HELOC Calculator (Home Equity Line of Credit)
Estimate your maximum borrowing power based on your home's equity.
70% (Conservative)
75%
80% (Standard)
85% (Aggressive)
90% (Credit Unions/High LTV)
Most lenders limit borrowing to 80-85% of the home's value.
Your Estimated HELOC Limit
How a HELOC Calculator Works
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows you to borrow against the equity in your home. Unlike a standard home equity loan, a HELOC works more like a credit card where you only pay interest on what you actually spend.
The HELOC Formula
Lenders use a specific formula to determine how much you can borrow. It looks like this:
(Home Value × Combined Loan-to-Value Ratio) – Outstanding Mortgage Balance = Maximum HELOC Amount
Example Calculation
Imagine your home is valued at $400,000 and you currently owe $250,000 on your primary mortgage. If your lender allows for an 80% LTV limit:
- 80% of $400,000 = $320,000 (Maximum total debt allowed)
- $320,000 – $250,000 (Current balance) = $70,000 HELOC Limit
Key Factors Affecting Your HELOC
- Current Home Value: Determined by a professional appraisal or automated valuation model.
- LTV (Loan-to-Value): The ratio between your debt and the home value. Most banks cap this at 80% to 85% to ensure they have a safety buffer if home prices drop.
- Credit Score: While equity is the primary collateral, your credit score determines the interest rate and can sometimes influence the maximum LTV allowed.
- Debt-to-Income (DTI) Ratio: Lenders will verify that you have enough monthly income to cover potential payments if you were to max out the line of credit.
Why Use a HELOC?
Homeowners often use HELOCs for high-impact expenses such as:
- Home Renovations: Increasing the value of the collateral itself.
- Debt Consolidation: Paying off high-interest credit cards with a lower interest rate.
- Emergency Funds: Having access to cash for unexpected medical bills or repairs.
- Education Expenses: Funding college tuition.