HELOC Eligibility Calculator
Estimate how much equity you can access from your home.
How a HELOC Calculation Works
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home. Unlike a home equity loan, which provides a lump sum, a HELOC allows you to borrow as needed up to a certain limit. Lenders typically use a specific formula to determine your maximum line of credit.
The primary factor in this calculation is the Loan-to-Value (LTV) ratio. Most lenders will allow you to borrow up to 80% or 85% of your home's appraised value, minus what you still owe on your first mortgage.
The HELOC Formula
To calculate your potential credit limit manually, use this equation:
Example Calculation
Suppose your home is worth $400,000 and your current mortgage balance is $250,000. If your lender offers an 85% LTV limit:
- Step 1: $400,000 × 0.85 = $340,000 (Maximum total debt allowed)
- Step 2: $340,000 – $250,000 = $90,000
In this scenario, your estimated HELOC limit would be $90,000.
Factors That Affect Your HELOC Limit
- Credit Score: Higher scores (720+) often unlock higher LTV limits (up to 90%) and lower interest rates.
- Debt-to-Income (DTI) Ratio: Lenders prefer a DTI below 43% to ensure you can manage the new monthly payments.
- Appraised Value: The calculation relies on a professional appraisal, which may differ from your own estimate or Zestimate.
- Market Conditions: In volatile real estate markets, some lenders reduce their maximum LTV to 70% or 75% to mitigate risk.
HELOC vs. Home Equity Loan
While both use your home as collateral, a HELOC functions like a credit card with a variable interest rate and a "draw period" (usually 10 years). A Home Equity Loan is a second mortgage with a fixed interest rate and fixed monthly payments. Use a HELOC for ongoing projects like home renovations or emergency funds where you don't need all the cash at once.