How HELOC LTV is calculated
For a home equity line, lenders measure combined loan-to-value, or CLTV: the first mortgage, any other liens and the whole credit limit of the new line, as a share of the home's value. Fannie Mae's version of this ratio for loans with a HELOC behind them counts the full amount of the line whether or not it has been drawn,[3] and bank supervisors expect lenders to judge whether you could repay the fully drawn line.[4][5]
CLTV = (mortgage + other liens + HELOC limit) ÷ home value($240,000 + $80,000) ÷ $400,000 = 80.0%
Maximum line = home value × CLTV limit − what you owe$400,000 × 85% − $240,000 = $100,000
The CFPB describes the limit the same way: generally a percentage of the appraised value of your home, minus what you owe on the mortgage.[1] Its older booklet works an example at 75%: a $100,000 home × 75% − a $40,000 mortgage = a $35,000 line.[2] Your credit history, income and the lender's own policy decide the percentage you are offered.
How much can you borrow with a HELOC?
Your maximum line falls by 5% of the home's value for every 5 points the limit drops. With $240,000 owed on a $400,000 home:
| CLTV limit | Total debt allowed | Maximum line |
|---|---|---|
| 80% | $320,000 | $80,000 |
| 85% | $340,000 | $100,000 |
| 90% | $360,000 | $120,000 |
| 95% | $380,000 | $140,000 |
| 100% | $400,000 | $160,000 |
And by home value, with a mortgage of 60% of value (a common position a few years after buying):
| Home value | Mortgage (60%) | 80% CLTV | 85% CLTV | 90% CLTV |
|---|---|---|---|---|
| $250,000 | $150,000 | $50,000 | $62,500 | $75,000 |
| $350,000 | $210,000 | $70,000 | $87,500 | $105,000 |
| $500,000 | $300,000 | $100,000 | $125,000 | $150,000 |
| $750,000 | $450,000 | $150,000 | $187,500 | $225,000 |
Limits above 90% exist. Federal bank supervisors single out home equity loans at 90% CLTV or more on an owner-occupied home as high-LTV lending that needs extra risk controls;[4] the high LTV HELOC page explains what they cost.
LTV vs. CLTV
LTV usually refers to one loan: your first mortgage balance ÷ value, here 60.0%. CLTV adds every lien. PMI and refinance rules look at LTV; HELOC limits look at CLTV. The LTV calculator covers the first-mortgage side, including when PMI can be dropped.
| Measure | Formula | Result |
|---|---|---|
| LTV | $240,000 ÷ $400,000 | 60.0% |
| CLTV today | $240,000 ÷ $400,000 | 60.0% |
| CLTV with the new line | ($240,000 + $80,000) ÷ $400,000 | 80.0% |
| Equity left if fully drawn | $400,000 − $320,000 | $80,000 |
Why the cushion matters
The lower your CLTV, the further prices can fall before you owe more than the home is worth. At 80% CLTV the home can lose 20% of its value first. If the value drops significantly below the appraisal, federal rules allow the lender to freeze or reduce the line.[6] "Significant" has a test: the gap between the credit limit and your available equity shrinks by half. In the official example, a $100,000 home with a $50,000 mortgage and a $30,000 line can be frozen if the value falls to $90,000.[7] A high CLTV reaches that point after a much smaller price drop.
Borrowing the maximumThe maximum line is what a lender may allow, not what is safe for your budget. Check the payment on the amount you plan to draw with the HELOC payment calculator, including the jump when the draw period ends.
Raising the amount you can borrow
- A higher valuation. The limit uses the lender's appraisal or automated value, not your estimate.
- A lower first-mortgage balance. Every dollar of principal you repay adds a dollar to the maximum line at the same CLTV limit; the extra payment calculator shows how fast.
- A different product. A home equity loan may have a different limit, and a cash-out refinance replaces the first mortgage altogether.
Frequently asked questions
What LTV do you need for a HELOC?
Most lenders want your combined loan-to-value, including the new line, at or below 80% to 90%. Some offer more, with stricter credit requirements or higher rates.
How much HELOC can I get on a $400,000 house?
Subtract what you owe from the value times the lender's limit. With $240,000 owed: $80,000 at 80% CLTV, $100,000 at 85% and $120,000 at 90%.
Does a HELOC count the full line or only what I draw?
For the borrowing limit, lenders generally count the full credit line, because you can draw all of it; Fannie Mae's HCLTV ratio includes the full HELOC amount whether or not it is drawn.[3] Your payment is based only on what you have drawn.
Can a lender lower my HELOC limit later?
Yes, in specific situations set by federal rules, such as a significant decline in the home's value or a material change in your finances.[6]
Sources
- What You Should Know About Home Equity Lines of Credit (HELOC)
- What you should know about home equity lines of credit (booklet)
- B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios (Selling Guide)
- Credit Risk Management Guidance for Home Equity Lending (interagency guidance, SR 05-11)
- Comptroller's Handbook: Residential Real Estate Lending (home equity lines and loans)
- Regulation Z § 1026.40, Requirements for home equity plans
- Official Interpretation of § 1026.40, comment 40(f)(3)(vi)-6 (significant decline in value)