HELOC Maximum Loan Calculator
Estimate how much equity you can access from your home.
Most lenders allow 80% to 85%.
Your Estimated HELOC Limit
What is a HELOC and How is it Calculated?
A Home Equity Line of Credit (HELOC) is a revolving line of credit that uses your home as collateral. Unlike a standard home equity loan, a HELOC works similarly to a credit card where you can borrow, repay, and borrow again during the "draw period."
Lenders determine your maximum credit limit based on a specific formula involving your Loan-to-Value (LTV) ratio. Generally, lenders permit a combined LTV (CLTV) of 80% to 90% of your home's appraised value, minus what you still owe on your first mortgage.
Realistic Example:
Suppose your home is worth $450,000. Your lender allows an 85% LTV.
1. Total borrowing limit: $450,000 x 0.85 = $382,500.
2. If you owe $250,000 on your mortgage, subtract that from the limit.
3. Result: $382,500 – $250,000 = $132,500 HELOC limit.
Suppose your home is worth $450,000. Your lender allows an 85% LTV.
1. Total borrowing limit: $450,000 x 0.85 = $382,500.
2. If you owe $250,000 on your mortgage, subtract that from the limit.
3. Result: $382,500 – $250,000 = $132,500 HELOC limit.
Key Factors Influencing Your HELOC Limit
- Current Market Value: A professional appraisal will determine the official value of your home, which is the baseline for the calculation.
- Debt-to-Income (DTI) Ratio: Even if you have equity, lenders look at your monthly income versus your debts to ensure you can handle the payments.
- Credit Score: Higher credit scores often unlock higher LTV percentages (e.g., 90% vs 80%) and lower interest rates.
- Existing Liens: Any secondary loans or tax liens on the property will reduce the available equity.
Why Use a HELOC?
HELOCs are popular for high-cost needs such as home renovations, debt consolidation, or emergency funds. Because the loan is secured by your property, the interest rates are typically much lower than credit cards or personal loans. However, remember that your home serves as collateral; failure to repay could lead to foreclosure.