Yes, you can get a loan against your house deed if you have equity in the property. Homeowners typically do this three ways: a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance. Most lenders let you borrow up to 80 to 85 percent of your home’s value minus what you still owe on the existing mortgage. Because your home secures the debt, rates are lower than on unsecured credit, but missing payments can lead to foreclosure.
The Three Ways to Borrow Against Your Home
Each product uses your home as collateral, but they work differently. The right one depends on whether you need a lump sum, ongoing access to funds, or a full mortgage reset.
A home equity loan gives you a single lump sum repaid in fixed monthly installments over a set term. Most carry a fixed rate, so the payment stays the same until you pay it off.1Consumer Financial Protection Bureau. What Is the Difference Between a Home Equity Loan and a Home Equity Line of Credit
A HELOC is a revolving credit line you draw from as needed, much like a credit card. HELOCs almost always carry a variable rate. During the initial draw period you may pay interest only; once that period ends, you begin repaying principal and interest together.2Consumer Advice (FTC). Home Equity Loans and Home Equity Lines of Credit Explained
A cash-out refinance replaces your existing mortgage entirely with a larger one. The new loan pays off the old balance and you keep the difference in cash. You end up with one monthly payment instead of two, but you restart your mortgage term and closing costs run higher.
A home equity loan or HELOC sits behind your primary mortgage as a second lien, so the lender takes on more risk and charges a slightly higher rate. A cash-out refinance is a first lien with a typically lower rate but higher closing costs and a longer break-even period. If your existing mortgage rate is already low, a second-lien product usually makes more sense because you keep that rate intact.
How Much You Can Borrow
Lenders measure borrowing capacity using your combined loan-to-value ratio (CLTV): existing mortgage balance plus the new loan, divided by the home’s appraised value. Most lenders cap CLTV at 80 to 85 percent. If your home appraises for $400,000, your total mortgage debt after the new loan generally cannot exceed $320,000 to $340,000. For cash-out refinances on conventional loans, Fannie Mae caps CLTV at 80 percent on a primary residence.3Fannie Mae. Eligibility Matrix
In practice, you need at least 15 to 20 percent equity before most lenders will approve a home equity product. “Tappable equity” refers to what you could withdraw while keeping your loan-to-value ratio at 80 percent or below. If you bought recently with a small down payment or your home’s value has fallen, you may not qualify yet.
What Lenders Check Before Approving You
Beyond equity, lenders look at credit, income, and documentation.
Credit Score
A 620 credit score is the floor for most conventional mortgage products, including home equity loans.4Fannie Mae. General Requirements for Credit Scores In practice, many home equity lenders set minimums at 660 to 680, and borrowers with scores of 720 or higher get the best rates. A lower score won’t automatically disqualify you, but expect a higher rate and a smaller credit limit.
Debt-to-Income Ratio
Your debt-to-income ratio (DTI) compares total monthly debt payments to gross monthly income. Most lenders want to see a DTI of 43 percent or lower. The lower your ratio, the more room the lender sees for you to take on a new payment.
Documents You’ll Need
Lenders verify employment history going back at least two years, looking for income stability rather than length at any single job. Expect to provide recent pay stubs, W-2 forms, and federal tax returns. Self-employed borrowers typically need two years of tax returns plus profit-and-loss statements.
You’ll also need proof of homeowners insurance, your most recent mortgage statement, and bank statements from the past two to three months. The lender orders a title search to check for existing liens and an appraisal to confirm the home’s current market value.
What It Costs
Home equity products carry closing costs, though they’re generally lower than on a purchase mortgage or cash-out refinance. Expect 2 to 5 percent of the loan amount, covering origination, title search and insurance, attorney or document preparation, recording fees, and appraisal.
Appraisal fees for a single-family home usually run $300 to $600 for a desktop or drive-by appraisal, and $500 to $800 or more for a full interior inspection. Complex or high-value properties cost more. Some lenders waive the appraisal for smaller loan amounts or strong borrower profiles, using an automated valuation model instead.
Some lenders advertise “no closing cost” home equity loans, but the costs are typically rolled into a higher interest rate. Over a long repayment period, the extra interest can exceed what you would have paid upfront.
When the Interest Is Tax Deductible
Interest on a home equity loan or HELOC is deductible only if you use the money to buy, build, or substantially improve the home securing the loan.5Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction Spend the proceeds on credit card payoff, tuition, or a vacation, and the interest isn’t deductible regardless of the loan type.
When the funds do qualify, the deduction applies to the first $750,000 of total mortgage debt combining your primary mortgage and the home equity loan. Mortgages taken out before December 16, 2017 follow the older $1 million limit. The One Big Beautiful Bill Act, signed in July 2025, made the $750,000 cap permanent rather than letting it expire at the end of 2025.5Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
Keep records showing exactly how you spent the loan proceeds. If the IRS questions the deduction, you’ll need receipts, contractor invoices, or other documentation linking the funds to qualifying home improvements.
If Your Title Has Liens
Before approving a loan, the lender orders a title search to identify every claim against your property. Liens get paid in the order they were recorded, so a first mortgage lender gets paid first if the home is ever sold or foreclosed. A home equity lender takes a subordinate position behind that first mortgage, which is why second-lien rates are higher.
Tax liens are a bigger problem. The IRS or a state tax agency can place a lien that, depending on when it was filed, may take priority over other creditors. Lenders often refuse to approve a home equity loan until a tax lien is resolved. Judgment liens from lawsuits or unpaid debts can cause similar complications. If the title search reveals issues like these, you may need to negotiate payoffs or get lien releases before closing.
Sometimes a new lender will ask your existing second-lien holder to sign a subordination agreement, moving the existing lien behind the new one. These negotiations take time, and the existing lienholder is under no obligation to agree.
Your Three-Day Right to Cancel
Federal law gives you a three-business-day cooling-off period after closing on a home equity loan or HELOC secured by your primary residence. During that window, you can cancel for any reason without penalty by notifying the lender in writing.6Office of the Law Revision Counsel. 15 U.S. Code 1635 – Right of Rescission as to Certain Transactions The clock starts when you sign the paperwork, receive the required Truth in Lending disclosures, and get two copies of the rescission notice, whichever happens last.
This right applies only to refinances and new credit lines secured by your principal dwelling, not to a loan used to purchase a home. If the lender fails to provide the required disclosures, your right to cancel extends to three years from closing or until you sell the property, whichever comes first.6Office of the Law Revision Counsel. 15 U.S. Code 1635 – Right of Rescission as to Certain Transactions
Risks If You Fall Behind
Because the loan is secured by your home, falling behind can lead to foreclosure, and the process moves faster than most people expect. Default typically triggers a formal notice giving you a set number of days to catch up. If you don’t, the lender can move to sell the property.
How that sale works depends on your state. In roughly half of states, the lender must sue you in court and get a judge’s order before foreclosing. In the other half, the lender can proceed without court involvement if the loan documents include a power-of-sale clause. The no-court path is faster and cheaper for the lender, which is one reason it pays to respond quickly to any default notice.
When a foreclosure sale doesn’t cover the full debt, some states allow the lender to pursue a deficiency judgment against you for the difference. Your credit score takes a severe hit either way, and a foreclosure stays on your credit report for seven years.
If you’re struggling, contact your loan servicer before you miss a payment. Servicers are required to evaluate you for loss mitigation options, which may include a repayment plan that spreads overdue amounts across future payments, a temporary forbearance that pauses or reduces payments, or a loan modification that permanently changes the interest rate, term, or balance.7U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program Acting early gives you the widest range of alternatives. Once foreclosure is underway, your options narrow considerably.
Federal Protections Worth Knowing
Several federal laws protect borrowers who take out loans secured by their homes. Knowing what the lender is required to tell you makes it easier to spot problems.
Truth in Lending Act
TILA requires lenders to disclose the annual percentage rate, total finance charges, payment amounts, and total cost of the loan before you sign. These standardized disclosures let you compare offers from different lenders on equal terms.8Office of the Law Revision Counsel. 15 U.S.C. Chapter 41, Subchapter I – Consumer Credit Cost Disclosure If a quoted rate doesn’t match the formal disclosure, that’s a red flag worth investigating before closing.
Real Estate Settlement Procedures Act
RESPA governs the closing process. It requires lenders to give you a good faith estimate of settlement costs and prohibits kickbacks or referral fees that inflate what you pay.9Consumer Financial Protection Bureau. 12 CFR Part 1024 (Regulation X) – Appendix B Illustrations of Requirements of RESPA If you suspect a lender is steering you toward a particular title company or appraiser in exchange for a fee, you can file a complaint with the Consumer Financial Protection Bureau.10Consumer Financial Protection Bureau. Submit a Complaint
High-Cost Loan Protections
The Home Ownership and Equity Protection Act adds safeguards for loans with unusually high rates or fees. A home equity loan is classified as “high-cost” if its APR exceeds the average prime offer rate by more than 6.5 percentage points on a first lien or 8.5 percentage points on a subordinate lien.11Consumer Financial Protection Bureau. 12 CFR 1026.32 – Requirements for High-Cost Mortgages The law also triggers high-cost status based on points and fees: for 2026, a loan of $27,592 or more is flagged if points and fees exceed 5 percent of the loan amount, while smaller loans hit the threshold at $1,380 or 8 percent, whichever is less.12Federal Register. Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages)
Once a loan is classified as high-cost, the lender faces restrictions on balloon payments, prepayment penalties, and certain fee structures. State laws may layer additional anti-predatory lending rules on top of the federal floor, so check your state attorney general’s website for local requirements before signing.