Not all, but many lenders offer a home equity line of credit (HELOC) with a combined loan-to-value (CLTV) ratio of up to 90%. The CLVT ratio equals your outstanding mortgage balance plus the HELOC, divided by the fair market value of your property according to an appraisal report. Lenders use the fully-drawn HELOC amount to calculate the CLTV ratio even if the line is only partially drawn at closing.
The higher the CLTV ratio used by the lender, the larger the HELOC you are eligible for. If your goal is to maximize your ability to access the equity in your home, you want the highest CLTV possible.
The good news is that lenders have more flexibility to determine qualification guidelines for HELOCs as compared to mortgages. Although some lenders cap the CLTV ratio at 80%, similar to a standard mortgage, other lenders permit a higher ratio.
The table below outlines HELOC and home equity loan terms for leading lenders. Many of these lenders allow higher CLTV ratios. Please note that lenders may charge a higher interest rate for HELOCs with a CLTV ratio above 80%. We recommend that you contact multiple lenders to find the loan terms that best meet your objectives.
There are several points to keep in mind when you contact HELOC lenders and compare loan terms. First, HELOC lenders may be more willing to approve a higher CLTV ratio for applicants with stronger financial profiles.
For example, applicants with low debt-to-income ratios and significant financial reserves are more likely to qualify for a HELOC with a CLTV ratio above 80%. The value of your property is an important factor but it there are other inputs such as your income and savings that lenders also consider when they review your application. The stronger your application is in other areas, the more likely you are to get approved for the HELOC you want.
Review How HELOCs Work
Second, as outlined above, the pricing, qualification requirements and eligibility guidelines for a HELOC can vary significantly as lenders have more discretion to set loan terms. This makes it more important, and worth your time, to contact multiple lenders and compare loan proposals.
Just because one lender does not offer the terms or conditions you want does not mean all lenders will offer the same proposal. Shopping multiple lenders improves your ability to find the right HELOC and potentially saves you money in the process.
Finally, it is important to contact different types of lenders when you shop for your loan. For example, credit unions typically use more flexible lending guidelines for HELOCs, including allowing a higher CLTV ratio, as compared to other types of lenders such as traditional banks.
Unlike other lenders, most credit unions have membership eligibility requirements you must meet to join but they may offer more competitive HELOC terms. Even if you have an existing lender relationship it is a good idea to contact a credit union to compare loan terms and understand what is possible.
You can use the FREEandCLEAR Lender Directory to search by lender type, location and loan program. For example, you can search for top-rated credit unions in your state that offer HELOCs and home equity loans.