Home Equity Loan Calculator
Calculate your estimated borrowing power based on your home's current value.
75% (Conservative)
80% (Standard)
85% (Aggressive)
90% (High LTV)
Excellent (740+)
Good (670-739)
Fair (580-669)
Maximum Estimated Loan Amount
$0
How Much Home Equity Can You Borrow?
A Home Equity Loan, often referred to as a "second mortgage," allows homeowners to borrow against the value of their property. Most lenders follow a strict set of guidelines to determine how much you can borrow. This calculator uses the Combined Loan-to-Value (CLTV) ratio to estimate your borrowing potential.
How the Calculation Works
Lenders typically allow you to borrow up to 80% or 85% of your home's total market value, including your existing mortgage balance. The formula looks like this:
(Home Value × LTV Limit) – Remaining Mortgage Balance = Available Equity Loan
Example: If your home is worth $500,000 and your lender allows an 80% CLTV, your total debt ceiling is $400,000. If you still owe $300,000 on your primary mortgage, you could potentially qualify for a $100,000 home equity loan.
Key Factors Influencing Your Loan
- Loan-to-Value (LTV) Ratio: Most lenders cap this at 80%, though some credit unions may go higher.
- Credit Score: A higher credit score often unlocks higher LTV limits and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders will examine your monthly income versus your recurring debts to ensure you can handle the new payment.
- Appraised Value: While online estimates are a great start, a lender will require a professional appraisal to confirm the value.
Common Uses for Home Equity Loans
Because home equity loans often carry lower interest rates than personal loans or credit cards, they are frequently used for large expenses such as:
- Home Renovations: Increasing the value of the asset while utilizing the equity.
- Debt Consolidation: Paying off high-interest credit cards with a lower-interest secured loan.
- Emergency Expenses: Covering medical bills or urgent repairs.
- Education: Funding tuition for higher education.