Homeowners can gain access to significant chunks of cash with a HELOC—but there are limits to be aware of in order to avoid being surprised by them when you apply. Here are the ins and outs of a HELOC and how to estimate how big a HELOC you might get.

How Does a HELOC Work?

A HELOC works much like a credit card. Your home is used as collateral, or the item that secures the loan if you don’t pay. With a HELOC, the bank approves a revolving line of credit of a certain amount. You can borrow from that credit line as you wish, and must repay it with interest. The money becomes available again when you repay the amount taken out, much like a credit card. The HELOC’s line of credit is only available for a limited time, which is called the “draw period.” Then, the HELOC may enter a repayment period. While each HELOC may work a little differently, here’s a simple example: After applying for a HELOC, you’re approved for a $50,000 line of credit. You borrow $10,000 to repair your roof. Now, only $40,000 is available on your credit line. However, you pay off the $10,000 through aggressive debt repayments, even though you’re still in the draw period. Now the full $50,000 is available to you again.

Lender HELOC Limits

HELOC dollar limits vary by lender, your home’s equity, credit history, and current debt payments. The following are a few examples as of May 2022.

How Big a HELOC Can You Get?

While $2 million might sound nice, you won’t necessarily get such a generous line of credit. The amount you’ll qualify for depends on the particulars of your home, your equity in it, your current debts, the bank’s approach to HELOCs, and your credit history. First, the lender performs an appraisal of your home’s current value. The lender then extends a line of credit for a limited amount of your home’s assessed value after calculating how much you still owe on the mortgage. The lender doesn’t offer an amount that’s equal to all your home’s equity. Here’s how to do the calculations. Suppose the bank said your house is worth $700,000. Homeowners generally can borrow up to 80% to 90% of the home’s value after deducting the amount owed. Based on that information, below is an example of how to estimate the amount of money you could get from a HELOC from a particular lender.

State limits: For example, Texas law limits home equity lines of credit to 80% of loan-to-value (LTV).Home-type limits: Whether you live in the house (primary or owner-occupied) or if it’s a second or investment propertyLien-status limits: Whether you already have a mortgage or lien on your home, or the HELOC will be your only mortgage or lienHousing-market limits: Your ability to qualify for a high HELOC limit may depend on your home’s appraised value; in a depressed market, you may not qualify for as much.

Your Credit History

Lenders are seeking signs that you’re a dependable person to lend to—whether $10,000 or $100,000. To get the HELOC or loan amount approved, they may require:

A certain amount of equity in the home, such as 15% to 20% Good history of repaying debts Minimum credit score of 660 to 700 Documentation of income Low debt-to-income (DTI) ratio Lower than 30% credit-utilization ratio

Find the Right HELOC Lender for You

When shopping for a HELOC lender, closely compare these offered features of HELOCs:

HELOC limit Monthly payments—interest only, or interest plus principal Annual percentage rate (APR) Fixed or variable interest rate? How much can this vary? Draw and repayment period lengths Application, appraisal, and other fees Upfront charges, including points Closing costs Balloon payment requirement, if any Availability of renewal or refinancing