HELOC (Home Equity Line of Credit) Calculator
Estimate the maximum credit line available to you based on your home's current market value and your existing mortgage balance.
Estimated Results
Understanding Your HELOC Calculation
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 traditional home equity loan, a HELOC works more like a credit card where you can draw funds, pay them back, and draw again during the "draw period."
How the HELOC Amount is Determined
Lenders use a specific formula to determine how much you can borrow. This is primarily based on your 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 primary mortgage.
(Home Value × Max LTV %) – Current Mortgage Balance = Available HELOC
Example Calculation
Suppose your home is valued at $500,000 and your current mortgage balance is $300,000. If a lender offers an 80% LTV limit, the calculation would be:
- $500,000 (Value) × 0.80 (LTV) = $400,000 (Maximum total borrowing)
- $400,000 – $300,000 (Balance) = $100,000 HELOC Limit
Factors That Influence HELOC Approval
- Credit Score: A higher credit score often leads to better interest rates and higher LTV limits.
- Debt-to-Income (DTI) Ratio: Lenders look at your monthly income compared to your monthly debt obligations.
- Home Appraisal: Professional appraisals are required to confirm the current market value of the property.
- Equity Cushion: Lenders require you to keep a certain amount of equity (usually 15-20%) untouched.
Benefits of a HELOC
HELOCs are popular for home improvements, debt consolidation, or emergency funds because they offer flexibility. You only pay interest on the amount you actually borrow, not the entire credit limit. Furthermore, the interest rates on HELOCs are typically lower than those of credit cards or personal loans because the debt is secured by your property.