Calculate your borrowing power, monthly payments, and CLTV ratio.
Combined Loan-to-Value (CLTV):
Estimated Monthly Payment:
Total Interest Paid:
Total Cost of Loan:
Remaining Equity After Loan:
Understanding Your Home Equity Loan
A home equity loan, often referred to as a "second mortgage," allows you to borrow against the value of your home. Unlike a Home Equity Line of Credit (HELOC), a home equity loan provides a lump sum of cash upfront with a fixed interest rate and a set repayment schedule.
How to Calculate Your Home Equity
Home equity is the difference between your property's current market value and the remaining balance on all debts secured by the property. For example, if your home is worth $500,000 and you owe $300,000 on your mortgage, you have $200,000 in equity.
What is the CLTV Ratio?
Lenders use the Combined Loan-to-Value (CLTV) ratio to determine your eligibility. This is calculated by adding your current mortgage balance and your requested loan amount, then dividing by the home's value. Most lenders prefer a CLTV of 80% to 85% or lower. If your CLTV exceeds 90%, you may find it difficult to secure a loan or may face significantly higher interest rates.
Example Calculation
If you have a home valued at $400,000 with a $200,000 mortgage and you want a $40,000 home equity loan:
Total Debt: $240,000 ($200,000 + $40,000)
CLTV: 60% ($240,000 / $400,000)
Decision: At 60% CLTV, you are well within the standard lending limits.
Key Factors Lenders Consider
Credit Score: A higher score typically unlocks lower interest rates.
Debt-to-Income (DTI) Ratio: Lenders look at your monthly gross income compared to your monthly debt obligations.
Appraised Value: Professional appraisals are usually required to verify the home's worth.
function calculateHomeEquity() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var loanAmount = parseFloat(document.getElementById('loanAmount').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var warningBox = document.getElementById('warningBox');
var resultsArea = document.getElementById('resultsArea');
// Validation
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(loanAmount) || isNaN(interestRate) || isNaN(loanTerm)) {
alert("Please enter valid numbers in all fields.");
return;
}
// CLTV Calculation
var totalDebt = mortgageBalance + loanAmount;
var cltv = (totalDebt / homeValue) * 100;
// Monthly Payment Calculation (Amortization formula)
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var monthlyPayment = 0;
if (interestRate > 0) {
monthlyPayment = (loanAmount * monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
monthlyPayment = loanAmount / numberOfPayments;
}
var totalCost = monthlyPayment * numberOfPayments;
var totalInterest = totalCost – loanAmount;
var remainingEquity = homeValue – totalDebt;
// Display Results
document.getElementById('resCLTV').innerHTML = cltv.toFixed(2) + "%";
document.getElementById('resMonthly').innerHTML = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resInterest').innerHTML = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotalCost').innerHTML = "$" + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resEquity').innerHTML = "$" + remainingEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultsArea.style.display = "block";
// Warning logic
if (cltv > 85) {
warningBox.innerHTML = "Warning: Your Combined Loan-to-Value (CLTV) ratio is " + cltv.toFixed(2) + "%. Most lenders require a CLTV below 85% to qualify for a home equity loan.";
warningBox.style.display = "block";
} else if (remainingEquity < 0) {
warningBox.innerHTML = "Critical: The requested loan amount exceeds your home's value. This is considered an 'underwater' mortgage scenario.";
warningBox.style.display = "block";
} else {
warningBox.style.display = "none";
}
}