HELOC Maximum Borrowing Calculator
Maximum Estimated HELOC Amount:
$0.00
What is a HELOC and How is it Calculated?
A Home Equity Line of Credit (HELOC) is a revolving line of credit that uses your home as collateral. Unlike a traditional home equity loan, which provides a lump sum, a HELOC allows you to withdraw funds as needed, similar to a credit card.
To determine how much you can borrow, lenders use the Combined Loan-to-Value (CLTV) ratio. This ratio compares the total of all loans secured by your home (your first mortgage plus the requested HELOC) against the home's appraised value.
The HELOC Formula
Lenders typically allow you to borrow up to 80% or 85% of your home's value, including your existing mortgage balance. The formula used by this calculator is:
(Home Value × Max CLTV %) – Existing Mortgage Balance = Max HELOC Amount
Real-World Example
Imagine your home is worth $500,000 and you still owe $300,000 on your primary mortgage. If your lender allows for an 85% CLTV:
- 85% of $500,000 = $425,000
- $425,000 – $300,000 (Current Debt) = $125,000
In this scenario, your maximum credit limit for a HELOC would be $125,000.
Factors That Influence Your HELOC Limit
- Credit Score: Higher scores often unlock higher CLTV limits (up to 90% in some cases) and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders evaluate your monthly income against all debt payments to ensure you can afford the line of credit.
- Appraisal: A professional appraisal will determine the final "Home Value" used in the calculation, which may differ from online estimates.