function calculateHomeEquity() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var cltvLimit = parseFloat(document.getElementById('cltvLimit').value) / 100;
var desiredLoan = parseFloat(document.getElementById('desiredLoan').value);
var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12;
var loanTermMonths = parseFloat(document.getElementById('loanTerm').value) * 12;
if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(cltvLimit)) {
alert("Please enter valid numeric values.");
return;
}
// Calculation: Max Loan = (Value * Max LTV) – Existing Mortgage
var maxBorrowingAmount = (homeValue * cltvLimit) – mortgageBalance;
if (maxBorrowingAmount 0 && interestRate > 0) {
var x = Math.pow(1 + interestRate, loanTermMonths);
monthlyPayment = (desiredLoan * x * interestRate) / (x – 1);
totalInterest = (monthlyPayment * loanTermMonths) – desiredLoan;
}
if (desiredLoan > maxBorrowingAmount) {
warningEl.innerHTML = "Warning: Your desired loan exceeds the max recommended LTV limit.";
warningEl.style.display = 'block';
}
var remainingEquity = homeValue – mortgageBalance – desiredLoan;
// Formatting
document.getElementById('maxLoanOutput').innerText = "$" + maxBorrowingAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlyPaymentOutput').innerText = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalInterestOutput').innerText = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('remainingEquityOutput').innerText = "$" + remainingEquity.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('results-section').style.display = 'block';
}
How to Calculate Your Home Equity Loan Potential
A home equity loan, often referred to as a "second mortgage," allows homeowners to borrow against the value of their property. This calculator helps you determine how much cash you can extract from your home based on its current market value and your existing mortgage balance.
The "80% Rule" Explained
Most lenders use a Combined Loan-to-Value (CLTV) ratio to determine your eligibility. Typically, lenders allow you to borrow up to 80% or 85% of your home's total value, minus what you still owe on your primary mortgage.
The Formula: (Market Value × Max LTV %) - Current Mortgage Balance = Max Equity Loan
Example Calculation
Imagine your home is worth $500,000 and you owe $300,000 on your mortgage. If a lender allows an 80% CLTV:
80% of $500,000 is $400,000.
Subtract your current balance: $400,000 – $300,000 = $100,000.
Your maximum home equity loan amount would be $100,000.
Benefits of a Home Equity Loan
Fixed Interest Rates: Unlike credit cards or HELOCs, home equity loans usually offer fixed rates and predictable monthly payments.
Lump Sum: You receive the entire loan amount at once, making it ideal for large expenses like home renovations or debt consolidation.
Potential Tax Deductions: If the funds are used to buy, build, or substantially improve the home that secures the loan, the interest may be tax-deductible (consult a tax advisor).
Key Considerations
Before taking out a home equity loan, remember that your home serves as collateral. Failure to make payments could result in foreclosure. Additionally, consider closing costs, which typically range from 2% to 5% of the loan amount.