90 LTV HELOC: How to Get One

A 90 LTV HELOC lets you borrow up to 90% of your home’s value. How much you can actually get depends on your home’s equity and your credit score, among other things. If you’re approved for a high LTV HELOC, you’ll have more borrowing power and easy access to money for various needs.

At RenoFi, we’re here to help you understand your borrowing options so you can find the right type of loan for your specific needs. This guide explains everything you need to know about qualifying for and getting a 90% LTV HELOC. Although 90% LTV HELOCs are rare, RenoFi offers a unique solution that can actually go over 100% LTV by leveraging the after-renovation value of your home.

What Does LTV Mean?

LTV stands for Loan-to-Value. It shows how much of an asset’s value a lender will loan you. For HELOCs, the LTV ratio is important because it tells you how much you can borrow against your home’s worth.

It’s important to understand your LTV ratio because it helps you gauge your home equity and borrowing capacity.

Let’s say your home is worth $400,000, and you still owe $280,000 on your mortgage. That means your home equity is $120,000 ($400,000 - $280,000). This gives you an LTV ratio of 70%, meaning you can potentially borrow up to 70% of your home’s value. We’ll cover how to calculate the LTV ratio in a bit.

In most cases, lenders will lend you around 80% to 85% of your home’s value. However, some lenders may extend up to 90% if you’re well-qualified.

What Is a 90% LTV HELOC?

A 90 LTV HELOC lets you borrow up to 90% of your home’s value minus what you still owe on your mortgage. This type of HELOC can give you access to a large chunk of money to fund major projects like home improvements. You can also use the money to consolidate your debts or handle other financial needs.

Keep in mind that 90% LTV HELOCs usually have variable interest rates, so your monthly payments may go up or down. Some lenders offer fixed-rate options to help stabilize your payments against interest rate changes.

Benefits of a 90% LTV HELOC

Opting for a 90 LTV HELOC comes with many advantages, including:

• More Borrowing Power: If you need a lot of cash for a big project such as a home renovation, a 90% LTV HELOC can be a good choice. Being able to borrow up to 90% of your home’s appraised value means you have access to more funds and plenty of financial wiggle room to meet some major needs.
• Flexible Repayment Options: With HELOCs, you usually have flexible repayment terms, so you can adjust your payments based on your financial situation.
• Potential for Better Interest Rates: Higher LTV HELOCs might come with more competitive interest rates, which can help you save money on borrowing costs in the long run.

Potential Risks of a High LTV HELOC

Before you take the plunge, though, it’s important to consider the potential downsides of taking out a high LTV HELOC. Some of the risks include:

• Risk of Losing Your Home: The biggest risk with this home financing option is the chance of losing your home. If property values drop, high LTV HELOCs can put your home at risk of being foreclosed, making it tough to pay back the loan.
• Higher Interest Rates: High LTV HELOCs often come with higher interest rates because lenders see them as riskier.
• Reduced Equity: When you borrow at a high LTV ratio, you’re left with less equity in your home. If property values drop, this can be a big financial risk that can affect your financial security.
• Financial Strain: High LTV HELOCs can lead to a heavier debt load, which can hurt your credit score and make it harder to manage your finances.

Requirements for Getting a HELOC

To get a 90% LTV HELOC, you’ll need to meet certain requirements. Here’s what most lenders look for:

Substantial Equity in the Home

You need at least 10% equity in your home. This means your mortgage balance should be no more than 90% of your home’s value. For example, if your home is worth $400,000, your mortgage balance shouldn’t be more than $360,000. This leaves you with $40,000 in equity, which is 10% of your home’s value.

A Good Credit Score

Many lenders will want to see a minimum credit score of 620. But to get better rates, you might need a score of 680 or higher, especially for a high LTV HELOC. A higher credit score makes it easier to get approved. Plus, it can get you lower interest rates.

A DTI Ratio of 43% or Less

Your debt-to-income (DTI) ratio is important when it comes to getting approved for HELOC. Lenders prefer a DTI ratio of 43% or lower because it shows you have enough income to manage your debt. In other words, your total monthly debt payments shouldn’t be more than 43% of your gross monthly income.

At Least Two Years of Verifiable Income History

Lenders want to make sure you can repay the loan, so they’ll ask for proof of income, such as recent pay stubs, W-2 forms, or tax returns. If you’re self-employed, you might need to provide extra documents like profit and loss statements.

Benefits of RenoFi Loans

Getting a 90% LTV HELOC can be challenging due to some of the requirements listed above and in some instances it may still not be enough to finance your home renovation project. RenoFi Loans are a great alternative that let you borrow against the future value of your property post-renovation, rather than borrowing against its current value like a traditional HELOC. 

For example, imagine your home is currently valued at $500,000 and your outstanding mortgage balance is $400,000. You are planning a renovation and expect that the after renovation value of your home would be approximately $640,000. Your current loan-to-value ratio (LTV) is at 80%, which means that you effectively can’t borrow anything to fund your renovation. A RenoFi loan, however, would allow you to go as high as 150% LTV or 90% LTV using the after renovation value.

So in this example, while using a standard home equity loan results in your borrowing power being $0, a RenoFi loan allows you to borrow up to $176,000 thanks to the after renovation value of your home!

If you are considering a home renovation, RenoFi is by far the smartest way to finance your project. Learn more and explore your borrowing options here.

How to Calculate Your LTV Ratio

To find your LTV ratio, divide the amount you owe on your mortgage by your home’s current value and then multiply the result by 100. Here’s how:

1. Start by figuring out your home’s current value. You can get an estimate from a recent appraisal, a real estate agent, or an online tool like Redfin, Realtor.com, or Zillow.
2. Find out your mortgage balance. You can get this from your latest mortgage statement or ask your lender for your current balance.
3. Use this formula. LTV Ratio = Loan Balance / Property Value.

Here’s an example. If your home is worth $500,000 and you owe $450,000, divide $450,000 by $500,000. Then multiply by 100 to get a percentage, which makes your LTV ratio 90%.

How to Calculate Your HELOC Limit

Here’s a simple way to calculate your HELOC limit:

1. Find out your home’s current value.
2. Calculate your maximum loan amount using this formula: Maximum Loan Amount = Home Value × LTV Percentage. For a 90% LTV HELOC, you can borrow up to 90% of your home’s value.
3. Subtract your current mortgage balance from your maximum loan amount using this formula: HELOC Limit = Maximum Loan Amount - Current Mortgage Balance.

Here’s an example:

• If your home is worth $500,000 and you can borrow up to 90% of its value, your maximum loan amount = %500,000 (home value) x 0.9 (LTV percentage). This gives you $450,000.
• If you still owe $300,000 on your mortgage, your HELOC limit = $450,000 (maximum loan amount) - $300,000 (current mortgage balance). This gives you a HELOC limit of $150,000.

This means you can potentially borrow up to $150,000 through a HELOC, but it all comes down to your lender’s requirements and your financial situation.

How to Use a 90% LTV HELOC Wisely

Indeed, you can use a HELOC for various purposes as long as it is within the terms and conditions of the loan agreement. But before using your home as a piggy bank, remember that HELOCs can quickly turn into bad debt, especially when you use the fund for the wrong reasons.

For this reason, it’s usually a good idea to use the funds wisely. Here are some tips to help you make the most of your HELOC:

• Spend Smart. Use the money for things that will benefit you in the long run. Consider upgrading your home, starting a business that can make you money, or paying off high-interest debts.
• Focus on High-Value Projects. If you’re going to use your HELOC for home improvements, put the money into projects that boost the value of your property. You might want to redo your kitchen, upgrade the bathroom, or add energy-efficient features. This way, you get more bang for your buck.
• Avoid Unnecessary Spending. While it can be tempting, don’t use your HELOC for things you don’t really need, like vacations or luxury items. This can lead to financial strain down the road.
• Combine Debts. If you have high-interest debts, such as credit cards, it’s usually wise to use your HELOC to consolidate them. For one, it’ll likely lower your interest costs. Also, it makes it a lot easier to manage your monthly payments.
• Have a Clear Repayment Plan. Know the terms of your HELOC, including when you’ll start repayments. If you can, commit to paying more than just the interest on your HELOC (the principal balance) during the draw period. Don’t forget to check if your HELOC has early-repayment penalties (although most lenders don’t charge this fee).

Remember, if you need quick access to cash, it’s usually better to try other loan alternatives rather than putting your home on the line every time you need a loan.

HELOC Alternatives

Cash-Out Refinance

This alternative allows you to refinance your mortgage for more than you owe and get the difference in cash. Basically, this option resets your mortgage with a higher loan amount. The interest rate is usually fixed, and your monthly payments might be lower than a HELOC.

Zero Percent Annual Percentage Rate (APR) Credit Card

If you need quick cash, a zero percent APR credit card can help out. You can make large qualifying purchases with this credit card without paying any interest during the promotional period. Remember, the credit limit is usually lower than a HELOC. If you choose this option, make sure to pay off the balance before the promotional period ends to avoid high interest rates.

401(k) Loan

If you have a 401(k) retirement account and your employer allows it, you might be able to borrow from your retirement savings. The interest rate is usually lower than a HELOC, but keep in mind that there might be extra taxes and penalties for early withdrawal.

Personal Loan

You can take out a personal loan from a bank, credit union, or an online lender. The interest rate is usually fixed, and the repayment period is shorter than a HELOC. But the interest rates might be higher than a HELOC.

Family Loan

If you have a family member or friend who’s willing to lend you money, a family loan can be a good way to get quick cash without getting financial institutions involved. The major downside with this option is that it can hurt your relationship if you fail to repay the loan. To avoid any misunderstandings, be sure to spell out clear terms and repayment schedules.

Is a 90% LTV HELOC Right for You?

Getting access to 90% of your home’s equity might sound appealing, and indeed, it can be a great option for some homeowners. But it’s simply not for everyone.

Before you take this route, it’s super important to think about your finances, credit profile, and how confident you are in repaying the loan.

And one more thing: it’s usually a good idea to check out offers from different lenders and fully understand the terms before making up your mind.

A Smart Alternative for Your Home Financing

A 90 LTV HELOC might be a good choice for homeowners with considerable equity in their homes. But if that’s not you, don’t worry. You don’t need to refinance your existing mortgage because we’ve got a better option for you ― a RenoFi HELOC.

RenoFi loans are the smartest way to finance a home renovation project. Unlike traditional loans, which are based on your current home value or require you to refinance your primary mortgage and give up your low rate, RenoFi loans are based on the After Renovation Value of your home. This allows you to borrow 11x more on average, get a low monthly payment, and keep your low rate on your first mortgage. 

Explore rates and find out how much you can borrow today.