HELOC Maximum Loan Calculator
How to Calculate Your HELOC Limit
A Home Equity Line of Credit (HELOC) allows you to borrow against the equity you've built in your home. Unlike a standard home equity loan, a HELOC works like a credit card, where you have a revolving balance that you can draw from and pay back as needed.
Lenders determine your maximum borrowing limit using a formula based on your Combined Loan-to-Value (CLTV) ratio. Most banks will allow you to borrow up to 80% or 85% of your home's total value, minus what you still owe on your primary mortgage.
Realistic Example:
Suppose your home is worth $400,000. Your bank allows an 80% LTV.
1. $400,000 x 0.80 = $320,000 (Maximum total debt allowed).
2. If you owe $200,000 on your mortgage, subtract that from the $320,000.
3. Your HELOC limit would be $120,000.
Suppose your home is worth $400,000. Your bank allows an 80% LTV.
1. $400,000 x 0.80 = $320,000 (Maximum total debt allowed).
2. If you owe $200,000 on your mortgage, subtract that from the $320,000.
3. Your HELOC limit would be $120,000.
Key Factors Affecting Your HELOC Approval
- Credit Score: Higher scores often unlock higher LTV percentages and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders look at your monthly obligations to ensure you can handle the potential HELOC payments.
- Appraised Value: While online estimates are helpful, a lender will require a professional appraisal to finalize the home's value.
Why Use a HELOC?
Homeowners frequently use HELOCs for high-impact home renovations that increase property value, debt consolidation to pay off high-interest credit cards, or as an emergency fund for unexpected expenses. Because the loan is secured by your home, interest rates are typically much lower than personal loans or credit cards.