Home much can I borrow in a Home Equity Loan
Home equity lenders have traditionally allowed you to borrow from
your home equity until you have reached a loan-to-value (LTV) ratio
of 80%. The loan-to-value ratio is the total money that you have
borrowed on your home divided by the value of your home.
If your home is worth a $100,000 and you have a $60,000 mortgage,
your LTV is 60%. If you then take out a home equity loan for $20,000,
your LTV rises to 80%. Lenders have typically allowed the combined
value of your first mortgage and your home equity loan to be 80%
of the home's value but lenders do allow higher LTV's - some lenders
will allow LTV's between 80% and 90% and some lenders go as high
as LTV's of 125%. There is of course a catch to this - higher LTV
loans cost more since they pose a greater degree of risk to the
lender.
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