Home equity & borrowing power
A quick estimate of how much you could borrow against your home to fund a renovation — then see how much of that spend you recoup at resale.
How home-equity borrowing works
Your equity is your home's current value minus what you still owe on the mortgage. Lenders will usually let your combined borrowing reach a loan-to-value (LTV) limit — often 80–90% — across your existing mortgage plus any new borrowing. So your available headroom is roughly (home value × LTV) − mortgage balance. The lower your current LTV, the more you can typically access and the better the rate you'll be offered.
A worked example
Say your home is worth $400,000 and you owe $220,000. Your raw equity is $180,000, but you can't borrow all of it. At an 85% combined LTV limit, the most debt the lender will allow is $340,000 — so your borrowable headroom is $340,000 − $220,000 = $120,000. Push the limit to 90% and it rises to $140,000; drop to a conservative 80% and it falls to $100,000. Your income, credit score and the lender's rules then determine how much of that headroom you're actually offered.
Ways to fund a renovation with equity
| Option | How it works | Best for |
|---|---|---|
| Home-equity loan | Lump sum, fixed rate, fixed term (a "second mortgage"). | A one-off project with a known cost. |
| HELOC | Revolving credit line, usually variable rate; draw as you go. | Phased work or uncertain final cost. |
| Cash-out refinance | Replace your mortgage with a bigger one; pocket the difference. | When today's rates beat your current mortgage. |
| Personal / unsecured loan | No home as security; higher rate, shorter term. | Smaller projects or little available equity. |
Rates and limits vary by lender, product, and your credit — treat these as a starting point, not an offer.
How much can you tap by LTV limit
| Combined LTV cap | Max total debt on a $400k home | Headroom if you owe $220k |
|---|---|---|
| 80% (conservative) | $320,000 | $100,000 |
| 85% (common) | $340,000 | $120,000 |
| 90% (aggressive) | $360,000 | $140,000 |
Before you borrow
Two checks are worth doing first. Estimate the monthly repayments on any new borrowing with the renovation loan calculator, and confirm the project actually pays back with the ROI calculator — some renovations recoup most of their cost at resale, others far less. If you're weighing how much to spend in the first place, the renovation budget calculator gives a sensible range for your home's value.
Frequently asked questions
How much equity can I borrow against my home?
Most lenders let your total borrowing (existing mortgage plus new) reach 80–90% of your home's value. So if your home is worth $400,000 and you owe $220,000, at an 85% limit you could access roughly (400,000 × 0.85) − 220,000 = $120,000 of headroom — subject to your income and credit.
What's the difference between a HELOC, a home-equity loan, and a cash-out refinance?
A home-equity loan is a lump sum at a fixed rate repaid over a set term. A HELOC is a revolving credit line you draw on as needed, usually at a variable rate. A cash-out refinance replaces your existing mortgage with a larger one and pays you the difference. Which is cheapest depends on your current mortgage rate and how you'll spend the money.
What is loan-to-value (LTV) and why does it matter?
LTV is your total mortgage debt divided by your home's value. Lenders cap combined LTV (typically 80–90%) to protect themselves if prices fall, so the lower your LTV, the more you can borrow and usually the better the rate. Borrowing above 80% can also trigger private mortgage insurance in some markets.
Should I borrow against my home to renovate?
It can make sense when the project adds lasting value or usability and the repayments fit your budget — but you're putting your home up as security. Estimate the monthly cost with the renovation loan calculator and check the project earns its keep with the ROI calculator before committing.
Does the renovation itself increase my borrowing power?
Often yes, over time: a project that raises your home's appraised value increases your equity, which can expand future borrowing. But lenders base the initial loan on the current value, so you generally can't borrow against value the renovation hasn't created yet.
An estimate only. Actual borrowing limits depend on the lender, your income, credit, and the product. This is not a loan offer or financial advice. Reviewed July 2026.
Know the return, too
Borrowing to renovate makes most sense when the project pays you back. See how much it does.
Open the ROI calculator →