HELOC (Home Equity Line of Credit) Calculator
Estimate your maximum credit line and potential monthly payments.
Your HELOC Summary
Estimated Max Credit Line:
$0.00
Est. Interest-Only Payment:
$0.00
Note: Your current mortgage balance exceeds the allowable LTV. You may not qualify for a HELOC at this time.
Understanding How a HELOC Works
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity they have built in their property. Unlike a standard home equity loan, a HELOC functions much like a credit card: you have a limit, you can draw from it as needed, and you only pay interest on the amount you actually use.
How the HELOC Amount is Calculated
Lenders typically use a specific formula to determine your borrowing capacity, focusing on the Loan-to-Value (LTV) ratio. Most lenders allow for a Combined Loan-to-Value (CLTV) ratio of 80% to 85% of your home's current appraised value.
(Home Value × Max LTV Percentage) – Current Mortgage Balance = Available HELOC Limit
Example Calculation
Suppose your home is worth $500,000 and your lender allows an 80% LTV. They will allow a total debt of $400,000 (500,000 * 0.80). If you still owe $320,000 on your primary mortgage, your maximum HELOC limit would be:
- $400,000 (Max Debt Allowed)
- – $320,000 (Current Mortgage)
- = $80,000 (Available HELOC)
Important Factors to Consider
- Variable Interest Rates: Most HELOCs have variable rates tied to the Prime Rate. This means your monthly payments can fluctuate over time.
- Draw vs. Repayment Period: During the initial "draw period" (usually 10 years), you often only have to pay interest. Afterward, you enter the "repayment period" (often 15-20 years) where you must pay back both principal and interest.
- Credit Score: While equity is the main driver, your credit score and debt-to-income (DTI) ratio will determine your interest rate and final approval.