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Interest rates have been shifting over the past year, and with home values high, many lenders are reevaluating their home equity products, particularly home equity lines of credit (HELOCs), which offer borrowers a lengthy line of credit based on their home equity stake. For many, it could be a good time to request a HELOC credit limit increase, either to cover upcoming costs or provide a financial safety net amid concerns this fall over unemployment, inflation and the ongoing government shutdown. A HELOC limit increase in this climate could be the difference between making ends meet and not. But what does it take to get approved for a HELOC increase this fall and how can you improve your chances? Below, we'll detail what experts say you should know now. Start by seeing how much you could borrow with a HELOC here. How to get a HELOC credit limit increase this fall There are three ways to go about increasing your HELOC's credit limit. First, you may be able to ask your current lender for a loan modification. This lets you keep your current HELOC — only with a larger limit. You can also refinance your current HELOC (with your current lender or a different company) or apply for a new HELOC entirely. In the latter case, you could either get a second HELOC in the new amount you need or get a larger one, using your new one to pay off the old one. In all cases, you'll need to prove you have the financial capability to handle the new, larger limit and the payment it comes with. "The most common method is refinancing to a larger credit line, which typically requires you to go through a new application process, including a credit check, providing your financial documents and, in some cases, an appraisal to ensure that you qualify and that you have the appropriate equity available in your home," says Jeff DerGurahian, chief investment officer and head economist at loanDepot. To make sure you qualify, lenders will consider your full financial profile. "Banks typically review a few factors like credit score, debt-to-income ratio (DTI), and current home value," says Chuck Bowman, retail and business banking division manager at Amegy Bank. "If the financial profile has improved since first opening the HELOC or if the home has appreciated in value, you might be in a good position to qualify." The exact qualifications you'll need to meet depend on your lender and how much more you're looking to borrow. You also may need to have your home reappraised. This will allow the lender to determine any changes to your home's worth and, therefore, how much equity you now have to work with versus what was determined during your previous HELOC application. "In some cases, lenders may allow you to modify your HELOC with a higher loan limit if your financial situation has improved or if your home's appraised value has increased," DerGurahian says. Learn more about your current HELOC options here. Unique market considerations Before you apply for a HELOC credit increase this fall, there are some current market conditions you should take into account first. For one, HELOCs usually have variable rates, meaning they have a set rate for the first few years of the credit line, and then rates can fluctuate after that. The Federal Reserve is largely expected to cut interest rates this fall, but waiting isn't necessary as the rate will change independently based on market conditions. "With one Federal Reserve rate cut this year behind us and potentially two more on the horizon, HELOC rates are easing," DerGurahian says. "These lower interest rates can mean lower monthly payments, which may help you qualify for a higher credit limit, assuming you have an appropriate DTI and sufficient equity in your home." There are also home values to consider. While home values in most markets are holding strong, they're not increasing like they have been in recent years. In fact, the median list price is unchanged from a year ago, according to Realtor.com. Should home values start to decline, that could pose a problem if you've borrowed a lot of your equity. "You don't want to find yourself over-obligated, with mortgage payments that add up to more than your home is worth," DerGurahian says. Lastly, there are qualifying standards to think about, too. As Bowman puts it, "Higher interest rates can tighten lending standards. While the equity might be there, qualifying still depends on the full financial picture." Pros and cons of getting a HELOC credit increase Getting a HELOC credit increase can have a lot of advantages. For one, it can give you the funds you need to improve your house, cover unexpected expenses, or just function as a financial safety net in a time of economic uncertainty and rising inflation. "Compared to other unsecured lending options such as personal loans and credit cards, HELOCs are a savvier way to access funds because they typically come with lower interest rates," DerGurahian says. "If you already have a HELOC and your family's financial needs have changed — maybe your credit card balances have grown or a renovation turned out to be more expensive than expected, then responsibly increasing your limit can be a smart financial move as the cost of living continues to rise." On the downside, though, HELOC's variable rates can be a risk. While it's likely interest rates will drop this fall, it's not a given, and if they head the other direction, that could be a problem. "If rates begin to rise, your monthly payments could become unaffordable," says Michael Primavera, retirement planning advisor at Daniel A. White & Associates. "The risk here is you could lose your home if you fail to make payments. HELOCs are secured loans, and the house is on the line if things should go sideways." Refinancing or taking out a new HELOC can also come with an initial hit to your credit score (though this is often temporary, as long as you make on-time payments). How to improve your HELOC credit limit increase application If you want to be sure you're approved for your HELOC credit limit increase, then polishing your credit profile is critical before applying. "Ensure your credit is in good standing," says Rose Krieger, senior home loan specialist at Churchill Mortgage. "Showing positive payment history is a strong start." If you can, set your bills on autopay so you don't miss payments. Reducing your debt load can also help, as can increasing your income with a side hustle or freelancing gig. Lastly, keep your home in good condition. This will help you secure a high appraisal, potentially giving you more equity to tap with your HELOC. The bottom line
