Home Equity Loan Calculator
Calculate your maximum borrowing power based on your home's value.
Total Estimated Equity:
$0.00
Max Allowable Debt (LTV):
$0.00
Estimated Amount You Can Borrow:
$0.00
How to Calculate Your Home Equity Loan Amount
A Home Equity Loan, often called a "second mortgage," allows you to borrow against the value of your home. To understand how much you can borrow, lenders use a metric called Loan-to-Value (LTV) ratio. Most lenders allow a maximum LTV of 80% to 85% of your home's appraised value.
The Home Equity Formula
The calculation follows a specific sequence of steps:
- Step 1: Determine your home's current market value.
- Step 2: Multiply the value by the lender's LTV limit (e.g., 0.80 for 80%).
- Step 3: Subtract your existing mortgage balance and any other liens from that number.
Example: If your home is worth $500,000 and the lender allows 80% LTV, your maximum total debt is $400,000. If you currently owe $300,000 on your mortgage, you could potentially borrow up to $100,000 ($400,000 – $300,000).
Key Factors Lenders Consider
While this calculator provides a technical maximum, lenders also evaluate other factors before approving a Home Equity Loan:
- Credit Score: Higher scores (720+) often unlock higher LTV limits 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: A professional appraisal will be required to verify the home value used in the calculation.
Difference Between Home Equity Loan and HELOC
A Home Equity Loan provides a lump sum of cash with a fixed interest rate and fixed monthly payments. A Home Equity Line of Credit (HELOC) works more like a credit card, where you have a revolving balance and variable interest rates based on what you actually spend.