping DTI) but increase total interest cost.

Strategies to Increase How Much You Can Borrow

Boost value (carefully): Minor improvements or recent comps can support a higher appraisal.
Reduce balances: Pay down your first mortgage or other debts to improve CLTV/DTI.
Consider a smaller ask: Target an amount that lands you at ≤ 80% CLTV for easier approval.
Shop lender types: Credit unions, banks, and online lenders set different CLTV caps.

Primary Residence vs. Second Home vs. Investment Property

Lenders usually offer the highest CLTV caps and best pricing on primary residences. Second homes and investment properties often face:

Lower CLTV limits (e.g., 70%–80%),
Higher minimum credit scores,
Stricter income and reserve requirements.

Pros & Cons of Borrowing to the Max

Bottom Line

Most borrowers should plan to leave at least 15%–20% equity after taking a home equity loan. Calculate your CLTV before you apply, stress-test your budget, and compare multiple lenders’ CLTV caps to find the sweet spot between access to funds and long-term flexibility.

Key Takeaways

Plan to keep CLTV ≤ 80%–85% (leave 15%–20% equity after borrowing).
Appraisal value directly controls how much you can borrow.
Credit score, DTI, and property type can tighten CLTV caps.
Borrow conservatively (≤ 75%–80% CLTV) for more financial flexibility.

Looking for the right lender? Compare the best home equity loan companies on
SuperMoney. See personalized offers, review rates and terms, and find a loan that fits your financial goals—all without affecting your credit score.

Show Article Sources

Share this post:

Table of Contents