Home equity is the difference between the current market value of your property and the amount you still owe on your mortgage. As you make monthly mortgage payments and as property values in your area increase, your equity grows. This calculator helps you determine how much of that equity you might be able to borrow against through a Home Equity Loan or a Home Equity Line of Credit (HELOC).
How the Calculation Works
Lenders typically do not allow you to borrow 100% of your home's value. Most financial institutions set a maximum Loan-to-Value (LTV) ratio, often capped at 80% or 85%. The formula used by our calculator is:
(Market Value × Max LTV %) – Current Mortgage Balance = Potential Loan Amount
Example Scenario
Imagine your home is currently worth $500,000 and your remaining mortgage balance is $300,000. If a lender allows an 80% LTV:
80% of $500,000 is $400,000.
$400,000 minus your $300,000 balance equals $100,000.
In this case, your maximum potential home equity loan would be $100,000.
Factors That Influence Your Loan Approval
While equity is the primary factor, lenders will also evaluate other aspects of your financial profile:
Credit Score: A higher score often unlocks lower interest rates and higher LTV limits.
Debt-to-Income (DTI) Ratio: Lenders want to ensure you have enough monthly income to cover the new loan payment alongside existing debts.
Appraisal: A professional appraisal will be required to verify the current market value used in the calculation.
function calculateHomeEquity() {
var homeValue = parseFloat(document.getElementById("homeValue").value);
var mortgageBalance = parseFloat(document.getElementById("mortgageBalance").value);
var ltvLimit = parseFloat(document.getElementById("ltvLimit").value);
var resultArea = document.getElementById("result-area");
var resultText = document.getElementById("result-text");
var resultValueDisplay = document.getElementById("result-value");
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(ltvLimit)) {
alert("Please enter valid numbers for all fields.");
return;
}
var maxBorrowingBase = homeValue * (ltvLimit / 100);
var availableEquity = maxBorrowingBase – mortgageBalance;
resultArea.style.display = "block";
resultArea.className = ""; // Reset classes
if (availableEquity > 0) {
resultArea.classList.add("result-success");
resultText.innerText = "Based on an " + ltvLimit + "% LTV, your estimated maximum loan amount is:";
resultValueDisplay.innerText = "$" + availableEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
} else {
resultArea.classList.add("result-warning");
resultText.innerText = "Based on these figures, you currently do not have enough equity to borrow under an " + ltvLimit + "% LTV limit.";
resultValueDisplay.innerText = "$0.00";
}
}