Estimate how much you can borrow against your home's value and see your potential monthly payments.
Total Equity in Home:
Max Allowable Debt (at LTV Limit):
Estimated Loan Amount Available:
Estimated Monthly Payment (for Available Loan)
Understanding Home Equity Loans: How Much Can You Borrow?
Home equity is the difference between your home's current market value and the outstanding balance of all liens on the property (like your primary mortgage). A home equity loan allows you to borrow a lump sum of money using that equity as collateral.
How the Home Equity Calculation Works
Lenders typically don't let you borrow 100% of your home's value. Instead, they use a Loan-to-Value (LTV) ratio. Most lenders limit your combined loan-to-value (CLTV) ratio to 80% or 85%.
The Formula: (Home Value × Max LTV %) – Existing Mortgage Balance = Maximum Loan Amount
Example Calculation
Imagine your home is worth $500,000 and you owe $300,000 on your mortgage. If a lender has an 80% LTV limit:
80% of $500,000 = $400,000 (Maximum total debt allowed)
$400,000 – $300,000 (Current Balance) = $100,000
In this scenario, your maximum home equity loan would be $100,000.
Factors That Affect Your Eligibility
Credit Score: A higher score usually translates to lower interest rates and higher LTV limits.
Debt-to-Income (DTI) Ratio: Lenders want to ensure you have enough income to cover the new loan payment alongside existing debts.
Appraised Value: Professional appraisals may differ from your estimated value, which directly impacts the borrowing limit.
Frequently Asked Questions
What is the difference between a Home Equity Loan and a HELOC?
A Home Equity Loan provides a lump sum with a fixed interest rate and fixed monthly payments. A Home Equity Line of Credit (HELOC) works more like a credit card, where you have a revolving balance and a variable interest rate.
Will a home equity loan affect my primary mortgage?
No, it is a separate loan (often called a "second mortgage"). You will continue to make your original mortgage payments in addition to the new home equity loan payment.
function calculateEquity() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var ltvLimit = parseFloat(document.getElementById('ltvLimit').value) / 100;
var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12;
var loanTermMonths = parseFloat(document.getElementById('loanTerm').value) * 12;
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(ltvLimit) || isNaN(interestRate) || isNaN(loanTermMonths)) {
alert("Please enter valid numeric values in all fields.");
return;
}
// Calculate Total Equity
var totalEquity = homeValue – mortgageBalance;
// Calculate Max Debt Allowed
var maxDebtAllowed = homeValue * ltvLimit;
// Calculate Available Loan
var availableLoan = maxDebtAllowed – mortgageBalance;
if (availableLoan 0 && interestRate > 0) {
var x = Math.pow(1 + interestRate, loanTermMonths);
monthlyPayment = (availableLoan * x * interestRate) / (x – 1);
} else if (availableLoan > 0 && interestRate === 0) {
monthlyPayment = availableLoan / loanTermMonths;
}
// Format results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
var paymentFormatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 2
});
document.getElementById('totalEquity').innerText = formatter.format(totalEquity);
document.getElementById('maxDebt').innerText = formatter.format(maxDebtAllowed);
document.getElementById('availableLoan').innerText = formatter.format(availableLoan);
document.getElementById('monthlyPayment').innerText = paymentFormatter.format(monthlyPayment) + "/mo";
// Show results
document.getElementById('equityResults').style.display = 'block';
}