Your Home Equity Quote: What Banks Are Looking At

Your home equity quote will be based on two independent factors: first, the equity of the asset; second, your ability to pay the loan.

Equity of the Asset

The estimated equity you have in your property will directly affect the limit of your home equity loan quote. If you have just purchased the home, the most you can achieve in a home equity loan is the value of your down payment.

 Those borrowers who have been in their homes for some time and paid off a significant portion of their mortgage will be able to achieve higher loan limits. Your home's current value on the market will also come into play.

Ability to Pay the Loan

Your ability to pay is assessed based on your credit score and your income to debt ratio. Your credit score will show your performance with debt in the past, telling the lender if they should raise your interest rates based on the possibility you will be late on payments or default. Your income to debt ratio will also affect your limits. If you are currently deeply in debt on your mortgage and other loans, then your limits will be much smaller regardless of how much money you bring in each month.