Can I Increase My HELOC Limit?

Whether you need additional funds to consolidate debt or pay for your child’s education, increasing your HELOC limit could be beneficial. HELOCs usually have lower rates than other forms of debt like credit cards.

You could increase your limit by refinancing your HELOC with your current lender or a new one. Keep reading to learn how to increase your HELOC limit and scenarios where doing so could be wise.

Can you increase your HELOC limit without refinancing? 

When you refinance a HELOC, you switch out your existing one with a new one. Some lenders require you to submit a refinance application if you want to increase your HELOC limit.

However, a few lenders might allow you to modify your limit without refinancing. You may want to do this if rates have increased and you don’t want to refinance to a higher rate or pay for closing costs again.

That said, you might have trouble finding a lender that allows you to increase your HELOC limit without refinancing. Most lenders we contacted don’t allow you to increase your limit without applying for a new HELOC.

Can I increase my HELOC limit by refinancing? 

You could refinance your HELOC to one with a higher limit, provided you meet a lender’s eligibility requirements. Below are some factors lenders often consider to assess whether you qualify.

Credit score

When you apply for refinancing, lenders perform another hard credit check to review your credit score and history. If your credit score has improved since applying for your current HELOC, you might qualify for a lower rate. 

Conversely, if your credit score has taken a significant hit, you may have trouble qualifying for a new HELOC.

Your loan-to-value ratio (LTV)

Lenders will also consider your current LTV,  which compares your current mortgage balance against your home’s equity. Requirements vary, but many lenders require an LTV of 85%. You can calculate your LTV by dividing your current mortgage balance by your home’s appraised value. 

For example, if your outstanding balance is $150,000 and your home’s appraised value is $250,000, your LTV is 60%.

Paying down your mortgage can help lower your LTV. Your equity in your home can also increase if home prices rise in your area.

Income and current debt load

Lenders will review your income to assess your ability to repay the new line of credit. In addition, they’ll review your debt-to-income ratio (DTI) to gauge whether you can take on new debt. 

You can calculate your DTI by dividing your monthly debt load by your gross monthly income. For instance, if your monthly debt is $5,000, and your gross monthly income is $12,000, your DTI is 41.6%.

DTI requirements vary, but lenders generally require a DTI of 43% or lower.

Should I refinance to increase my HELOC limit?

Whether it’s smart to refinance your HELOC depends on your financial circumstances and goals. The table below highlights some scenarios when doing so might make sense.

Consider refinancing a HELOC if …	Reconsider refinancing if …
Your home’s value has increased	Your home’s value has fallen
You can afford to borrow more	Your financial situation is uncertain
You can qualify for a lower rate	Average HELOC rates have increased

Consider refinancing if your home’s value has increased

If your home’s value has risen substantially since taking out your current HELOC, you may have a better chance of qualifying for a higher limit.

Reconsider refinancing if your home’s value has fallen

Increasing your HELOC limit might be more challenging if your home’s value has fallen. That’s because lenders only allow you to borrow a certain percentage of your home’s loan-to-value ratio or LTV, which compares your current mortgage balance against your home’s equity.

Note that a lender might even lower your existing HELOC limit if the current value of your home falls too much, according to the Federal Trade Commission.

Consider refinancing if you can afford to borrow more

If your income is stable and you can comfortably afford to borrow more of your home’s equity, the lower your chances of not repaying your HELOC bill on time.

Reconsider refinancing if your financial situation is uncertain

Borrowing money when your financial situation is shaky, could put you at risk of defaulting on the HELOC.

Consider refinancing if you can qualify for a lower rate

If you can refinance to a lower rate while increasing your HELOC limit, you could lower your total borrowing costs.

Reconsider refinancing if average HELOC rates have increased

When average HELOC rates rise, it might be harder to secure a lower rate than your existing rate. If that’s the case, consider waiting until you qualify for a lower rate. 

Ask the expert

Eric Kirste

CFP®

It may make sense to increase your HELOC if you need to consolidate additional debt by organizing and streamlining all your payments into one single loan, which could potentially save you money over time, depending on the interest rate offered. Or, if you started with a smaller HELOC, paid down your mortgage balance, and now have access to additional equity for larger purchases, a higher HELOC limit can enable you to finance larger expenses such as renovations, college tuition fees, or a new car.

How to increase your HELOC limit

If you want to refinance your HELOC, ask your current lender whether it allows this. Also, compare rates and fees from other HELOC lenders to get the best deal for your situation. While some lenders charge closing costs, others don’t.

After you’ve found the best option for you, submit a refinance application. The lender might ask you to provide the following information or documents:

• Driver’s license or passport
• List of current debts
• Most recent pay stubs 
• Last two years of W-2’s 
• Business tax returns if self-employed

It generally takes at least two to six weeks for a lender to process your refinance application.

Ask the expert

Eric Kirste

CFP®

If you do not have a budget and long-term plan to pay off the debt, then increasing your HELOC may not be a good idea. If you default on your HELOC, the lender has rights to your house/property. Consider what the funds are being used for. Increasing your HELOC for the sake of having more may not be best.

FAQ 

What’s the maximum HELOC amount?

HELOC limits are often capped at 85% of your home’s appraised value minus the balance you owe on your mortgage. But lenders also consider your credit history, income, and overall financial health when setting your limit. 

Based on your financial profile, you could be eligible for less than 85% of your home’s value.

What other options do I have if refinancing my HELOC isn’t right for me?

Refinancing isn’t the only route when you want to increase your credit line. Another option could be to apply for a home equity loan. Unlike a HELOC, which is a revolving line of credit, a home equity loan provides you with a lump sum. 

Another strategy could be to seek out a personal loan. You might also want to consider paying down debt to improve your credit profile, which can be more appealing to lenders.

Will any terms other than the credit limit change by increasing my HELOC limit?

Updating your HELOC limit, anticipate other possible changes besides the credit limit because you’re refinancing your credit line. The interest rate, for instance, might change, or the terms and conditions. 

Your lender might also update the minimum payments, variable rates, and timelines. Be sure to scrutinize any changes and question anything that seems unclear.