HELOC Maximum Borrowing Calculator
Estimated Maximum HELOC Amount:
$0.00
How Much Equity Can You Actually Tap?
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity in their property. Unlike a standard home equity loan, a HELOC works more like a credit card: you have a limit, you can borrow what you need, pay it back, and borrow again during the "draw period."
How the HELOC Calculation Works
Lenders generally use a specific formula to determine your borrowing capacity. This is known as the Combined Loan-to-Value (CLTV) ratio. Most lenders allow for a CLTV between 80% and 85%.
The Formula:
(Current Home Value × Max LTV Percentage) – Current Mortgage Balance – Other Liens = Maximum HELOC Amount
Realistic Example:
If your home is worth $450,000 and your lender allows an 85% LTV, they start with a total allowable debt of $382,500. If you still owe $250,000 on your primary mortgage, your maximum HELOC would be $132,500 ($382,500 – $250,000).
If your home is worth $450,000 and your lender allows an 85% LTV, they start with a total allowable debt of $382,500. If you still owe $250,000 on your primary mortgage, your maximum HELOC would be $132,500 ($382,500 – $250,000).
Key Factors Influencing Your HELOC Limit
- Appraised Value: Lenders will require a professional appraisal to confirm the current market value of your home.
- Credit Score: Higher scores (720+) often unlock higher LTV limits (up to 90% with some credit unions).
- Debt-to-Income (DTI) Ratio: Even if you have equity, lenders must ensure you have enough monthly income to cover potential payments.
- Existing Liens: Any second mortgages or tax liens will be subtracted from your available borrowing power.
Draw Period vs. Repayment Period
Most HELOCs have a 10-year draw period where you only pay interest on what you borrow. After that, you enter the repayment period (usually 15-20 years), during which you must pay back both principal and interest. It is crucial to use a HELOC calculator to ensure you don't over-leverage your home beyond your ability to repay once the full payments kick in.