Home Equity Loan Calculator
Determine how much you can borrow against your home's current value.
Excellent (740+)
Good (670-739)
Fair (580-669)
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Estimated Loan Availability
$0.00
*This is an estimate. Actual bank approvals depend on income, debt-to-income ratio, and professional appraisals.
How to Calculate Your Home Equity
Home equity is the difference between the fair market value of your home and the remaining balance on your mortgage. A home equity loan allows you to borrow against that value, using your house as collateral. This is often called a "second mortgage."
Most lenders follow a specific formula to determine your borrowing limit, primarily focusing on the Loan-to-Value (LTV) Ratio. Generally, lenders allow you to borrow up to 80% or 85% of your home's total value, including your existing mortgage.
The Home Equity Formula
The calculation used by this tool is as follows:
- Maximum Allowed Value: (Home Value) × (LTV Limit / 100)
- Available Loan Amount: (Maximum Allowed Value) – (Current Mortgage Balance)
Example Calculation
Imagine your home is worth $400,000 and you still owe $200,000 on your primary mortgage. If a lender has an 80% LTV limit, the calculation looks like this:
- 80% of $400,000 = $320,000
- $320,000 – $200,000 = $120,000
In this scenario, you could potentially qualify for a home equity loan or HELOC (Home Equity Line of Credit) of up to $120,000.
Factors That Influence Your Approval
While equity is the primary factor, lenders also look at:
- Credit Score: Higher scores typically unlock higher LTV limits (sometimes up to 90%) and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders want to ensure your monthly income can support the new loan payment alongside your existing debts.
- Appraisal: A professional appraiser will verify your home's value; if it comes in lower than expected, your loan amount will decrease.