function calculateHELOC() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var ltvLimit = parseFloat(document.getElementById('ltvLimit').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(ltvLimit)) {
alert("Please fill in all required fields with valid numbers.");
return;
}
var totalBorrowingLimit = homeValue * (ltvLimit / 100);
var helocAvailable = totalBorrowingLimit – mortgageBalance;
var currentEquity = homeValue – mortgageBalance;
if (helocAvailable < 0) {
helocAvailable = 0;
}
var monthlyInterest = (helocAvailable * (interestRate / 100)) / 12;
var combinedLTV = ((mortgageBalance + helocAvailable) / homeValue) * 100;
document.getElementById('maxHELOC').innerText = "$" + helocAvailable.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalPower').innerText = "$" + totalBorrowingLimit.toLocaleString();
document.getElementById('currentEquity').innerText = "$" + currentEquity.toLocaleString();
document.getElementById('estPayment').innerText = "$" + monthlyInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "/mo";
document.getElementById('cltvRatio').innerText = ltvLimit.toFixed(1) + "%";
document.getElementById('heloc-result').style.display = 'block';
}
Understanding Your Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home. Unlike a traditional home equity loan, which provides a lump sum, a HELOC works more like a credit card, allowing you to borrow, repay, and borrow again during a set "draw period."
How This HELOC Calculator Works
Lenders typically allow you to borrow up to a specific Combined Loan-to-Value (CLTV) ratio, often 80% to 90% of your home's current appraised value. The formula used in this calculator is:
HELOC Limit = (Home Value × Max LTV %) – Current Mortgage Balance
Practical Example
Imagine your home is valued at $500,000 and you still owe $300,000 on your primary mortgage. If your lender has an 80% LTV limit:
- Total Borrowing Capacity: $500,000 × 0.80 = $400,000
- Current Debt: $300,000
- Available HELOC: $400,000 – $300,000 = $100,000
Why Use a HELOC?
HELOCs are popular for homeowners who need flexible access to cash for:
- Home Improvements: Increasing the value of your asset.
- Debt Consolidation: Paying off high-interest credit cards at a lower rate.
- Emergency Fund: Having a safety net that doesn't cost anything until you use it.
- Education Costs: Funding tuition or specialized training.
Key Terms to Know
Draw Period: The timeframe (usually 5-10 years) during which you can withdraw money from the line of credit and typically make interest-only payments.
Repayment Period: The phase (usually 10-20 years) following the draw period where you can no longer borrow money and must pay back both principal and interest.
Variable Rate: Most HELOCs have interest rates that fluctuate based on the Prime Rate, meaning your monthly payments can change over time.
Important Note: Because your home serves as collateral, failure to make payments on a HELOC could result in foreclosure. Always borrow responsibly and ensure you can manage the potential for rising interest rates.