Home Equity Loan Calculator
Estimate how much you can borrow against your home's value.
How a Home Equity Loan Works
A home equity loan, often referred to as a "second mortgage," allows you to borrow a lump sum of money using the equity in your home as collateral. Equity is the difference between what your home is worth and what you still owe on your primary mortgage.
The 80% Rule (LTV Ratio)
Most lenders use a Loan-to-Value (LTV) ratio to determine your borrowing capacity. Typically, lenders allow you to borrow up to 80% or 85% of your home's appraised value, inclusive of your current mortgage balance.
Example Calculation:
- Home Value: $500,000
- LTV Limit (80%): $400,000
- Current Mortgage: $300,000
- Maximum Loan: $100,000
Home Equity Loan vs. HELOC
While a home equity loan provides a one-time lump sum with a fixed interest rate, a Home Equity Line of Credit (HELOC) works more like a credit card with a variable rate. Use this calculator specifically for fixed-term loans to understand your fixed monthly commitment.
Key Requirements for Approval
Beyond equity, lenders will evaluate your credit score (typically 620+ required), your Debt-to-Income (DTI) ratio, and verify your income. Ensure your DTI remains below 43% for the best chance of approval at competitive rates.