Lesson 23 of 25 · 7 min
Home equity lines, and the house behind other spending
A home equity line is a second claim on the same house, typically variable and often payable on demand.
A home equity line is a revolving claim on the house, sitting behind a first mortgage. Track 5 lesson 9 is a securities-backed line: a facility secured by a pledged account. This lesson is that structure on a different asset. The collateral is the house you live in. Combined LTV is both claims added, divided by the mark.
Ilex Lending's first mortgage is $248,600. Home equity line limit $70,000, drawn $36,400 at 6.80 percent, the book from lesson 8. Combined claims are $248,600 + $36,400 = $285,000 against the $412,000 mark from lesson 22, so combined LTV is $285,000 ÷ $412,000 = 69.2 percent. The undrawn $70,000 − $36,400 = $33,600 is capacity that can still become loan, the way an undrawn securities line can still become balance.
The line is typically variable and often payable on demand in the sense Track 1 lesson 12 and Track 5 lesson 1 already taught. This lesson does not re-teach payable-on-demand. It points at those two lessons and notes the clock: lesson 8 already showed the line repricing within a cycle of a policy move, while the first mortgage, if fixed, did not. Combined LTV does not wait for a reset date either. A draw raises the numerator the same day.
Other spending against this line is the same geometry as lesson 22's cash-out, without rewriting the first mortgage. The roof sits behind whatever the $36,400 bought. Combined 69.2 percent is the two claims the house is actually carrying. The first mortgage's own LTV of $248,600 ÷ $412,000 = 60.3 percent is a narrower picture, because it omits the second claim.
Two loans, one house. Combined LTV is the ratio that includes both. The line is Track 5 lesson 9 with a roof as the pledged account.
Key terms
- Home equity line
- A revolving second claim on the house. Typically variable, and often payable on demand in the sense Track 1 lesson 12 and Track 5 lesson 1 teach.
- Combined LTV
- First mortgage plus drawn line, divided by the mark. Here, 69.2 percent.
- Undrawn capacity
- Line limit minus amount drawn. Here, $33,600 that can still become loan against the same house.
Worked example
Two claims, one $412,000
Ilex Lending. First mortgage $248,600. Line limit $70,000, drawn $36,400 at 6.80 percent. Mark $412,000.
- Combined claims
- $285,000
- Combined LTV
- 69.2%
- First-mortgage LTV alone
- 60.3%
- Undrawn
- $33,600
- Clock on the line
- Variable, demand-like
$248,600 + $36,400.
$285,000 ÷ $412,000.
$248,600 ÷ $412,000. Omits the second claim.
$70,000 − $36,400.
Track 1 lesson 12 and Track 5 lesson 1. Not re-taught here.
The house is carrying $285,000, not $248,600. The line is a securities-backed facility whose pledged account is the roof.
Check yourself
First mortgage $186,400, line limit $55,000 drawn $22,800, mark $318,000. What is combined LTV, first-mortgage LTV alone, and undrawn capacity?
A home equity line is borrowing against an asset you still live in — a securities-backed line whose collateral is the house, Track 5 lesson 9's structure on a different asset. Open What a securities-backed line is, and who offers them →
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.