Bankrate Home Equity Line of Credit Calculator

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Home Equity Line of Credit (HELOC) Eligibility Calculator

function calculateHeloc() { var currentHomeValue = parseFloat(document.getElementById('currentHomeValue').value); var outstandingMortgageBalance = parseFloat(document.getElementById('outstandingMortgageBalance').value); var maxCltvRatio = parseFloat(document.getElementById('maxCltvRatio').value); var desiredHelocAmount = parseFloat(document.getElementById('desiredHelocAmount').value); var resultDiv = document.getElementById('helocResult'); if (isNaN(currentHomeValue) || isNaN(outstandingMortgageBalance) || isNaN(maxCltvRatio) || currentHomeValue <= 0 || maxCltvRatio = currentHomeValue) { resultDiv.innerHTML = 'Your outstanding mortgage balance cannot be greater than or equal to your home\'s current value. You have no equity.'; return; } var totalHomeEquity = currentHomeValue – outstandingMortgageBalance; var maxAllowableTotalDebt = currentHomeValue * (maxCltvRatio / 100); var maxPotentialHeloc = maxAllowableTotalDebt – outstandingMortgageBalance; // Ensure maxPotentialHeloc doesn't exceed actual equity if (maxPotentialHeloc > totalHomeEquity) { maxPotentialHeloc = totalHomeEquity; } // Ensure maxPotentialHeloc is not negative if (maxPotentialHeloc < 0) { maxPotentialHeloc = 0; } var output = '

Your HELOC Eligibility Summary:

'; output += 'Total Home Equity: $' + totalHomeEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "; output += 'Maximum Potential HELOC Amount: $' + maxPotentialHeloc.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' (based on your lender\'s ' + maxCltvRatio + '% CLTV limit)'; if (!isNaN(desiredHelocAmount) && desiredHelocAmount > 0) { var cltvWithDesiredHeloc = ((outstandingMortgageBalance + desiredHelocAmount) / currentHomeValue) * 100; output += 'Combined Loan-to-Value (CLTV) with Desired HELOC ($' + desiredHelocAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + '): ' + cltvWithDesiredHeloc.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + '%'; if (desiredHelocAmount <= maxPotentialHeloc) { output += 'Your desired HELOC amount of $' + desiredHelocAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' is likely within your eligibility.'; } else { output += 'Your desired HELOC amount of $' + desiredHelocAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' exceeds your maximum potential HELOC of $' + maxPotentialHeloc.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + ' based on your home equity and lender\'s CLTV limits.'; } } else if (desiredHelocAmount < 0) { output += 'Desired HELOC Amount cannot be negative.'; } resultDiv.innerHTML = output; }

Understanding Your Home Equity Line of Credit (HELOC) Eligibility

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity they've built in their home. Unlike a traditional mortgage or home equity loan, a HELOC provides access to funds as needed, up to a certain limit, similar to a credit card. It's secured by your home, often offering lower interest rates than unsecured loans.

How HELOCs Work

A HELOC typically has two phases: a draw period and a repayment period. During the draw period (usually 5-10 years), you can borrow money as needed, make interest-only payments, or pay down the principal. Once the draw period ends, the repayment period begins (often 10-20 years), during which you can no longer draw funds and must make principal and interest payments.

Key Factors for HELOC Eligibility

Lenders assess several factors to determine your eligibility and the maximum amount you can borrow. Our calculator focuses on the primary financial components:

  1. Current Home Value: This is the estimated market value of your property. Lenders often use an appraisal to determine this.
  2. Outstanding Mortgage Balance: The remaining amount you owe on your primary mortgage.
  3. Total Home Equity: This is the difference between your home's current value and your outstanding mortgage balance. It represents the portion of your home you truly own.
  4. Lender's Maximum Combined Loan-to-Value (CLTV) Ratio: This is a critical metric. Lenders typically have a maximum CLTV they will allow, often ranging from 75% to 90%. The CLTV ratio is calculated as (Outstanding Mortgage Balance + HELOC Limit) / Current Home Value. It represents the total percentage of your home's value that is encumbered by debt.

How the Calculator Works

Our HELOC Eligibility Calculator helps you understand your borrowing potential by considering these key factors:

  • It first calculates your Total Home Equity.
  • Then, it determines the Maximum Potential HELOC Amount you might qualify for based on your home's value, your existing mortgage, and your lender's specified maximum CLTV ratio. This is often the most significant limiting factor.
  • If you enter a Desired HELOC Amount, the calculator will show you what your CLTV would be with that amount and indicate if it falls within typical lender limits.

Example Scenario:

Let's say your home is valued at $600,000, and you have an outstanding mortgage balance of $250,000. Your lender has a maximum CLTV ratio of 80%.

  • Total Home Equity: $600,000 – $250,000 = $350,000
  • Maximum Allowable Total Debt (at 80% CLTV): $600,000 * 0.80 = $480,000
  • Maximum Potential HELOC Amount: $480,000 (Max Debt) – $250,000 (Mortgage) = $230,000

In this scenario, you could potentially qualify for a HELOC of up to $230,000. If you desired a HELOC of $150,000, your CLTV would be (($250,000 + $150,000) / $600,000) * 100 = 66.67%, which is well within the 80% limit.

Important Considerations

While this calculator provides a strong estimate of your HELOC eligibility, remember that actual approval and terms depend on additional factors such as your credit score, debt-to-income ratio, employment history, and the specific lender's underwriting guidelines. Always consult with a financial advisor and multiple lenders to explore your best options.

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