Home Equity Loan Calculator
Estimate how much cash you can borrow against your home's value.
75% (Conservative)
80% (Standard)
85% (Generous)
90% (Credit Unions)
Excellent (740+)
Good (670-739)
Fair (580-669)
Total Estimated Equity:
Current LTV Ratio:
Max Loan Amount:
How Much Home Equity Can You Actually Borrow?
A Home Equity Loan, often called a "second mortgage," allows you to borrow a lump sum of money using your home as collateral. Unlike a personal loan, the interest rates are typically lower because the loan is secured by your property.
Most lenders will not allow you to borrow 100% of your home's value. Instead, they look at your Combined Loan-to-Value (CLTV) ratio. This is the total of your existing mortgage plus the new loan you want to take out, divided by the home's appraised value.
The Home Equity Calculation Formula
Lenders usually cap your CLTV at 80% to 85%. To calculate your maximum potential loan amount, use this formula:
(Home Value × Max LTV %) – Current Mortgage Balance = Potential Loan Amount
Real-Life Example
Suppose your home is worth $500,000 and you still owe $300,000 on your primary mortgage. If a lender has an 85% LTV limit:
- 85% of $500,000 = $425,000 (Maximum total debt allowed)
- $425,000 – $300,000 (Existing balance) = $125,000
In this scenario, you could qualify for a home equity loan of up to $125,000.
Factors That Influence Your Loan Approval
While equity is the most important factor, lenders also evaluate several other criteria before cutting a check:
- Credit Score: A score above 700 usually secures the best interest rates. If your score is below 620, you may struggle to find a lender for a second mortgage.
- Debt-to-Income (DTI) Ratio: Lenders prefer your total monthly debt payments (including the new loan) to be less than 43% of your gross monthly income.
- Verifiable Income: You must provide pay stubs, W-2s, or tax returns to prove you can afford the monthly installments.
- Appraisal: Your "estimated" value might differ from a professional appraisal. The lender will hire a pro to determine the official market value.
Home Equity Loan vs. HELOC
It is important to distinguish between a Home Equity Loan and a Home Equity Line of Credit (HELOC):
- Home Equity Loan: A fixed lump sum with a fixed interest rate and fixed monthly payments. Great for one-time costs like a roof replacement or debt consolidation.
- HELOC: A revolving line of credit (like a credit card) with a variable interest rate. You only pay interest on what you use. Ideal for ongoing projects or emergency funds.