How much home equity can you borrow?
Cynthia E. Brodrick

When you're ready to tap your home equity, keep in mind that banks often have a minimum amount that you have to borrow, ranging from $1,000 to $10,000.

Obviously, they don't want to go through this paperwork just for you to have a little spending cash for a weekend at Disney World. Know how much money you need for your project, and find a lender who'll give you what you need and not more than necessary.

Generally you can't borrow against all your equity. Many lenders only let you borrow up to 80 percent to 90 percent of the appraised value of the home -- minus your debt. Let's say that your house would sell for $150,000 and you still owe $120,000. The bank would allow you to borrow up to $135,000 (90 percent of the value) minus that $120,000 mortgage. In other words, you can get your hands on only $15,000.

Be forewarned: A few lenders will loan you 100 percent of your equity and sometimes even more! This is not a good idea. These loans charge a higher interest, up to five points above the prime rate. And remember: The more you borrow against home sweet home, the greater your risk of losing it all.

For more on the costs of a home equity loan, read "The cost of a home equity loan."

To learn more about unscrupulous lenders, read this Bankrate.com story, "Beware of home equity deceptions."

-- Posted: April 24, 2000