# How much home equity triggers a lien on an SBA loan?

**Short answer:** A lender is not required to take a lien when equity is less than 25% of fair market value. At or above that level, the equity is available if the loan's rules call for it. Source: SOP 50 10 8.1, App. 19, Para. A.1, Personal Real Estate.

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Last checked: 2026-11-08

A lender is not required to take a lien when equity is less than 25% of fair market value. That test is in SOP 50 10 8.1, App. 19, Para. A.1, Personal Real Estate. At or above that level, the equity is available if the loan's rules call for it.

## How the math works

Subtract existing liens from fair market value, then divide by fair market value.

- A home worth $400,000 with a $320,000 mortgage has $80,000 of equity. That is 20%, so no lien is required.
- The same home with a $280,000 mortgage has $120,000 of equity. That is 30%, so the equity is available.

## What does not count as lack of equity

The SOP defines lack of equity as a fair market value that, after existing liens, does not provide at least 25% equity. A prior lien that restricts or bars a second lien does not by itself count as lack of equity.

## What the lender must document

The lender must document a source other than your personal financial statement or the tax assessment value. SBA has no specific appraisal requirements for non-commercial real estate taken to secure a personal guaranty (App. 19, Para. A.1).

## Where else the test applies

The same test appears for business purchases, where it covers commercial, residential and investment properties (App. 15, Para. C.3.d). It also applies to Working Capital CAPLines without a borrowing base certificate (App. 19, Para. B.5).

The test sets what a lender must take, not what it may take. A lender can ask for more under its own policy.

## Sources

- [SOP 50 10 8.1, App. 19, Para. A.1, Personal Real Estate (Para. A begins p. 404)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 15, Para. C.3.d (Para. C begins p. 371)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 19, Para. B.5 (Para. B begins p. 408)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)