Equity reduction limit

The equity reduction limit puts a cap on the amount you can deduct from your home equity. Once you react this limit, you can no longer advance loan funds from your property value. The limit ranges from 50% to 80% of the value of the property, or a reduction of 50% to 20% of the home equity. The equity reduction limit is usually set by the lender, although some allow the borrower to define the cap. Equity caps keep you from overdrawing on your funds and ensure that your mortgage stays sustainable.