How Much Can I Borrow? Depending on your creditworthiness (your income, credit rating, etc.) and the amount of your outstanding debt, home equity lenders may let you borrow up to 85%* of the appraised value of your home minus the amount you still owe on your first mortgage. Ask about the length of the home equity loan, whether there is a minimum withdrawal requirement when you open your account, and whether there are minimum or maximum withdrawal requirements after your account is opened. Inquire how you gain access to your credit line -- with checks, credit cards, or both. Loan Renewal Also, find out if your home equity plan sets a fixed time -- a draw period -- when you can make withdrawals from your account. Once the draw period expires, you may be able to renew your credit line. If you cannot, you will not be permitted to borrow additional funds. With some programs, you may have to pay your full outstanding balance. In others, you may be able to repay the balance over a fixed time. Qualifying For The Loan Lenders use qualifying ratios to determine how much of a mortgage you can reasonably afford. It is important to remember that these ratios may vary from lender to lender and each application is handled on an individual basis. You can research on your own and calculate various mortgage costs to help plan your payment. Housing Expenses Your monthly housing costs include the mortgage principle, interest, taxes and insurance. Generally, to qualify for conventional loans, housing expenses should not exceed 26% to 28% of your gross monthly income. For FHA loans, the ratio is 29% of gross monthly income. Example Annual Income   Gross Monthly Income Maximum Conventional Loan Housing Expense Monthly Housing Payments $30,000 ÷12 $2,500 X28% $700
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