What does "HE-LTV" mean in real estate?
HE-LTV (Home Equity Loan-to-Value) is a specialized ratio that measures the size of a home equity loan or a home equity line of credit (HELOC) relative to the property's appraised value. Unlike LTV or CLTV, HE-LTV focuses only on the equity loan/HELOC portion to assess that loan’s specific risk and the borrower’s remaining equity.
Quick definition
- Formula: HE-LTV = (home equity loan or HELOC balance) ÷ (appraised property value).
- Scope: Counts only the second-lien home equity loan or HELOC, not the first mortgage.
- Use: Lender risk assessment, setting interest rates, and deciding additional borrowing capacity.
How it differs from related ratios
- LTV compares the primary mortgage balance to property value (first mortgage only).
- CLTV combines all loans secured by the property (first mortgage + home equity loan/HELOC) divided by value.
- HE-LTV isolates just the home equity loan or HELOC, making it useful for evaluating the added risk from that specific product.
Calculation examples
- Basic HE-LTV: Home value = $500,000; proposed HELOC = $75,000 → HE-LTV = 75,000 ÷ 500,000 = 15%.
- Combined limit check: If the first mortgage balance is $300,000 (LTV = 60%), adding a $75,000 HELOC yields CLTV = (300,000 + 75,000) ÷ 500,000 = 75% — under a typical 85% combined cap.
- Refinance or cash-out scenario: If existing CLTV is already near lender limits (e.g., 80–85%), additional HE-LTV may be denied or priced higher.
Why lenders and borrowers care
- Risk management: A higher HE-LTV raises lender exposure on the second lien, often resulting in higher rates or stricter underwriting.
- Borrowing capacity: HE-LTV helps determine how much additional equity borrowing is reasonable without breaching CLTV maximums.
- Refinancing decisions: Borrowers use HE-LTV to decide if a cash-out HELOC or second mortgage is feasible given lender caps and pricing.
At-a-glance comparison
| Term | Calculation Focus | Loan Types Included | Common Usage |
|---|
| LTV | Primary mortgage balance ÷ property value | First mortgage only | Initial mortgage risk |
| CLTV | Sum of all loans ÷ property value | First mortgage + home equity loans/HELOCs | Overall debt risk on the home |
| HE-LTV | Home equity loan or HELOC amount ÷ property value | Home equity loans or HELOCs only | Evaluate home equity loan risk and borrowing capacity |
Practical tips
- Check both HE-LTV and CLTV before applying for a HELOC—lenders enforce combined limits (commonly ~85%).
- Lower HE-LTVs generally get better rates and fewer additional conditions like mortgage insurance.
- If your HE-LTV would push CLTV past lender caps, consider paying down the first mortgage, seeking a lower HELOC amount, or refinancing the first mortgage as an alternative.
Bottom line: HE-LTV is a focused, easy-to-calculate ratio that helps lenders and borrowers evaluate the risk and affordability of a home equity loan or HELOC relative to the home’s value. It’s best used alongside LTV and CLTV when planning additional borrowing or refinancing.
