home equity lenders

Home Equity Lenders

One of the first things to do when you're considering a home equity loan is to find out how much you can expect home equity lenders to lend you. Since most borrowers of home equity have specific expenses in mind when they apply for a home equity loan, it helps to know how much they can expect to get.

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 home equity 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.