*Monthly payment is based on the full credit limit being utilized. Most HELOCs have a 10-year interest-only draw period followed by a 20-year repayment period.
Understanding Your Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit, or HELOC, is a revolving line of credit secured by your home. Think of it like a credit card with a high limit and a much lower interest rate, where your house serves as collateral. Our calculator helps you determine how much equity you can actually tap into based on current banking standards.
How is HELOC Capacity Calculated?
Lenders typically allow you to borrow up to a specific Loan-to-Value (LTV) ratio, usually between 80% and 90% of your home's appraised value. The formula used is:
(Home Value × LTV %) – Current Mortgage Balance = HELOC Credit Limit
Example Calculation
Let's say your home is worth $500,000 and you owe $300,000 on your primary mortgage. If a lender offers an 85% LTV limit:
Max Combined Loan Amount: $500,000 × 0.85 = $425,000
HELOC Limit: $425,000 – $300,000 = $125,000
In this scenario, you could access a credit line of $125,000 for home renovations, debt consolidation, or emergency expenses.
Key Terms to Know
Draw Period: The timeframe (usually 10 years) during which you can withdraw funds and typically only pay interest.
Repayment Period: The timeframe (usually 20 years) after the draw period ends, where you must pay back both principal and interest.
Variable Rate: Most HELOCs have interest rates that fluctuate based on the Prime Rate.
function calculateHeloc() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgage = parseFloat(document.getElementById('mortgageBalance').value);
var ltv = parseFloat(document.getElementById('ltvLimit').value) / 100;
var rate = parseFloat(document.getElementById('interestRate').value) / 100;
if (isNaN(homeValue) || isNaN(mortgage) || isNaN(ltv) || isNaN(rate)) {
alert("Please enter valid numeric values in all fields.");
return;
}
// Calculate Max Combined Loan to Value amount
var maxCombinedLoan = homeValue * ltv;
// Calculate available credit limit
var helocLimit = maxCombinedLoan – mortgage;
// Ensure limit isn't negative
if (helocLimit < 0) {
helocLimit = 0;
}
// Calculate monthly interest-only payment (Interest only during draw period)
var monthlyInterest = (helocLimit * rate) / 12;
// Format as currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('maxLimitResult').innerHTML = formatter.format(helocLimit);
document.getElementById('monthlyPaymentResult').innerHTML = formatter.format(monthlyInterest);
// Show result div
document.getElementById('heloc-results').style.display = 'block';
// Smooth scroll to results
document.getElementById('heloc-results').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}