Home Equity Loan Calculator
Calculate exactly how much you can borrow against your home's current market value.
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Most lenders cap total debt at 80% to 85% of home value.
How Home Equity Loan Limits Are Calculated
A Home Equity Loan or Home Equity Line of Credit (HELOC) allows you to borrow against the "equity" you have built in your property. Equity is the difference between what your home is worth today and what you owe on your mortgage.
Lenders use a metric called Combined Loan-to-Value (CLTV) to determine your borrowing limit. Most traditional banks allow a maximum CLTV of 80%, meaning your total debt (existing mortgage + new loan) cannot exceed 80% of the home's appraised value.
The Math Formula
The formula used by the calculator above is:
(Market Value × Max LTV%) – Current Mortgage Balance = Maximum Loan Amount
Realistic Example
Imagine your home is currently worth $500,000. You still owe $300,000 on your primary mortgage. If a lender allows an 85% LTV, the calculation works as follows:
| Step | Calculation | Result |
|---|---|---|
| 1. Determine Max Total Debt | $500,000 × 0.85 | $425,000 |
| 2. Subtract Current Debt | $425,000 – $300,000 | $125,000 |
| 3. Available Equity Loan | — | $125,000 |
Factors That Affect Your Approval
- Credit Score: Higher scores (720+) often unlock higher LTV limits (up to 90%) and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders typically want your total monthly debt payments to be less than 43% of your gross monthly income.
- Appraisal: The "Home Value" used in the final calculation is determined by a professional appraiser, not just online estimates.
- Property Type: Primary residences usually allow for higher borrowing limits than investment properties or second homes.
Common Uses for Home Equity
Home equity loans are popular because they typically offer lower interest rates than credit cards or personal loans. Common uses include:
- Home Improvements: Renovating a kitchen or bathroom can increase the home's value further.
- Debt Consolidation: Paying off high-interest credit card debt with a lower-interest secured loan.
- Education: Funding college tuition or vocational training.
- Emergency Expenses: Using a HELOC as a safety net for major unexpected costs.
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html += "";
html += "Total Home Equity: $" + totalEquityRaw.toLocaleString() + "";
html += "Maximum Total Debt Allowed: $" + maxTotalDebt.toLocaleString();
html += "";
} else {
html += "$0.00
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html += "Your current mortgage balance exceeds the " + ltvLimit + "% LTV threshold. You may need more equity or a higher LTV program to borrow against this property.";
}
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