How to Get Approved for a High LTV Home Equity Loan

Please note: Discover® Home Loans offers a home equity loan product, but does not offer HELOCs.

When getting a home equity loan or home equity line of credit (HELOC), your mortgage eligibility and loan terms can depend on your loan-to-value ratio (LTV).

LTV measures how much money youre borrowing against the value of your home, and the max amount of LTV acceptable by lenders is determined through home equity loan and HELOC LTV limits.

Getting approved for a home equity loan with a high loan-to-value (LTV) ratio can be challenging, but it is possible if you know where to look. As a homeowner, you may need to tap into your home equity to finance home improvements, pay off higher interest debt, or cover large expenses. But if you don’t have a lot of equity built up yet, you’ll need to find a lender that offers high LTV home equity loans.

In this article, we’ll explain what a high LTV home equity loan is, the pros and cons, and tips for getting approved. We’ll also share the top lenders offering high LTV home equity loans in 2023.

What is a High LTV Home Equity Loan?

A high LTV home equity loan is a loan where the amount borrowed represents a high percentage of your home’s value. Many lenders cap home equity loans at 80% LTV or 85% LTV. But some lenders will approve loans up to 90%, 95%, or even 100% LTV.

For example

Your home is worth $300,000
You owe $180,000 on your mortgage
Your home equity is $120,000 ($300,000 – $180,000)
An 80% LTV loan would be $96,000 ($120,000 x 0.80)
A 90% LTV loan would be $108,000 ($120,000 x 0.90)

So a high LTV loan allows you to tap into more of your home’s equity than a standard home equity loan.

Pros of a High LTV Home Equity Loan

Here are some potential benefits of getting a high LTV home equity loan

Access more funds: You can borrow more money compared to a traditional 80% LTV home equity loan. This gives you more cash to use for any purpose.
Consolidate high-interest debt: If you have credit card balances or personal loans with high interest rates, you may be able to consolidate them into a home equity loan at a lower rate. This can save you money each month.
Finance major expenses A high LTV loan provides funds for large planned expenses like home renovations, college tuition, or medical bills.
Tap equity without refinancing: With a high LTV home equity loan, you can access your home equity without the cost and paperwork of a cash-out mortgage refinance.
Predictable payments: Home equity loans have fixed interest rates and monthly payments, unlike HELOCs with variable rates. This gives you stability in your budget.

Cons of a High LTV Home Equity Loan

There are also some potential downsides of high LTV home equity loans to consider:

Higher interest rates: Because these loans represent more risk for the lender, interest rates are typically higher than a low LTV home equity loan.
Closing costs: You’ll have to pay closing costs and fees to obtain the loan, which can add up to thousands of dollars.
Less equity protection: If home values decline, you’ll have less equity cushion before hitting a negative equity situation.
Difficulty getting approved: Not all lenders offer high LTV home equity loans, so you have fewer options. Approval is harder with less equity.
Higher monthly payments: Since you can borrow more, monthly payments will be higher than a lower LTV loan for the same term.

Tips for Getting Approved for a High LTV Home Equity Loan

If you need to borrow more than 80% of your home equity, follow these tips to boost your chances of getting approved:

Shop with high LTV lenders: Compare several lenders known for doing high LTV loans up to 90% or more LTV. Credit unions and online lenders are good options.
Improve your credit score: Lenders view 700+ credit scores as the least risky. Pay down debts and dispute any errors to maximize your score.
Lower your DTI: Calculate your debt-to-income ratio and reduce monthly obligations if it’s over 40% DTI. Pay off credit cards and other debts.
Choose a shorter term: Opt for a 10 or 15-year term rather than 30 years. This shows you can handle higher payments from a riskier loan.
Use home equity you’ve built: If your LTV is lower now than when you bought your home, highlight this equity growth to the lender.
Provide assets and reserves: Large down payments or assets can offset the higher LTV for some lenders. High reserves also help your case.
Offer a co-signer: Adding a co-signer with higher income and credit can get you approved if you fall slightly short.

Best Lenders for High LTV Home Equity Loans

While most lenders stick to 80% LTV or below, these lenders offer home equity loans up to 95% or 100% LTV in many cases:

Lender	Max LTV	Loan Amounts	Rates
LightStream	100%	$5K – $100K	4.99% – 19.99%
LendingClub	90%	$5K – $40K	8.49% – 21.07%
Laurel Road	90%	$10K – $750K	6.99% – 13.24%
SoFi	90%	$5K – $100K	5.74% – 20.29%
Avant	95%	$5K – $90K	9.95% – 35.99%
Lenda	90%	$2K – $100K	Rates Vary
Figure	85%	$5K – $250K	5.99% – 15.99%

LightStream and SoFi have some of the best high LTV loan options right now, with LightStream going up to 100% LTV. Credit unions are another place to look for high LTV lending.

When comparing lenders, pay attention to their minimum credit score requirements, maximum LTV, loan amounts, rates, fees, and other eligibility criteria. Pre-qualifying with multiple lenders will help you find the best high LTV home equity loan.

How Much Can You Borrow with a High LTV Home Equity Loan?

Most lenders will let you borrow up to 80% of your home equity, while others go up to 85%, 90% or higher LTV ratios. The maximum amount you can qualify for will depend on:

Your credit score and income
The value of your home
Your existing mortgage balance
Other monthly debts and obligations
The lender’s specific underwriting policies

For example, someone with a $200,000 home, a $100,000 mortgage, and $80,000 of tappable home equity could potentially get approved for:

Up to $64,000 with an 80% LTV loan
Up to $68,000 with an 85% LTV loan
Up to $72,000 with a 90% LTV loan
Up to $80,000 with a 100% LTV loan (from lenders like LightStream)

Run the numbers for your specific situation to see how much equity you can potentially leverage with a high LTV home equity loan.

What Credit Score is Needed?

To get approved for a high LTV home equity loan, you will need a strong credit score. Here are the typical credit score requirements:

720+ credit score: Ideal for the best rates and maximum LTV approval
680-719: Decent approval chances but higher rates than 720+
640-679: Lower approval odds except with specialized lenders
Below 640: Very difficult to get approved for a high LTV loan

Some lenders like LightStream and Lenda advertise approvals for borrowers with credit scores in the mid-600s. But for high LTV loans, it helps to be over 700 if possible. Improving your credit before applying will expand your options.

Alternatives if You’re Denied a High LTV Loan

If you get turned down for a high LTV home equity loan, here are some alternative options to consider:

Try another lender: Don’t give up after the first denial. Try other high LTV lenders on our list above.
Improve your credit: Give your credit score a boost by paying down debts and correcting errors, then re-apply in a few months.
Wait to build equity: Make extra mortgage payments to build your LTV ratio to 80% so more lenders will approve you.
Add a co-borrower: Applying with a family

What are HEL and HELOC LTV limits?

When you take out a home equity loan or HELOC, your lender will usually require that you maintain a certain LTV ratio. This requirement limits the amount you may be able to borrow.

Both home equity loans and HELOCs can be useful financial tools, but its important to understand the LTV limits before applying for either one.

What are home equity loans and HELOCs?

A home equity loan or a HELOC enables you to use your homes equity as collateral for a new loan. Equity is the difference between the value of your property and the amount remaining on your mortgage. While both tap into home equity, there are key differences between the two.

A home equity loan is a lump sum of money you borrow all at once and then pay in fixed increments over a set period, much like with your existing mortgage. A HELOC, on the other hand, functions more like a credit card — youre approved for a certain amount of credit and can then draw on that credit as needed. With a HELOC, you can make minimum monthly payments or choose to pay off a larger portion of the balance each month.

The interest rate on a HELOC is usually variable, while the interest rate on a home equity loan is usually fixed. Because of this flexibility, HELOCs are often used for home repairs or unexpected expenses, while home equity loans are more commonly used for larger projects and purchases.

You can take out a home equity loan or HELOC to pay for larger expenses like home renovations or repairs, medical bills, or college tuition. Since lenders might allow you to borrow up to 90% of the value of your property, this may be an ideal option if you ever need to tap into your equity.

My Top 5 Best HELOC Lenders in 2023 – WATCH FIRST

FAQ

What is the highest LTV for a home equity loan?

Lenders typically look for an LTV of 85% or less for home equity loans and HELOCs, meaning the loan should not exceed 85% of your home’s value.

Can you do a 90% HELOC?

The cash you can get out of your home depends on the amount of equity you have in your home, as well as your lender’s guidelines. A typical HELOC lender will allow you to access 80% of the amount of equity you have in your home but some lenders might go up to 90%, though usually at a higher interest rate.

Can I get a 100% LTV on a HELOC?

That ratio between your equity and your home’s value is called your loan-to-value (LTV) ratio. However, if you need more funds, it’s possible to get a high-LTV home equity loan or HELOC that allows you to borrow up to 100% of your home’s value.

Can I borrow 100% of the equity in my home?

A home equity loan generally allows you to borrow around 80% to 85% of your home’s value, minus what you owe on your mortgage.

Can you get a high LTV home equity loan?

What is considered a high LTV borrower?

If your current LTV ratio is above 85%, or if adding a second mortgage would push your LTV above 85%, you’d be considered a high-LTV borrower. The loan you used to purchase your home is your first mortgage, while a home equity loan or HELOC will be considered your second mortgage.

What is a good LTV ratio for a home equity loan?

Your LTV ratio is a key factor in qualifying for a home equity loan or HELOC. Standard guidelines might require a maximum 85% LTV ratio, but if you’re looking to borrow up to a 100% LTV, take the time to shop around. You may find the loan you need — just be prepared to pay higher interest rates.

How do you calculate LTV on a home equity loan?

When taking out a second mortgage, like a home equity loan or HELOC, your LTV will include both your original mortgage and the new loan against your equity. This number is called the “combined loan-to-value” (CLTV) ratio. Add your loan balances together. Divide that amount by your home’s value. What is a 100% LTV HELOC or home equity loan?