Home Equity Loan Calculator
Estimate how much cash you can borrow against your home's value.
Maximum Home Equity Loan Amount:
$0.00
How to Calculate Your Home Equity Loan Potential
A Home Equity Loan, often referred to as a "second mortgage," allows homeowners to borrow a lump sum of money using their home's equity as collateral. Calculating how much you can borrow involves three primary factors: your current market value, your existing mortgage debt, and the lender's CLTV limit.
Understanding CLTV (Combined Loan-to-Value)
Most lenders will not allow you to borrow 100% of your home's value. Instead, they use a Combined Loan-to-Value (CLTV) ratio. Typically, lenders cap this at 80% to 85%, though some may go higher for borrowers with exceptional credit scores. This ensures there is a "cushion" of equity left in the home should market prices fluctuate.
Real-World Example:
If your home is worth $500,000 and your lender allows an 85% CLTV, your total allowed debt is $425,000 ($500,000 x 0.85).
If you currently owe $300,000 on your primary mortgage, you subtract that from the allowed total:
$425,000 – $300,000 = $125,000. This is your maximum Home Equity Loan amount.
If your home is worth $500,000 and your lender allows an 85% CLTV, your total allowed debt is $425,000 ($500,000 x 0.85).
If you currently owe $300,000 on your primary mortgage, you subtract that from the allowed total:
$425,000 – $300,000 = $125,000. This is your maximum Home Equity Loan amount.
Factors That Affect Your Approval
- Credit Score: Higher scores often unlock higher CLTV limits and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders look at your monthly income versus your total monthly debt payments, including the new loan.
- Appraisal: A professional appraisal will be required to verify the actual "Home Value" used in the calculation.
Home Equity Loan vs. HELOC
While this calculator helps you find the lump sum amount for a Home Equity Loan, a HELOC (Home Equity Line of Credit) works differently. A loan provides cash all at once with a fixed interest rate, whereas a HELOC works like a credit card with a variable rate, allowing you to draw funds as needed.