*Results are estimates based on your input. Lenders may have different criteria.
How to Calculate Your Home Equity Loan Potential
A home equity loan, often referred to as a "second mortgage," allows you to borrow against the value you've built up in your property. Unlike a HELOC (Home Equity Line of Credit), a standard home equity loan provides a lump sum with a fixed interest rate and fixed monthly payments.
To determine how much you can borrow, lenders primarily look at your Loan-to-Value (LTV) ratio. Most lenders will limit your total debt (existing mortgage + new loan) to 80% or 85% of your home's current market value.
Real-World Example:
Imagine your home is worth $500,000 and you owe $300,000 on your primary mortgage. If a lender allows an 80% LTV:
Total borrowing limit: $500,000 × 0.80 = $400,000
Subtract current mortgage: $400,000 – $300,000 = $100,000
Your max loan amount: $100,000
Factors That Influence Your Approval
Credit Score: Higher scores usually unlock lower interest rates and higher LTV limits.
Debt-to-Income (DTI) Ratio: Lenders verify if your income can support both your current mortgage and the new equity loan payment.
Home Appraisal: While you may estimate your home value, the lender will require a professional appraisal to verify the equity exists.
Why Use a Home Equity Loan?
Many homeowners use these funds for debt consolidation, major home renovations, or educational expenses. Because the loan is secured by your home, the interest rates are typically much lower than those of credit cards or personal loans.
function calculateHomeEquity() {
var homeValue = parseFloat(document.getElementById('hel-home-value').value);
var balance = parseFloat(document.getElementById('hel-mortgage-balance').value);
var ltvLimit = parseFloat(document.getElementById('hel-ltv-limit').value);
var interest = parseFloat(document.getElementById('hel-interest').value);
var years = parseFloat(document.getElementById('hel-term').value);
if (isNaN(homeValue) || isNaN(balance) || isNaN(ltvLimit) || homeValue <= 0) {
alert("Please enter valid numbers for home value, mortgage balance, and LTV limit.");
return;
}
// 1. Calculate Total Equity
var totalEquity = homeValue – balance;
if (totalEquity < 0) totalEquity = 0;
// 2. Calculate Max Borrowable based on LTV
var maxTotalDebt = homeValue * (ltvLimit / 100);
var maxBorrowable = maxTotalDebt – balance;
if (maxBorrowable 0 && interest > 0 && years > 0) {
var r = interest / 100 / 12;
var n = years * 12;
monthlyPayment = (maxBorrowable * r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
} else if (maxBorrowable > 0 && interest === 0) {
monthlyPayment = maxBorrowable / (years * 12);
}
// Display Results
document.getElementById('hel-results').style.display = 'block';
document.getElementById('res-total-equity').innerHTML = '$' + totalEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res-max-borrow').innerHTML = '$' + maxBorrowable.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res-monthly-pay').innerHTML = '$' + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Scroll to results on mobile
document.getElementById('hel-results').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}