HELOC Borrowing Power Calculator
Estimate how much equity you can access with a Home Equity Line of Credit.
*This is an estimate. Lenders will also consider your credit score, income, and debt-to-income (DTI) ratio.
What is a Home Equity Line of Credit (HELOC)?
A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home. Think of it like a credit card where your home acts as the collateral. You can borrow as much or as little as you need up to your credit limit, pay it back, and borrow again during the "draw period."
How is a HELOC Limit Calculated?
Lenders determine your HELOC limit by looking at your Combined Loan-to-Value (CLTV) ratio. Most lenders will allow a CLTV of 80% to 90%. The formula is generally:
(Current Home Value × Max LTV Percentage) - Current Mortgage Balance = HELOC Limit
If your home is worth $500,000 and your lender allows an 85% LTV, your maximum total debt is $425,000. If you still owe $300,000 on your primary mortgage, your HELOC limit would be:
$425,000 – $300,000 = $125,000.
Key Factors Impacting Your HELOC Approval
- Equity: Usually, you need at least 15-20% equity in your home to qualify.
- Credit Score: Higher scores (720+) generally unlock lower interest rates and higher LTV limits.
- Debt-to-Income (DTI) Ratio: Lenders prefer a DTI below 43%, meaning your monthly debt payments shouldn't exceed 43% of your gross monthly income.
- Property Type: Primary residences usually qualify for better terms than investment properties or second homes.
HELOC vs. Home Equity Loan
While both use your home as collateral, a HELOC is a flexible line of credit with variable interest rates. A Home Equity Loan is a "second mortgage" that provides a lump sum of cash upfront with a fixed interest rate and fixed monthly payments. HELOCs are ideal for long-term projects with uncertain costs, like home renovations or emergency funds.