Can you get a $300,000 home equity loan?
Borrowing money is relatively easy to do for small amounts. Whether via a simple swipe of a credit card, a personal loan from your local bank or even a small amount of home equity withdrawn via a home equity loan or home equity line of credit (HELOC), borrowing an amount of money under $50,000 or so is generally achievable for many Americans, even if their credit history and credit score needs improving.
But what about borrowing large, six-figure sums of money? And what needs to be considered when securing that money via your home equity? These questions need to be carefully reviewed and answered before applying, especially if you're looking to borrow that money from your home.
If you want to borrow $300,000, for example, and want to do so via a home equity loan, the most obvious question surrounds the ability to do so. Specifically, can you even get a $300,000 home equity loan? And, if so, how? That's what we'll cover below.
Start by seeing how much home equity you could potentially borrow here.
Can you get a $300,000 home equity loan?
Technically, yes, you can get a home equity loan for $300,000 or even higher. But not every homeowner (or even most) can secure a loan in this amount. According to a report released earlier in March, the average home equity level is a bit above that number, coming in at around $313,000 right now. And while that's up 6% year-over-year, it's still not enough for most to secure that $300,000 loan.
That's because home equity lenders prefer borrowers to keep a 20% equity threshold in the property. In other words, you'll only be able to borrow up to 80% of your available equity. So you'll be capped at around $250,000 if you have the average $313,000 amount.
But that's assuming you have the average amount. Some homeowners can easily have a greater home equity amount accumulated, especially considering the rise in home prices over the past five years. These homeowners, then, can theoretically secure a home equity loan for $300,000. To get it, however — and to maintain that 20% threshold — they'll need approximately $375,000 worth of equity in their home (80% of $375,000 = $300,000).
Still, that won't be the only eligibility requirement. Homeowners will also need to have excellent credit to secure the loan at a reasonable interest rate, considering the large, six-figure amount being withdrawn. And they may need to provide additional documentation to lenders than they would if they had applied for a smaller amount.
So, technically, yes, some homeowners can get a $300,000 home equity loan. And if they plan to use it efficiently, like for debt consolidation or to buy a second home, it could be the most cost-effective way to secure that much money. But it will need to be approached strategically and with careful consideration to make sure it's the right move at the right time.
See how much a home equity loan could cost you here now.
Should you get a $300,000 home equity loan?
Once you've determined your precise eligibility for a $300,000 home equity loan, an equally important question surfaces: Should you actually get the $300,000 home equity loan? The answer to this question is less clear and will depend on your specific financial situation.
For select homeowners, a $300,000 home equity loan makes up only a portion of their available equity, so a loan for this amount is less prohibitive than it would be for those homeowners who are withdrawing the full 80%. That latter group, however, may want to be cautious. If you can't pay back all that you owe — and monthly repayments on a $300,000 home equity loan are substantial — you can easily lose your home back to the lender, putting you in an even worse financial position than when you started.
And even if you can afford monthly payments, a $300,000 home equity loan will significantly alter your home's value, which can be problematic both for the current homeowner and any beneficiaries the homeowner is planning to leave the home to. So that will need to be carefully considered, as well. Still, with interest rates on alternatives like personal loans and credit cards steep, and the difficulty of securing a six-figure amount of money on either unsecured credit option high, a $300,000 home equity loan could be the better option for some homeowners now.
The bottom line
For some homeowners, not only is a $300,000 home equity loan available, it may even be the better borrowing option in today's high-rate climate. Still, borrowing from your home equity should always be approached with nuance and care, particularly when withdrawing such a substantial amount. So go into the process clear-eyed and focused and be sure to have explored all other alternatives (including HELOCs), to make sure that this is the safest and most cost-effective way to secure $300,000 worth of financing for your circumstances now.
