Understanding Your HELOC Borrowing Power
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, which provides a lump sum, a HELOC works more like a credit card where you can draw funds as needed up to a certain limit.
How the Calculation Works
Lenders typically use a Loan-to-Value (LTV) ratio—usually between 75% and 85%—to determine how much they are willing to lend. The formula used in this calculator is:
(Home Value × Max LTV %) – Current Mortgage Balance = Available HELOC
Example Calculation
If your home is worth $400,000 and your lender allows an 80% LTV, they will allow a total debt of $320,000. If you still owe $200,000 on your primary mortgage, your available HELOC limit would be $120,000.
- Home Value: The current market appraisal of your property.
- Max LTV: The maximum percentage of the home's value the lender is willing to secure (including all loans).
- Mortgage Balance: The remaining principal on your current first mortgage.
Why Use a HELOC?
HELOCs are popular for home renovations, debt consolidation, or emergency funds because they often carry lower interest rates than personal loans or credit cards. However, remember that your home serves as collateral, so it is vital to borrow responsibly.
function calculateHeloc() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var ltvLimit = parseFloat(document.getElementById('ltvLimit').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var resultArea = document.getElementById('helocResultArea');
var helocAmountDisplay = document.getElementById('helocAmount');
var explanationDisplay = document.getElementById('helocExplanation');
if (isNaN(homeValue) || isNaN(ltvLimit) || isNaN(mortgageBalance)) {
alert('Please enter valid numerical values for all fields.');
return;
}
if (ltvLimit > 100) {
alert('LTV Ratio usually does not exceed 100%. Please check your entry.');
return;
}
var maxTotalLoan = homeValue * (ltvLimit / 100);
var availableEquity = maxTotalLoan – mortgageBalance;
resultArea.style.display = 'block';
if (availableEquity <= 0) {
helocAmountDisplay.innerHTML = "$0";
helocAmountDisplay.style.color = "#e53e3e";
explanationDisplay.innerHTML = "Based on your current mortgage balance and the lender's LTV limit, you do not currently have enough equity to open a HELOC.";
} else {
helocAmountDisplay.innerHTML = "$" + availableEquity.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
helocAmountDisplay.style.color = "#2b6cb0";
explanationDisplay.innerHTML = "You have approximately " + ltvLimit + "% of your home's value ($" + maxTotalLoan.toLocaleString() + ") minus your mortgage balance available for a credit line.";
}
resultArea.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}