Home equity lines of credit are secured loans on a home that can be accessed, repaid and then re-accessed again. These types of loans are often beneficial for consumers performing home improvements or home repairs and who have fluctuating financing needs. It is important to remember that each HELOC is a lien on the property, and most often these are in addition to a first mortgage. Although it is possible to have two HELOCs, it is rare and you must have enough home equity to support all the secured loans.
Home Equity Requirements
Before you can obtain multiple HELOCs, you must first make sure that you have enough equity in your home. Lenders use a ratio called loan-to-value to establish this. To calculate your LTV, divide the total of your current and/or proposed secured loans (including the total credit line of each HELOC) by the appraised value of your home. If you are more than 100 percent, you cannot get multiple HELOCs. However, if you are less than 100 percent LTV, it is possible.
Loan-to-Value Considerations
While your house may be less than 100 percent LTV, it does not necessarily mean you will automatically qualify for two HELOCs. In most cases, actually, it is very difficult to obtain secured loans unless you have an LTV that is less than 80 percent LTV. However, if you are willing to use mortgage brokers and finance institutions that have more lax underwriting criteria, it is possible to work around the 80 percent LTV cutoff, which normally is the standard for banks and credit unions.
Amount Borrowed vs. Amount Available
Another equity consideration is the total value of the two HELOCs. Lenders will not finance equity loans if the total amount available on a credit line exceeds 100 percent LTV on your home. For example, if your home is worth $300,000 and you have a first mortgage for $200,000, a lender cannot give you one HELOC for $50,000 and an additional one for $60,000 as the total amount available will bring you to more than 100 percent LTV, despite what you actually decide to borrow from the credit line.
Exploring Other Options
It is possible to secure two HELOC loans if you have great equity, good credit and disposable income, but if you find that you cannot qualify for these two loans, you may want to consider obtaining a larger unsecured credit line to complement the HELOC loan. The rates and payments on these accounts will likely be less competitive than those on a secured loan, but this is a way to work around LTV problems and still obtain the necessary cash or available credit.
