Home Equity Loan Calculator
Estimate how much cash you can access from your home's value.
Please enter valid numerical values for all fields.
Total Home Equity:
$0
Current LTV Ratio:
0%
Maximum Combined Loan Amount:
$0
Estimated Max Loan Available:
$0
How to Calculate Your Home Equity Loan Amount
A home equity loan, often referred to as a "second mortgage," allows you to borrow against the difference between your home's current market value and the balance of your existing mortgage. Lenders typically allow you to borrow up to a specific percentage of your home's value, known as the Loan-to-Value (LTV) ratio.
The Formula for Home Equity Borrowing
To determine your maximum loan amount, lenders use the Combined Loan-to-Value (CLTV) formula:
(Home Value × Max LTV %) - Current Mortgage Balance = Potential Loan Amount
Example Calculation
Suppose your home is appraised at $500,000 and your current mortgage balance is $300,000. If your lender permits an 80% LTV:
- 80% of $500,000 = $400,000 (The maximum total debt allowed on the home)
- $400,000 – $300,000 (Current Balance) = $100,000 (The maximum amount you can borrow)
Key Factors That Influence Your Equity
- Market Appraisal: Your equity is based on current market value, not what you originally paid for the house.
- Credit Score: Higher credit scores often unlock higher LTV limits (up to 85% or 90% with some credit unions).
- Debt-to-Income (DTI) Ratio: Even if you have equity, you must have enough monthly income to cover the new loan payments.
- Current Liens: Any other liens or judgments against the property will reduce the accessible equity.
Why Use a Home Equity Loan?
Home equity loans offer a lump sum of cash with a fixed interest rate, making them ideal for predictable expenses like:
- Home renovations or major repairs that increase property value.
- Consolidating high-interest credit card debt into a lower fixed rate.
- Covering educational expenses or large medical bills.
Disclaimer: This calculator provides estimates only. Your actual borrowing capacity depends on lender requirements, credit checks, and professional appraisals.