On a $800,000 home with a $400,000 mortgage balance, most lenders allow borrowing up to $280,000 — 85% of the home's value ($680,000) minus what you still owe. That is less than your $400,000 of raw equity, because lenders size these loans off combined loan-to-value.
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Up to $280,000 at a 85% combined loan-to-value cap with a $400,000 first mortgage. A more conservative 80% lender would allow $240,000.
Lenders cap total liens at a percentage of value, typically 80–85%. At 85% your total debt can reach $680,000; the remaining $120,000 stays as the lender's cushion against a price decline.
Borrowing the full $280,000 at 8.50% costs about $2,429.91 per month amortizing over 20 years. A HELOC's interest-only draw payment would be about $1,983.33.
The payment jumps from about $1,983.33 interest-only to $2,429.91 fully amortizing — an increase of $446.58. Plan for it years ahead; this is the most common HELOC surprise.
If your first mortgage carries a below-market rate, usually yes. A cash-out refinance re-prices your entire $400,000 balance at today's rate; a home equity loan or HELOC leaves it untouched and charges the higher rate only on what you borrow.
Sources: Freddie Mac Primary Mortgage Market Survey; Tax Foundation — Property Taxes by State; Consumer Financial Protection Bureau.
Estimates for educational purposes only — not a loan offer, financial advice, or a commitment to lend. Actual rates, payments, and terms vary by lender and creditworthiness.