Most lenders require you to have at least 15 to 20 percent equity in your home before they will approve a HELOC, though some will go lower
The amount of equity you need depends on the lender, your credit score, and how much you want to borrow. A lender calculates your equity by subtracting what you owe on your mortgage from what your home is worth. If your home is worth $300,000 and you owe $240,000, you have $60,000 in equity — or 20 percent of the home's value.
Lenders typically let you borrow against 80 to 85 percent of your home's total value, minus what you still owe. So if your home is worth $300,000 and you owe $240,000, a lender might let you borrow up to $240,000 total (85 percent of $300,000), meaning you could access $0 through a HELOC because you already owe $240,000. If you owed only $180,000 on the same home, you could potentially borrow up to $60,000 through a HELOC.
The minimum equity requirement varies. Some lenders will work with you at 10 to 15 percent equity, but you will pay a higher interest rate and may face stricter terms. Others require 20 percent or more, especially if your credit score is below 700 or your income is variable.
Key Takeaways
- Lenders typically require between 15 and 20 percent equity in your home, though some accept as little as 10 percent at higher rates.
- Your equity is calculated as your home's current value minus your mortgage balance, and lenders usually let you borrow against 80 to 85 percent of your home's value.
- A lower credit score or higher debt-to-income ratio may push the minimum equity requirement up or make a HELOC unavailable.
- The amount you can actually borrow depends on both your equity and the lender's willingness to lend, which changes based on market conditions and your financial profile.
How lenders calculate the equity you can borrow against
Lenders use a number called the loan-to-value ratio, or LTV. This is the amount you want to borrow divided by what your home is worth. If you want to borrow $50,000 and your home is worth $300,000, your LTV is about 17 percent.
Most lenders set a maximum LTV of 80 to 90 percent for a HELOC. This means they will not lend you more than 80 to 90 percent of your home's value, even if you have the equity. The exact cap depends on the lender, your credit score, and current market conditions. During periods when home values are uncertain, lenders often lower their maximum LTV to reduce their risk.
Your lender will order an appraisal or use an automated valuation model to determine your home's current worth. This is not the price you paid or what you think it is worth — it is what the lender believes it would sell for today. If your home's value has dropped since you bought it, your available equity drops too, even though your mortgage balance has not changed.
How your credit score and debt affect the equity you need
A higher credit score makes it easier to borrow with less equity. If your score is 750 or above, lenders may approve you with 10 to 15 percent equity. If your score is between 650 and 700, you may need 20 to 25 percent equity, and some lenders may decline you altogether.
Your debt-to-income ratio — the percentage of your monthly income that goes to debt payments — also matters. If you already pay 40 percent or more of your gross income toward existing debts, a lender may require higher equity or decline the HELOC. They want to see that you can afford the new payment without overextending yourself.
Employment history and income stability affect the decision too. If you are self-employed, work on commission, or have been in your job for less than two years, lenders often require more equity to offset the perceived risk. A stable W-2 job with the same employer for several years makes it easier to borrow with less equity.
What happens if you do not have enough equity
If you do not have 15 percent equity, you have a few options. You can wait and continue paying down your mortgage until your equity grows. On a $300,000 home with a 30-year mortgage at 6 percent, you build equity faster in the later years of the loan, but it still takes time in the early years.
You can also look for a lender with lower equity requirements. Credit unions and some regional banks are sometimes more flexible than national lenders, though they may charge higher interest rates to compensate for the added risk. Online lenders vary widely — some specialize in borrowers with lower equity, while others stick to stricter requirements.
A home equity loan (a lump-sum loan rather than a line of credit) sometimes has lower equity requirements than a HELOC, though not always. It is worth comparing both products with multiple lenders if you are close to the minimum threshold.
How home value changes affect your available equity
Your available equity shifts when your home's value changes. If your home appreciates and you owe the same amount on your mortgage, your equity grows. If your neighborhood experiences a downturn and your home's value drops, your equity shrinks even though you still owe the same mortgage payment.
This matters if you already have a HELOC open. Many HELOCs have a draw period — usually 5 to 10 years — during which you can borrow and repay as needed. If your home's value drops significantly, your lender may freeze or reduce your credit line, even if you have never missed a payment. This happened to many borrowers during the 2008 housing crisis.
Conversely, if your home appreciates, you may be able to borrow more. Some lenders allow you to request a credit line increase after a certain period, though they will order a new appraisal and reassess your finances.
Comparing equity requirements across lender types
| Lender Type | Typical Minimum Equity | Typical Maximum LTV | Credit Score Range |
|---|---|---|---|
| National banks | 15–20% | 80–85% | 700+ |
| Credit unions | 10–20% | 80–90% | 650+ |
| Online lenders | 10–25% | 75–90% | Varies widely |
| Mortgage servicers | 15–20% | 80–85% | 700+ |
These ranges are typical but not universal. A lender may have different requirements based on the state you live in, local real estate trends, and their current appetite for HELOC lending. During periods of economic uncertainty, lenders tighten requirements across the board.
Steps to determine your own equity right now
Start by finding your current mortgage balance. This is on your most recent mortgage statement or you can log into your lender's website. Next, research your home's current value using public records, recent sales of similar homes in your area, or an online home valuation tool. Tools like Zillow or Redfin give estimates, though they are not appraisals and can be off by 5 to 10 percent or more.
Subtract your mortgage balance from your home's value. If your home is worth $350,000 and you owe $280,000, your equity is $70,000. Divide your equity by your home's value: $70,000 divided by $350,000 equals 0.20, or 20 percent. This is your equity percentage.
Once you know your equity percentage, you can estimate how much you might borrow. If a lender allows you to borrow up to 85 percent of your home's value, you could borrow up to $297,500 total. Subtract what you owe on your mortgage ($280,000) and you have $17,500 available through a HELOC. Remember this is an estimate — the actual amount depends on the lender's assessment of your credit, income, and debt.
Frequently Asked Questions
Can I get a HELOC with less than 10 percent equity?
Some lenders will work with you at 5 to 10 percent equity, but it is rare and comes with higher interest rates, stricter terms, and a higher likelihood of denial. You are more likely to find options if you have a strong credit score (750+) and low debt-to-income ratio. Credit unions and some online lenders are more flexible than national banks.
What if my home value dropped and I lost equity?
If your home's value fell, your available equity fell with it. If you already have a HELOC open, your lender may reduce or freeze your credit line. If you are trying to open a new HELOC, you may no longer meet the lender's equity requirement. You can wait for the market to recover, look for a lender with lower equity minimums, or explore a home equity loan instead.
Does paying down my mortgage faster increase my available equity?
Yes. Every mortgage payment you make increases your equity. If you pay extra toward principal, you build equity faster. However, it takes time — in the early years of a 30-year mortgage, most of your payment goes toward interest rather than principal. You can use an amortization calculator to see how long it would take to reach your target equity percentage.
Will a lender re-evaluate my equity if I already have a HELOC?
Lenders typically do not re-check your equity unless you request a credit line increase, your home is refinanced, or market conditions trigger a portfolio review. Some lenders conduct periodic reviews, especially if home values in your area have shifted significantly. If your home's value drops sharply, your lender may freeze your line without asking.
Is there a difference in equity requirements between a HELOC and a home equity loan?
Home equity loans sometimes have lower equity requirements than HELOCs, though it varies by lender. A home equity loan gives you a lump sum upfront, while a HELOC is a revolving credit line. Compare both products with the same lender to see which has more favorable terms for your situation.