100% LTV HELOCs: Where To Find Them and How To Qualify
If you're searching for a way to tap into your built-up equity, you’ve probably noticed that many lenders limit how much they're willing to loan. With a home equity line of credit (HELOC), you are limited to 80-90% loan-to-value (LTV), meaning you must leave 10% to 20% of the property’s value unborrowed.
However, some lenders offer 100% LTV HELOCs that allow you to borrow against your home’s total appraised value.
For example, your home is worth $350,000 but you have an existing mortgage of $300,000. Some lenders would allow you to take out a $50,000 HELOC.
Check your eligibility. Connect with a lender here.
Where to Find 100% LTV HELOCs
100% LTV HELOCs are often only available from smaller lenders such as local credit unions and community banks. With larger banks and nationwide lenders, HELOC programs frequently get capped at 80% or 85% of your home's value.
You can usually sign up with a local credit union to apply for their HELOC. Often, you need to meet basic membership requirements like being a resident of your state or working for a qualifying employer.
Local banks likely have no membership requirements at all.
Should I Take Out 100% of My Equity?
Not all homeowners need to access 100% of their property’s value. Doing so typically comes with higher interest rates and stricter lending criteria than lower LTV lines of credit or other cash-out options.
But sometimes, a high-LTV HELOC may be the best – or only – choice available:
You purchased your home recently and haven’t built up equity.
You need access to more money than a standard HELOC would offer. This could be for completing home improvement projects, purchasing a car, or even just to have as an emergency fund.
You want to purchase another property and plan to use the HELOC as a bridge loan.
You have other higher-interest debt – including credit cards or personal loans – and consolidating with a HELOC would slash your monthly payments and interest costs.
How to Qualify
When you borrow your home's total value, the lender is unlikely to recoup their investment if you stop paying on the loan. As such, 100% LTV HELOCs are usually limited to property owners with the lowest-risk credit and debt profiles.
Credit Score
The minimum credit score required will vary from lender to lender, but you should plan to need a score of at least 680. Higher scores lower interest rates, and borrowers at 740 or above will have the easiest time qualifying.
Debt-to-Income Ratio
The lender will compare your gross income to all debts, including the future HELOC payment.
Many programs look for a DTI of no more than 36%. You may, however, be able to find HELOCs available up to 43% DTI.
Property Types
You're not likely to find many companies offering 100% LTV HELOCs on anything except a one-unit primary residence. Multi-family properties may be eligible, depending on the lender, if you reside full-time in one of the units.
Don't expect to be able to borrow 100% of the value of a second home or investment property.
Get started by finding a lender here.
How To Calculate Your Maximum HELOC Loan
Take your property's total value and subtract your current loan amount. This difference, minus closing costs, is how much of a line of credit you could qualify for with a 100% LTV HELOC.
For example: Your home has an appraised value of $350,000 and you owe $300,000 on your first mortgage. A 100% LTV HELOC means a maximum loan of $50,000, but you may need to subtract out $500 to $1,000 in closing costs with some lenders.
100% LTV HELOC Pros
Here are a few of the advantages that someone could benefit from:
Lower closing costs – Refinancing a mortgage has far higher closing costs than opening a HELOC. For most homeowners, the closing costs on a cash-out refinance are 2-4% of the total loan. In contrast, the closing costs on most HELOCS are below $1,000.
Keep your rate – A HELOC lets you tap into your equity without losing the favorable rate on your first mortgage.
Better access to cash – Access cash even if you don't have much equity built up.
100% LTV HELOC Cons
Taking out a 100% LTV HELOC does have some downsides and could leave you in a precarious position. Here are a few of the disadvantages that you need to consider:
Owe more than the home is worth – Borrowing 100% of your home's value leaves you with zero equity. If property prices dip in your area, you could owe more than your home is worth.
Difficult to sell – If you have little-to-no equity in your property, you might not be able to sell if you want or need to. Selling typically costs homeowners between 9% and 10% of the total sales price. If you don't have the equity to cover these expenses, you would need to come out of pocket to close.
No safety net – If you cash out all of your home’s equity right now, you may not have anywhere to turn if you need access to cash in the future.
Variable rates – Nearly all HELOCs have variable interest rates, which means your rate can go up depending on the market.
How to Use A High-LTV HELOC
A HELOC is a type of second mortgage that co-exists alongside your existing home loan. Unlike traditional mortgages, HELOCs provide you with a revolving line of credit tied to the equity in your home.
You can use these funds any way you’d like during the draw period, which commonly lasts up to ten years. With most lenders, this is as easy as an online transfer to your bank account or using a debit card or check attached to the loan.
You can borrow against your equity, repay the balance, and have the line of credit available to use again so long as your loan is still in the draw phase.
After the draw phase, home equity lines of credit enter the repayment period, in which you pay principal and interest for up to 20 years.
100% LTV HELOC Alternatives
If you can't find a high-LTV line of credit, here are some alternatives.
100% LTV Home Equity Loan
Often available from the same lenders who offer 100% LTV HELOCs, a 100% LTV home equity loan acts similarly as a second mortgage and lets you borrow up to your property's full appraised value. But rather than providing access to a revolving line of credit, a home equity loan lets you withdraw your equity as a one-time payment.
Whereas most 100% LTV HELOCs have adjustable interest tied to the federal prime rate, home equity loans typically have a fixed-rate repayment schedule.
VA Cash-Out Refinance
Cash-out refinances allow you to replace your existing first mortgage with a new, larger loan, netting you the difference.
Most of the time, however, lenders limit cash-out refinances to 80% LTV.
However, veterans and active military members may be eligible for a VA cash-out refinance up to 100% LTV.
Some lenders max out at 90% LTV, but borrowers who shop around may be able to get a 100% VA cash-out refinance at a lower rate than a HELOC.
See if you're eligible for a VA cash-out refinance.
90% LTV or 95% LTV HELOC
Once you get above 85% LTV, you're in the high loan-to-value HELOC range. These loans are riskier, and fewer lenders offer them. However, 100% LTV HELOCs aren't your only option. You may have better luck finding and qualifying for a 90% or 95% LTV HELOC.
Renovation Refinance Loan
Are you planning to use your home equity line of credit to fund repairs, improvements, or additions to your property? If so, refinancing your existing mortgage into a renovation refinance loan may be a better option.
Renovation refinance programs are available through conventional lenders, and they allow you to borrow up to 97% of your home's value. With a Community Seconds or Affordable Seconds loan, your combined loan-to-value can go as high as 105%.
There’s also the FHA 203(k) rehab refinance program that lets homeowners with a credit score as low as 580 borrow up to 97.75% of their property’s value.
Best of all, renovation refinance loans are based on your home’s after-repair value – not its current appraisal. For many people, this means that they can borrow more than they could with a 100% LTV HELOC.
For example, if your home is currently worth $250,000 and you have a $200,000 mortgage, you could be eligible for a 100% LTV HELOC up to $50,000 (minus closing costs). If you’re planning renovations that would increase your home’s value to $300,000, a 97% conventional rehab loan would give you access to up to $91,000 (minus closing costs) above your existing loan balance.
Applying for a 100% LTV HELOC
It's difficult, but not impossible, to find lenders who offer 100% LTV HELOCs. Plus, when you do, you'll need to pass stricter credit and debt criteria than with most other loans. However, for many homeowners, having access to a line of credit for their home's full value may well be worth the effort of shopping around with multiple HELOC lenders to find the perfect loan.
