*Results are estimates. Actual loan amounts depend on lender appraisals and debt-to-income ratios.
How to Calculate Your Home Equity Loan Potential
A Home Equity Loan, often referred to as a "second mortgage," allows you to borrow against the value of your home minus what you still owe on your primary mortgage. Lenders typically allow homeowners to borrow up to 80% or 85% of the home's total appraised value.
The Standard Formula:
(Home Value × LTV Limit) – Current Mortgage Balance = Potential Loan Amount
Example Calculation
Suppose your home is currently valued at $500,000 and your remaining mortgage balance is $300,000. If a lender has an 80% LTV (Loan-to-Value) limit:
80% of $500,000 = $400,000 (Maximum total debt allowed)
$400,000 – $300,000 (Current Mortgage) = $100,000
In this scenario, you could potentially qualify for a home equity loan or HELOC of up to $100,000.
Factors That Influence Your Loan Amount
LTV (Loan-to-Value) Ratio: Most lenders cap the CLTV (Combined Loan-to-Value) at 80% to 90%.
Credit Score: Higher scores often unlock higher LTV limits and lower interest rates.
Debt-to-Income (DTI) Ratio: Lenders will review your monthly gross income against your monthly debt payments (including the new loan).
Appraisal: A professional appraisal will determine the official market value, which may differ from online estimates.
function calculateHomeEquity() {
var homeVal = parseFloat(document.getElementById('homeValue').value);
var mortgageBal = parseFloat(document.getElementById('mortgageBalance').value);
var ltvPercentage = parseFloat(document.getElementById('ltvLimit').value);
if (isNaN(homeVal) || isNaN(mortgageBal) || homeVal <= 0) {
alert("Please enter valid positive numbers for home value and mortgage balance.");
return;
}
var totalEquity = homeVal – mortgageBal;
var maxTotalDebt = homeVal * (ltvPercentage / 100);
var maxLoan = maxTotalDebt – mortgageBal;
// Safety check for negative equity or no borrowing power
if (maxLoan < 0) {
maxLoan = 0;
}
// Format numbers as currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
document.getElementById('totalEquity').innerText = formatter.format(totalEquity);
document.getElementById('cltvMax').innerText = ltvPercentage + "%";
document.getElementById('maxLoanAmount').innerText = formatter.format(maxLoan);
// Show results
document.getElementById('equityResult').style.display = 'block';
// Smooth scroll to results
document.getElementById('equityResult').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}