Can I increase my HELOC limit?

Sometimes you just need a little more breathing room in your budget or with your HELOC limit. And raising it could help cover a major home repair, consolidate higher-interest debt, or just create a larger cushion for unexpected expenses.

Yes, you may be able to increase your home equity line of credit (HELOC) limit if your property value has risen, your mortgage balance has gone down, or your financial profile has improved. Lenders typically require a review of your equity, credit, and income, and approval isn’t guaranteed.

Here’s what you need to know if you’re interested in increasing your HELOC limit.

When can you ask to increase your HELOC limit?

Each lender's requirements will vary. You could have a better chance of your lender approving a HELOC limit increase if:

• Your home value has increased

• You have sufficient home equity

• Your income and/or credit score have improved

• You have a stable income

• You have a strong track record of on-time payments

• There’s been a recent change in lender policy, expanding the percentage you can borrow

How to increase your HELOC limit

You’ve got several ways to increase your HELOC. Some lenders may let you increase your limit, while others will require a new loan. Here’s a breakdown of the potential options.

Request a credit limit increase

To request a credit limit increase, first contact your current lender. It’s possible that they offer a streamlined loan process for existing customers. A streamlined loan process should be faster, and it should also be less expensive than taking out a new loan.

Your lender may want to reappraise your home, either by hiring a home appraiser or by running an automated valuation model (AVM) to determine your property's current value.

If the increase is approved, you’ll keep the same HELOC account.

Refinance

Refinancing a HELOC is when you open a new, larger HELOC to pay off your existing loan. This would require you to have enough equity in your home to qualify for the larger limit, plus meeting the lender's other criteria like credit score and income. 

If you refinance with a new HELOC with longer terms, you'll get more time to repay your loan, but also be paying interest for longer. Refinancing also generally requires paying new loan fees like origination fees.

Open a new HELOC

If you’ve met all the criteria but your current lender is unwilling to increase your HELOC limit, find out why. If it’s because you have insufficient equity in the home or your job situation has become shaky, chances are you could have a difficult time landing a HELOC with another lender.

However, if the equity you need is there and your finances are in order, you may want to investigate opening a new HELOC with another lender. Keep these two things in mind if you’re considering a new HELOC:

1. You’ll pay upfront fees again, including appraisal, origination, credit report, title search, and notary and filing fees.

2. The new lender may charge more in ongoing fees, including annual, transactional, inactivity, and early termination fees.

This may also mean you have three mortgages to keep track of, all tied to your home. Establish a solid repayment plan before taking on a third mortgage loan.

Why a lender might say no

A lender might say no to raising your HELOC limit for a few reasons, including your home's equity, your credit, or your income. Here's more.

CLTV caps

Combined loan-to-value ratio (CLTV) measures the total amount of debt secured by your home—including your mortgage and any home equity loans or HELOCs—compared to your home’s current value. Most lenders have a CLTV limit of 80% to 90% of your home's value.

For example, if your mortgage balance is $300,000 and your HELOC is $100,000, that’s a total of $400,000 secured by the home. If the home is worth $500,000, your CLTV is 80%. Here’s the calculation:

$400,000 / $500,000 = 0.80 x 100 = 80%.

If the lender's CLTV limit is 80%, then you wouldn't qualify for a larger HELOC limit unless your home's value increases or your loan balances decrease.

Credit score changes

Secured loans like HELOCs tend to have more flexible credit requirements than other types of credit, but most lenders will still have some sort of minimum credit score. If your credit score hasn't increased much since taking out the original HELOC, the lender may be less likely to raise your credit limit.

Insufficient income

Part of your HELOC limit is determined by how much the lender thinks you can afford. If your income isn't high enough to cover a larger credit limit, the lender is unlikely to give you one.

As much as it can sting to get turned down by a lender, it may help to think of it as a guardrail. The main reason a lender would deny loan approval is that they’re worried you may have trouble keeping up with the financial obligation. You may well qualify for a loan at some future time. The turn-down just means now may not be the best time to borrow more money.

Alternatives if you can’t increase your HELOC

Being told no is always disappointing, but in this case, you may still have other options. Here are some alternate strategies to think about.

Consider a personal loan

Like a HELOC, personal loans can typically be used to cover all manner of financial needs. If you have at least fair credit and your debt-to-income (DTI) ratio is low enough, you may be able to qualify for a personal loan that provides the funds you’re looking for.

Look into a cash-out refinance

If you have a good deal of equity, a cash-out refinance could work for you. With a cash-out refinance, you get a new, larger mortgage loan that can pay off your existing mortgage plus your current HELOC—and, ideally, leave you with some extra cash.

This route leaves you with a single mortgage and cash in hand. However, keep these things in mind:

• If you’re doing a conventional cash-out mortgage, you typically must leave 20% equity in the home after closing.

• You’ll have to go through full underwriting and pay all associated new mortgage fees.

• The new loan may have a higher APR than you were previously paying. 

Depending on why you want the limit increased, you may decide that it’s not worth the trouble or expense to take on a new mortgage.

Save up the cash

In some cases, the best thing to do may simply be to save up the cash instead of increasing your HELOC limit. This will depend on why you want the higher limit, though.

If your basement has become a lake due to flooding, you probably don't have the luxury of waiting. On the other hand, if you want a credit limit increase to remodel your kitchen or add a pizza oven to the back patio, consider whether you’d be better off saving your money and paying cash for the project when you have enough.

Consider a new HELOC? Get a risk-free estimate through Achieve Loans.