Identify the Formula for Calculating Indirect Cost Rates
by
Home Equity Loan Calculator
Lenders typically allow 80% to 85%.
Excellent (740+)
Good (670-739)
Fair (580-669)
Your Results
Total Estimated Equity:
Potential Loanable Amount (Based on LTV):
Current Combined LTV:
Understanding Home Equity Loans and How Much You Can Borrow
A home equity loan—often referred to as a "second mortgage"—allows homeowners to borrow against the value of their property. Unlike a primary mortgage used to buy a home, a home equity loan uses your property as collateral to provide a lump sum of cash for major expenses like renovations, debt consolidation, or education costs.
How Home Equity is Calculated
Your equity is the difference between what your home is worth on the current market and what you still owe on your mortgage. For example, if your home is valued at $500,000 and you owe $300,000, you have $200,000 in equity. However, you cannot usually borrow the full $200,000.
The 80% LTV Rule
Most lenders use a Loan-to-Value (LTV) ratio to determine your borrowing limit. Generally, lenders will allow you to borrow up to 80% or 85% of your home's total value, inclusive of your current mortgage. The formula looks like this:
(Home Value × Max LTV %) – Current Mortgage Balance = Potential Loan Amount
Example Calculation
Imagine your home is worth $400,000 and your current mortgage balance is $200,000. If the lender's LTV limit is 80%:
80% of $400,000 = $320,000
$320,000 – $200,000 (Existing Loan) = $120,000
In this scenario, you could potentially qualify for a home equity loan or HELOC (Home Equity Line of Credit) of up to $120,000.
Factors That Impact Your Approval
While the calculator provides a mathematical estimate based on equity, lenders also consider:
Credit Score: Higher scores (740+) typically unlock lower interest rates and higher LTV limits.
Debt-to-Income (DTI) Ratio: Lenders evaluate your monthly gross income against your monthly debt obligations.
Appraisal: A professional appraisal is usually required to confirm the estimated home value used in the calculation.
function calculateEquity() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var ltvLimit = parseFloat(document.getElementById('ltvLimit').value);
var creditScore = document.getElementById('creditScore').value;
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(ltvLimit)) {
alert("Please enter valid numerical values for home value, mortgage balance, and LTV limit.");
return;
}
if (mortgageBalance > homeValue) {
alert("Your mortgage balance exceeds your home value. This is known as being 'underwater' on your mortgage.");
return;
}
var totalEquity = homeValue – mortgageBalance;
var maxTotalDebt = homeValue * (ltvLimit / 100);
var availableLoan = maxTotalDebt – mortgageBalance;
var currentLTV = (mortgageBalance / homeValue) * 100;
// Adjust for negative loan availability
if (availableLoan < 0) {
availableLoan = 0;
}
// Display Results
document.getElementById('result-area').style.display = 'block';
document.getElementById('totalEquity').innerText = '$' + totalEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('loanableAmount').innerText = '$' + availableLoan.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('currentLTV').innerText = currentLTV.toFixed(2) + '%';
var adviceText = "";
if (creditScore === "fair") {
adviceText = "Note: With a 'Fair' credit score, lenders may restrict your maximum LTV to 70-75% regardless of the input above.";
} else if (availableLoan === 0) {
adviceText = "It appears you do not currently have enough equity to meet the " + ltvLimit + "% LTV requirement.";
} else {
adviceText = "Based on your " + currentLTV.toFixed(1) + "% current LTV, you have a healthy equity position for a secondary loan.";
}
document.getElementById('equityAdvice').innerText = adviceText;
// Smooth scroll to results
document.getElementById('result-area').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}