A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home's equity. Unlike a home equity loan, which provides a lump sum, a HELOC functions more like a credit card, allowing you to draw funds as needed up to a certain limit. Lenders determine this limit based on your home's value and your outstanding mortgage balance, among other factors.
How the HELOC Calculator Works:
This calculator estimates your maximum HELOC borrowing amount using the following formula:
Step 1: Calculate Equity: Your home's equity is the difference between its current market value and the amount you still owe on your mortgage.
Step 2: Determine Maximum Loan Amount: Lenders typically allow you to borrow up to a certain percentage of your home's value, known as the Loan-to-Value (LTV) ratio. A common maximum LTV for HELOCs is 80% or 85%, but this can vary by lender and your financial profile.
Step 3: Calculate HELOC Limit: The maximum HELOC limit is calculated by taking the maximum allowed loan amount (from Step 2) and subtracting your remaining mortgage balance.
The Formula:
Potential HELOC Limit = (Current Home Value * Desired LTV Ratio) - Remaining Mortgage Balance
Example:
Let's say:
Current Home Value = $500,000
Remaining Mortgage Balance = $300,000
Desired Loan-to-Value (LTV) Ratio = 85%
Calculation:
Maximum Allowed Loan Amount = $500,000 * 0.85 = $425,000
In this scenario, your estimated HELOC limit would be $125,000. Remember, this is an estimate. Your actual approved HELOC amount may differ based on the lender's specific criteria, your creditworthiness, income, and other financial factors.
Important Considerations:
Lender Policies: Different lenders have varying LTV limits and underwriting requirements.
Credit Score: A strong credit score generally improves your chances of approval and may lead to better terms.
Income Verification: Lenders will assess your ability to repay the credit line.
Draw Period vs. Repayment Period: Be aware of the terms, including how long you can borrow (draw period) and how long you have to repay (repayment period).
Variable Interest Rates: HELOCs typically have variable interest rates, meaning your payments can change over time.
Use this calculator as a starting point for your financial planning. Consult with multiple lenders to understand your specific options.
function calculateHELOC() {
var homeValue = parseFloat(document.getElementById("homeValue").value);
var remainingMortgage = parseFloat(document.getElementById("remainingMortgage").value);
var loanToValueRatio = parseFloat(document.getElementById("loanToValueRatio").value);
var resultValue = document.getElementById("result-value");
if (isNaN(homeValue) || isNaN(remainingMortgage) || isNaN(loanToValueRatio)) {
resultValue.textContent = "Please enter valid numbers for all fields.";
resultValue.style.color = "red";
return;
}
if (homeValue <= 0 || remainingMortgage < 0 || loanToValueRatio 100) {
resultValue.textContent = "Please enter realistic values.";
resultValue.style.color = "red";
return;
}
if (remainingMortgage > homeValue) {
resultValue.textContent = "Remaining mortgage cannot exceed home value.";
resultValue.style.color = "red";
return;
}
var ltvDecimal = loanToValueRatio / 100;
var maxLoanAmount = homeValue * ltvDecimal;
var helocLimit = maxLoanAmount – remainingMortgage;
if (helocLimit < 0) {
helocLimit = 0; // You cannot have a negative HELOC limit
}
resultValue.textContent = "$" + helocLimit.toFixed(2);
resultValue.style.color = "#004a99"; // Reset color to default
}