How Much Equity Do You Need to Apply for a HELOC

How Much Equity Do You Need to Apply for a HELOC

Senior Loan Officer
Brian Decker
Published on November 28, 2023

How Much Equity Do You Need to Apply for a HELOC

Large expenses such as home improvements and college tuition typically require an amount of money that exceeds what you have in your bank account. This is where credit cards and other types of loans become beneficial. When deciding the best way to borrow money, it is important to look into all options and choose the one that best fits your needs. For homeowners that have equity, a HELOC is one to consider. 

What is a HELOC

A HELOC stands for "Home Equity Line of Credit" and is a line of credit similar to a credit card. The money you borrow from a HELOC is based on your home equity (current home value subtracted by outstanding mortgage). 

How Are HELOCs Beneficial?

Taking out a HELOC helps homeowners use the equity in their home as a line of credit. Here are some of the benefits:

Low-Interest Rates 

HELOCs typically have lower interest rates because the line of credit is taken out of the borrower’s home equity. The lower interest rates make HELOCs desirable for larger expenses like paying off existing debts, medical expenses, home improvement projects, etc. 


HELOCs have a long draw period of 10 years. This means a homeowner has the flexibility to take out money as needed over the span of 10 years. This long draw period also gives homeowners time to plan out their repayments. 

Payments that are Interest-Only

During the 10-year draw period, it's possible to make interest-only payments. Interest-only payments require you to pay off the interest during the draw period giving you ten years to repay the loan balance. 

How Much Equity is Needed For a HELOC?

The exact equity needed for a HELOC varies from person to person based on credit score, lender, and other details. However, for most lenders, you need a minimum of 15%-20% home equity to qualify for a HELOC. 

Deciding if a HELOC is Right For You

Now that you know more about HELOCs, you can determine if it is the right loan for you. Consider the following - Is your expense large and long-term? Is a 10-year draw period desirable and realistic for you? Do you have a minimum of 15%-20% equity in your home? If so, a HELOC might be right for you. If you are interested in a HELOC, contact Modern Lending today at 844-4-MODERN for more information.

Senior Loan Officer
Brian Decker Senior Loan Officer
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