Enter values and click calculate
$"+v1.toLocaleString()+" x "+(v2/100).toFixed(2)+" = $"+limit.toLocaleString()+"
Step 2: Subtract Current Mortgage Balance
$"+limit.toLocaleString()+" – $"+v3.toLocaleString()+" = $"+maxLine.toLocaleString()+"
("+v4+"% / 100) / 12 = "+monthlyRate.toFixed(6)+"
Step 2: Multiply by Draw Amount
$"+v5.toLocaleString()+" x "+monthlyRate.toFixed(6)+" = $"+monthlyPay.toFixed(2)+"
Formula: P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Using the HELOC Calculator
A Home Equity Line of Credit (HELOC) is a flexible financial tool that allows you to borrow against the equity in your home. This heloc calculator is designed to help you determine three critical pieces of information: how much you can borrow, what your interest-only payments might look like during the draw period, and what your full repayment costs could be later.
To get started, you will need your current home valuation, your existing mortgage balance, and the LTV (Loan-to-Value) limit required by your lender.
- Home Value
- The current fair market value of your property. If you haven't had a recent appraisal, you can use an estimate from a real estate website.
- LTV Limit
- Most lenders allow for a "Combined Loan-to-Value" (CLTV) of up to 80% or 85%. This represents the total debt allowed on the home relative to its value.
- Mortgage Balance
- The total amount you still owe on your primary mortgage and any other liens currently against the home.
How the HELOC Amount is Calculated
Lenders calculate your available credit by applying a percentage to your home's value and then subtracting what you already owe. The primary formula used by the heloc calculator is:
HELOC Limit = (Home Value × Max LTV %) – Current Mortgage Balance
- Home Value: The benchmark for your total equity.
- Max LTV: The lender's threshold (e.g., 0.80 for 80%).
- Mortgage Balance: The "prior lien" that takes priority over the HELOC.
HELOC Calculation Example
Scenario: Imagine you own a home worth $500,000. You currently owe $300,000 on your first mortgage. Your bank offers a HELOC with an 85% CLTV limit and an interest rate of 7.5%.
Step-by-step solution for Maximum Line:
- Determine LTV Limit: $500,000 × 0.85 = $425,000
- Subtract Mortgage: $425,000 – $300,000 = $125,000
- Result: Your maximum HELOC line is $125,000.
If you decide to draw $20,000 for home renovations at a 7.5% interest rate, your monthly interest-only payment would be calculated as: ($20,000 × 0.075) / 12 = $125.00 per month.
Common Questions
What is the difference between a HELOC and a Home Equity Loan?
A Home Equity Loan is a "lump sum" loan with a fixed interest rate and fixed monthly payments. A HELOC is a revolving line of credit, similar to a credit card, where you only borrow what you need, when you need it. HELOCs usually have variable interest rates and an initial "draw period" where you may only be required to pay interest.
How do HELOC interest rates work?
Most HELOC rates are variable and tied to an index, such as the U.S. Prime Rate. When the index moves up or down, your interest rate and monthly payment will adjust accordingly. Some lenders offer "fixed-rate lock" options for specific draw amounts within your line of credit.
What happens when the draw period ends?
Once the draw period (typically 5 to 10 years) expires, you enter the repayment period. During this time, you can no longer withdraw funds, and you must begin paying back both the principal and the interest. This can lead to a significant "payment shock" if you were previously only making interest-only payments.