Home Equity Line of Credit Limits
- Home equity line of credit limits are set to keep you from borrowing more than the bank is confident that either you can pay back or that the bank can recover by foreclosing on your home. Usually, lenders set the limit at a percentage of your home's value. For example, the Federal Reserve uses 75 percent of the home's value as the maximum line of credit on its website, while Lending Tree states that some lenders may go even higher than 100 percent.
- Your maximum line of credit can be calculated by multiplying your home's value by the maximum percentage your lender will allow. According to Lending Tree, most lenders require your home to be appraised before they will issue you a line of credit. For example, if a home appraisal values your home at $398,000 and your lender is will to let you borrow up to 80 percent of your home's value, you would multiply $398,000 by 0.80 to see that your maximum line of credit would be $318,400.
- The amount of your home equity line of credit will be limited by loans that you have outstanding against the value of your home, such as a mortgage, second mortgage, home equity loan or other home equity line of credit. For example, if you owe $50,000 on your mortgage, the line of credit you would have been offered would be decreased by $50,000.
- Home equity line of credits typically have a time limit on how long you can access the line of credit, such as 10 years. After this period ends, you will have a specified period of time to repay the money. For example, a home equity line of credit may allow you to borrow money against the line of credit for 10 years, during which you make interest-only payments, and then pay the balance of the line of credit off over the next 10 years.
Tax Deduction Limits
- If you itemize your deductions, you may be able to write off some or all of the interest you pay on your home equity line of credit. Regardless of what you use the proceeds of the loan for, you can deduct the interest on the first $50,000 of the interest you pay on the home equity line of credit. If you are married and you and your spouse file your taxes together, you can write off the interest on the first $100,000.