HELOC (Home Equity Line of Credit) Calculator
Estimated HELOC Results
Estimated Available Credit: $0
Total Borrowing Capacity (at 80%):
Current Loan-to-Value (LTV): %
Understanding Your Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a revolving credit line that allows homeowners to borrow against the equity in their property. Unlike a standard home equity loan, which provides a lump sum, a HELOC works similarly to a credit card where you can draw funds as needed, pay them back, and draw again during the "draw period."
How the HELOC Calculation Works
Lenders typically determine your credit limit based on the Combined Loan-to-Value (CLTV) ratio. The standard formula used by most financial institutions is:
HELOC Limit = (Home Value × Max CLTV %) – Existing Mortgage Balance
Realistic HELOC Example
Suppose you own a home valued at $500,000 and you still owe $320,000 on your primary mortgage. If your bank allows a maximum CLTV of 85%:
- Step 1: Calculate max total borrowing ($500,000 × 0.85 = $425,000).
- Step 2: Subtract your existing debt ($425,000 – $320,000).
- Result: Your available HELOC limit would be $105,000.
Factors That Influence Your Approval
While this calculator provides an estimate based on equity, lenders also consider the following during the application process:
- Credit Score: A score of 720 or higher typically secures the best interest rates.
- Debt-to-Income (DTI) Ratio: Lenders usually prefer a DTI below 43%.
- Appraisal: A professional appraisal will confirm the actual market value used in the calculation.
- Income Verification: Reliable proof of income is required to ensure you can handle the monthly interest payments.