Nerdwallet Heloc Calculator

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HELOC Borrowing Capacity Calculator

Estimate how much you might be able to borrow with a Home Equity Line of Credit.

function calculateHeloc() { var homeValue = parseFloat(document.getElementById('homeValue').value); var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value); var maxCltv = parseFloat(document.getElementById('maxCltv').value); var resultDiv = document.getElementById('result'); if (isNaN(homeValue) || homeValue <= 0) { resultDiv.innerHTML = 'Please enter a valid current home value.'; return; } if (isNaN(mortgageBalance) || mortgageBalance < 0) { resultDiv.innerHTML = 'Please enter a valid existing mortgage balance.'; return; } if (isNaN(maxCltv) || maxCltv 100) { resultDiv.innerHTML = 'Please enter a valid maximum CLTV percentage (e.g., 85 for 85%).'; return; } var maxTotalDebtAllowed = homeValue * (maxCltv / 100); var potentialHeloc = maxTotalDebtAllowed – mortgageBalance; if (potentialHeloc < 0) { resultDiv.innerHTML = 'Based on your inputs, you may not be eligible for a HELOC at this time, or the amount would be $0.00.'; } else { resultDiv.innerHTML = 'Estimated Maximum HELOC Amount: $' + potentialHeloc.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ''; } }

Understanding Your Home Equity Line of Credit (HELOC) Potential

A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their home. Unlike a traditional home equity loan, which provides a lump sum, a HELOC offers flexibility, letting you draw funds as needed up to a certain limit, and only pay interest on the amount you've borrowed.

How Does a HELOC Work?

Lenders determine your HELOC borrowing capacity primarily based on your home's current market value, your existing mortgage balance, and their maximum Combined Loan-to-Value (CLTV) ratio. The CLTV represents the total percentage of your home's value that can be covered by all loans secured by the property, including your primary mortgage and the new HELOC.

For example, if your home is valued at $400,000 and your lender has a maximum CLTV of 85%, the total amount of debt secured by your home (first mortgage + HELOC) cannot exceed $340,000 ($400,000 * 0.85). If your existing mortgage balance is $200,000, your potential HELOC would be $140,000 ($340,000 – $200,000).

Key Factors in Determining Your HELOC Amount

  • Current Home Value: The higher your home's appraised value, the more equity you generally have available.
  • Existing Mortgage Balance: The less you owe on your primary mortgage, the more room there is for a HELOC within the lender's CLTV limits.
  • Lender's Maximum CLTV: This is a critical percentage set by the lender. It dictates the total amount of debt (first mortgage + HELOC) they are willing to allow against your home's value. Common CLTV limits range from 75% to 90%.
  • Credit Score and Income: While not directly calculated here, your creditworthiness and ability to repay are also significant factors lenders consider.

Using Our HELOC Borrowing Capacity Calculator

Our calculator simplifies the process of estimating your potential HELOC amount. Simply input the following:

  1. Current Home Value: Enter the estimated market value of your home.
  2. Existing Mortgage Balance: Input the outstanding balance on your primary mortgage.
  3. Lender's Maximum Combined Loan-to-Value (CLTV): This is the percentage your potential lender is willing to go up to. If you're unsure, 80% or 85% are common figures to start with.

The calculator will then provide an estimate of the maximum HELOC amount you might be able to qualify for, based on these financial parameters.

Example Calculation:

Let's say:

  • Your Current Home Value is $500,000
  • Your Existing Mortgage Balance is $250,000
  • Your Lender's Maximum CLTV is 80%

First, calculate the maximum total debt allowed:

$500,000 (Home Value) * 0.80 (CLTV) = $400,000 (Maximum Total Debt)

Next, subtract your existing mortgage balance from this maximum:

$400,000 (Maximum Total Debt) – $250,000 (Existing Mortgage Balance) = $150,000 (Potential HELOC)

This means you could potentially borrow up to $150,000 with a HELOC.

Important Considerations

This calculator provides an estimate based on common lending criteria. Your actual HELOC amount may vary based on your specific lender, credit history, debt-to-income ratio, and other financial factors. It's always recommended to consult with a financial advisor or lender to get personalized advice and accurate figures.

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