Net Salary Calculator

Home Equity Loan Calculator

70% 75% 80% (Standard) 85% 90% Most lenders allow a maximum Combined Loan-to-Value (CLTV) of 80% to 85%.

Your Results

Total Home Equity:

Max Potential Loan:

function calculateEquity() { var homeValue = parseFloat(document.getElementById('homeValue').value); var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value); var ltvLimit = parseFloat(document.getElementById('ltvLimit').value) / 100; var resultDiv = document.getElementById('equityResult'); if (isNaN(homeValue) || isNaN(mortgageBalance)) { alert("Please enter valid numbers for home value and mortgage balance."); return; } var totalEquity = homeValue – mortgageBalance; var maxBorrowingAmount = (homeValue * ltvLimit) – mortgageBalance; if (maxBorrowingAmount < 0) { maxBorrowingAmount = 0; } document.getElementById('totalEquity').innerText = '$' + totalEquity.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('maxLoan').innerText = '$' + maxBorrowingAmount.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); var msg = "Based on a " + (ltvLimit * 100) + "% CLTV limit, you could potentially borrow up to $" + maxBorrowingAmount.toLocaleString() + " through a home equity loan or HELOC."; document.getElementById('calcMessage').innerText = msg; resultDiv.style.display = 'block'; }

Understanding Home Equity Loans: How Much Can You Borrow?

A home equity loan allows you to borrow money by using the equity in your home as collateral. Equity is the difference between the current market value of your property and the amount you still owe on your mortgage. As you pay down your mortgage and property values in your area rise, your equity increases.

Key Factors in the Calculation

Lenders don't allow you to borrow against 100% of your home's value. Instead, they use a metric called Combined Loan-to-Value (CLTV). Here is how the components work:

• Appraised Home Value: The current fair market value determined by a professional appraisal.
• Mortgage Balance: The total remaining principal on all existing loans secured by the property.
• LTV Limit: Most lenders limit the CLTV to 80% or 85% to ensure there is a "cushion" of equity left in the home.

Example Calculation

Suppose your home is currently valued at $500,000 and your current mortgage balance is $300,000. If your lender has an 80% LTV limit, the calculation works as follows:

1. Calculate the maximum allowed total debt: $500,000 x 0.80 = $400,000.
2. Subtract existing debt: $400,000 – $300,000 = $100,000.
3. Your potential loan amount: $100,000.

Home Equity Loan vs. HELOC

While both use your home's equity, they function differently:

• Home Equity Loan: A "second mortgage" that provides a lump sum of cash upfront with a fixed interest rate and fixed monthly payments.
• HELOC (Home Equity Line of Credit): A revolving line of credit (similar to a credit card) with a variable interest rate. You only pay interest on the amount you actually draw.

Pro Tip:

Before applying, check your credit score. Lenders typically offer the best interest rates on home equity products to borrowers with a credit score of 720 or higher. Additionally, ensure your Debt-to-Income (DTI) ratio is below 43% for the best chance of approval.