Most lenders cap loans at 80% to 90% of home value.
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Calculation Results
Total Equity in Home:$0.00
Maximum Loan Amount (LTV Limit):$0.00
Available to Borrow (Cash Out):$0.00
Estimated Monthly Payment:$0.00
Understanding Your Home Equity Calculation
Home equity represents the portion of your property that you truly "own." It is the difference between your home's current market value and the amount you still owe on your mortgage. As you pay down your principal balance or as your property value increases, your equity grows.
How is Borrowable Equity Calculated?
While you may have a significant amount of total equity, lenders rarely allow you to borrow 100% of it. They use a metric called the Loan-to-Value (LTV) Ratio to determine risk. Most lenders cap combined loans (your primary mortgage + home equity loan) at 80% to 90% of the home's appraised value.
The Formula: ((Home Value × Max LTV %) – Current Mortgage Balance) = Available Cash Out
Example Calculation
Let's say your home is appraised at $400,000 and you currently owe $200,000 on your first mortgage.
Total Equity: $400,000 – $200,000 = $200,000.
Lender Limit (80% LTV): The lender allows debt up to $320,000 ($400,000 × 0.80).
Available to Borrow: $320,000 (Max Limit) – $200,000 (Existing Debt) = $120,000.
Even though you have $200,000 in equity, you can only borrow $120,000 to maintain the 80% LTV safety margin required by the bank.
Factors That Impact Your Home Equity Loan
Before applying for a home equity loan or HELOC (Home Equity Line of Credit), consider these variables:
Credit Score: A higher credit score often qualifies you for a higher LTV limit and a lower interest rate.
Debt-to-Income Ratio (DTI): Lenders want to ensure your income can support the new monthly payment in addition to your existing debts.
Appraisal Value: The calculation relies entirely on the current market value of your home, which must be verified by a professional appraisal.
Home Equity Loan vs. HELOC
This calculator estimates payments for a standard Home Equity Loan, which provides a lump sum with a fixed interest rate and fixed monthly payments. A HELOC works more like a credit card with a variable interest rate, where you draw funds as needed.
function calculateHomeEquity() {
// 1. Get Input Values
var homeValue = parseFloat(document.getElementById('heHomeValue').value);
var mortgageBalance = parseFloat(document.getElementById('heMortgageBalance').value);
var ltvLimit = parseFloat(document.getElementById('heLtvLimit').value);
var interestRate = parseFloat(document.getElementById('heInterestRate').value);
var loanTermYears = parseInt(document.getElementById('heLoanTerm').value);
// 2. Validation
if (isNaN(homeValue) || homeValue < 0) {
alert("Please enter a valid Home Value.");
return;
}
if (isNaN(mortgageBalance) || mortgageBalance < 0) {
mortgageBalance = 0;
}
if (isNaN(ltvLimit) || ltvLimit 100) {
alert("Please enter a valid LTV Limit (0-100).");
return;
}
if (isNaN(interestRate) || interestRate < 0) {
alert("Please enter a valid Interest Rate.");
return;
}
// 3. Logic: Calculate Equity and Limits
var totalEquity = homeValue – mortgageBalance;
var maxLoanAllowed = homeValue * (ltvLimit / 100);
var availableCash = maxLoanAllowed – mortgageBalance;
// Handle negative scenarios
if (availableCash 0) {
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
if (interestRate === 0) {
monthlyPayment = availableCash / numberOfPayments;
} else {
monthlyPayment = availableCash * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
}
}
// 5. Display Results
document.getElementById('resTotalEquity').innerText = formatCurrency(totalEquity);
document.getElementById('resMaxLoan').innerText = formatCurrency(maxLoanAllowed);
document.getElementById('resAvailableCash').innerText = formatCurrency(availableCash);
document.getElementById('resMonthlyPayment').innerText = formatCurrency(monthlyPayment);
// Show result section
document.getElementById('he-result-section').style.display = 'block';
}
function formatCurrency(num) {
return '$' + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}