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HELOC (Home Equity Line of Credit) Calculator

Estimate your available credit line and potential monthly payments.

function calculateHELOC() { var homeValue = parseFloat(document.getElementById('homeValue').value); var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value); var cltvLimit = parseFloat(document.getElementById('cltvLimit').value) / 100; var interestRate = parseFloat(document.getElementById('interestRate').value) / 100; var drawAmount = parseFloat(document.getElementById('drawAmount').value); var repaymentTerm = parseFloat(document.getElementById('repaymentTerm').value); if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(cltvLimit)) { alert("Please enter valid numbers for home value and mortgage balance."); return; } // Calculate Max Credit Line var maxLtvValue = homeValue * cltvLimit; var availableCredit = maxLtvValue – mortgageBalance; if (availableCredit 0) { fullPayment = drawAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1); } else { fullPayment = drawAmount / numberOfPayments; } var equityLeft = homeValue – mortgageBalance – drawAmount; // Format results document.getElementById('maxCreditLine').innerText = "$" + availableCredit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('interestOnlyPay').innerText = "$" + interestOnlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('fullPay').innerText = "$" + fullPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('remainingEquity').innerText = "$" + equityLeft.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('helocResults').style.display = 'block'; }

Understanding the HELOC Calculation

A Home Equity Line of Credit (HELOC) is a powerful financial tool that allows homeowners to leverage the value of their property. Unlike a standard home equity loan, which provides a lump sum, a HELOC functions more like a credit card secured by your home, where you can borrow as much or as little as you need up to a predetermined limit.

How is the HELOC Limit Calculated?

Lenders typically use a formula involving your Combined Loan-to-Value (CLTV) ratio. Most lenders allow a CLTV of 80% to 90%. To find your limit, the lender takes your home's appraised value, multiplies it by their CLTV limit, and then subtracts what you currently owe on your primary mortgage.

Example: If your home is worth $500,000 and the lender allows an 85% CLTV, your maximum total debt is $425,000. If your current mortgage is $300,000, your available HELOC would be $125,000.

Interest-Only vs. Repayment Phase

Most HELOCs consist of two distinct periods:

• The Draw Period: Usually lasts 5 to 10 years. During this time, you can borrow money and are often only required to pay interest on the amount you've used.
• The Repayment Period: Usually lasts 10 to 20 years. Once the draw period ends, you can no longer borrow money, and you must begin paying back both the principal and the interest.

Factors That Influence Your HELOC

Beyond your home's value, lenders look at several critical factors before approving a credit line:

• Credit Score: A higher score typically unlocks lower interest rates and higher CLTV limits.
• Debt-to-Income (DTI) Ratio: Lenders want to ensure your total monthly debt payments (including the new HELOC) don't exceed a certain percentage of your gross monthly income (usually 43%).
• Verifiable Income: You must prove you have the cash flow to manage the payments once the repayment phase begins.

Realistic Scenario

Imagine a homeowner with a $400,000 home and a $250,000 mortgage. Using an 80% CLTV limit, the total debt allowed is $320,000. This leaves $70,000 available in a HELOC. If the homeowner draws $20,000 for a kitchen renovation at an 8% interest rate, their interest-only payment during the draw period would be approximately $133.33 per month. However, if they enter the 20-year repayment phase immediately, that payment jumps to roughly $167.29 per month to cover the principal.

Is a HELOC Right for You?

HELOCs are ideal for ongoing projects like home renovations, debt consolidation, or as an emergency fund. However, because your home is collateral, failing to make payments can result in foreclosure. Always use a HELOC Calculator to ensure the monthly obligations fit within your long-term budget.