A good credit score and low debt-to-income ratio are just some of the 2025 HELOC requirements. Here’s everything you need to know.
If you’re a homeowner, a home equity line of credit (HELOC) can help fund renovations to increase your home’s overall value or help with unexpected expenses. However, before you start counting the money, you need to ensure you meet the HELOC requirements.
As with other loan types, HELOC lenders have certain qualifications borrowers must meet before issuing the money. Generally speaking, you need a good credit score (at least 620), a low debt-to-income ratio and at least 15-20% equity in your home to be approved for a HELOC.
In this post, we’ll walk you through the 2025 HELOC requirements, let you know which documents you’ll need to show, and provide tips from a credit union CEO and a real estate investor on how to find the best HELOC terms for your needs.
What is a HELOC?
A home equity line of credit, better known as a HELOC, allows homeowners to borrow cash against the equity they’ve built in a property. People use HELOCs to pay off mortgages, renovate their homes to increase their value, pay off credit card debt and more.
While it’s considered a loan, a HELOC works more like a credit card. Once approved, you’ll receive a revolving line of credit that you can withdraw for a certain period, known as the HELOC draw period, which typically lasts up to 10 years. This is followed by the HELOC repayment period or the time you must repay the principal balance plus interest.
Your home’s equity is calculated by taking the appraised value and subtracting whatever is owed on the mortgage. So, if you have a $500,000 home and a $200,000 mortgage, you’d have $300,000 in equity. A HELOC only allows you to borrow up to 80% of the equity, so in this example, you could be approved for up to $240,000.
What Are the HELOC Requirements for 2025?
Here are the 2025 HELOC requirements homeowners must meet to qualify for the revolving line of credit:
15-20% Equity in Your Home
Most HELOC lenders will want to see that you have at least 15-20% equity in your home. Equity is the home’s value minus the mortgage balance. If your home is valued at $250,000 and you have a mortgage balance of $150,000, you have $100,000 in equity. Lenders typically want to see you have at least 15% equity in your home, though some may require up to 20%. For a $250,000 home, you’d need anywhere from $37,500-$50,000 in equity.
Your Credit Score
“The minimum credit score to qualify for a HELOC in 2025 is usually at least 620,” says Tim Gordon, a San Diego-based real estate investor who’s used HELOCs to pay for renovations. Some lenders may require a minimum score of 680.
Lenders use your credit score to evaluate your payment history, which gives them a good idea of whether you’re likely to repay the money. Making late payments, having accounts in collections and carrying high credit card balances lowers your score and may make it harder to qualify for a HELOC.
Conversely, high credit scores make it more likely that you’ll be approved and could lower your HELOC interest rate and up-front costs.
You can check the minimum score accepted by several banks with Benzinga.
Your Debt-to-Income (DTI) Ratio
You’ll need a debt-to-income (DTI) ratio of around 43% to qualify for a HELOC.
Your DTI ratio is the amount of your monthly debt payments minus your gross income. Let’s say your car, mortgage, credit card payments and student loan payments total $4,500 per month and your pretax monthly income is $12,000.
That means you have a DTI ratio of about 37%, which would be favorable for most HELOC lenders. When your DTI is better than average, you can often get a lower interest rate or a rate discount.
As part of this process, you may have to provide pay stubs, W-2s or any other proof of income (such as rent from investment properties). “Your lender will assess your income and credit history against their eligibility criteria,” Gordon says.
When You Should Consider a HELOC
Since a HELOC is a flexible credit line, there are several scenarios where one might make sense.
- Home renovations and repairs: Home updates can be expensive and unpredictable. A flexible credit line allows you to borrow what you need. When costs are higher than you expect, you can borrow more.
- Education expenses: Tuition, books and fees add up, and the costs fluctuate yearly. A HELOC can help manage those expenses.
- Debt consolidation: “If you have high-interest debt, using a HELOC to consolidate and pay off that debt can save you money on interest and simplify your payments,” says Jose Garcia, president and CEO of Northwest Community Credit Union.
What to Consider When Looking for a HELOC Loan
“It’s important to remember that not all HELOCS are the same and there are a few steps you should take before applying,” Garcia says. Here are a few things Garcia recommends to those considering a HELOC:
- Shop around: “Make sure to compare rates and terms from multiple lenders to help ensure you get the best deal that fits your needs,” Garcia says. He adds that credit unions like his also offer HELOCs that often have more competitive rates and incentives than traditional banks. You can also look at our expert-verified picks for the best HELOC lenders.
- Read the terms: We really shouldn’t have to say this, but as with any financial product, you should take the time to read the terms and conditions before signing on the dotted line. “Before signing, make sure you know the interest rate, whether it's fixed or variable, and any associated fees,” Garcia says. “There are often details in the fine print, so be cautious of low introductory rates that may increase significantly later.”
- Check for conversion options: While most HELOCs have a variable interest rate that fluctuates every month, Garcia says some lenders may allow you to switch to a fixed-rate HELOC. “Switching to a fixed interest rate can provide more stability in your payments,” Garcia says.
- Be aware of fees: “Make sure to read the details and ask about any up-front costs, annual fees or penalties for early repayment,” Garcia says. “These can add up and affect the overall cost of the loan.”
- Approval time: Garcia notes that the HELOC pre-approval process can take 48-72 hours, and the closing process can take 48 days, depending on the lender.
Other Ways to Access Your Home’s Equity
While a HELOC is an efficient way to access cash using your home’s equity, it’s not the only way. Cash-out refinances and Home Equity Agreements (HEAs) are other options available to homeowners. We’ll briefly describe these two financial products and let you know the differences between them and a HELOC.
Cash-Out Refinance
A cash-out refinance is similar to a HELOC in that it’s based on your home’s equity, but there are two major differences. The first is that you’ll receive a lump sum rather than a revolving line of credit, and the second is that it replaces your initial mortgage rather than acting as a separate loan like a HELOC.
“This option can result in a lower interest rate, but it also extends your mortgage term,” Gordon says.
Home Equity Agreement
A home equity agreement (HEA) allows a homeowner to give up a percentage of their equity in exchange for a lump sum of cash. You’ll still have to repay the principal balance plus a percentage of any appreciation in the home’s value (on the flip side, if the home’s value decreases, so will the amount you’ll owe).
While HEAs are easier to qualify for than a HELOC and come with less interest, the lender will put a lien on your home until the principal is repaid or the home is sold, whichever comes first.
RELATED: HEA vs. HELOC: Which Home Equity is Right For You?
Key Takeaways
Here are the most important things to know about HELOC requirements in 2025:
- Specific terms and conditions will differ from lender to lender, so shop around
- You must have a credit score of 620-680
- Your debt-to-income (DTI) ratio should be 43% or lower
- You’ll need 15-20% of equity in your house
- You’ll need paperwork to prove your income
- The approval process could take up to two months
Why You Should Trust Us
Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his New York City economy coverage. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.
For this story, we worked with Tim Gordon, a San Diego-based real estate investor who’s used HELOCs on his properties, and Jose Garcia, president and CEO of Illinois-based Northwest Community Credit Union. This financial institution issues HELOCs and other loan types.
Frequently Asked Questions
Will HELOC rates go down in 2025?
Yes, financial experts expect HELOC rates to go down in 2025 because the Federal Reserve is expected to cut interest rates. HELOC rates have steadily been decreasing since the beginning of 2024.
What credit score do you need for a HELOC in 2025?
Most HELOC lenders require a minimum credit score of 620, though some look for at least 680 before approving borrowers.
Are HELOCs hard to get approved for?
It’s easy to be approved for a HELOC if you meet the requirements, which include:
A credit score of 620-680
A debt-to-income ratio of 43% or lower
At least 15-20% equity in your home
Will HELOC rates go down in 2025?
Sources
- Tim Gordon, real estate investor and financial expert at Gordon Buys Homes.
- Jose Garcia, president and CEO of Northwest Community Credit Union
About Anthony O'Reilly
Anthony O’Reilly is an updates editor for Benzinga. He’s won numerous journalism awards for his coverage of the New York City economy and Long Island school district budgets.