A home equity loan, often referred to as a "second mortgage," allows you to borrow against the value of your home. The amount you can borrow is determined by the difference between your home's current market value and the remaining balance on your mortgage.
How This Calculation Works
Lenders generally do not allow you to borrow 100% of your home's value. Most traditional banks cap the Loan-to-Value (LTV) ratio at 80%. This means the sum of your current mortgage and your new home equity loan cannot exceed 80% of what the home is worth.
Example Calculation:
Home Value: $500,000
Current Mortgage: $300,000
LTV Limit (80%): $400,000
Available Loan Amount: $400,000 – $300,000 = $100,000
Key Factors for Approval
Credit Score: Higher scores (720+) often unlock higher LTV limits up to 90%.
Debt-to-Income (DTI) Ratio: Lenders prefer your total monthly debt payments to be under 43% of your gross income.
Appraisal: The "Home Value" used in the final calculation is determined by a professional appraisal, not just an online estimate.
Home Equity Loan vs. HELOC
While this calculator helps determine the maximum amount you can borrow for both, they function differently. A Home Equity Loan provides a lump sum with a fixed interest rate. A Home Equity Line of Credit (HELOC) works like a credit card, allowing you to draw funds as needed with a variable interest rate.
function calculateHomeEquity() {
var homeValue = parseFloat(document.getElementById('homeValue').value);
var mortgageBalance = parseFloat(document.getElementById('mortgageBalance').value);
var ltvPercentage = parseFloat(document.getElementById('ltvLimit').value);
var resultArea = document.getElementById('resultArea');
var errorMsg = document.getElementById('errorMsg');
// Reset visibility and errors
errorMsg.style.display = 'none';
resultArea.style.display = 'none';
// Validation
if (isNaN(homeValue) || homeValue <= 0) {
alert('Please enter a valid home value.');
return;
}
if (isNaN(mortgageBalance) || mortgageBalance < 0) {
mortgageBalance = 0;
}
// Calculations
var totalEquity = homeValue – mortgageBalance;
var maxLtvAmount = homeValue * (ltvPercentage / 100);
var maxLoan = maxLtvAmount – mortgageBalance;
// Formatting as Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// Handle Negative Equity or No Room for Loan
if (maxLoan <= 0) {
document.getElementById('maxLoanAmount').innerText = "$0";
document.getElementById('maxLoanAmount').style.color = "#dc2626";
errorMsg.innerText = "Warning: Based on your mortgage balance and LTV limit, you do not have enough equity to borrow at this time.";
errorMsg.style.display = 'block';
} else {
document.getElementById('maxLoanAmount').innerText = formatter.format(maxLoan);
document.getElementById('maxLoanAmount').style.color = "#059669";
}
// Display values
document.getElementById('totalEquity').innerText = formatter.format(totalEquity);
document.getElementById('ltvDollar').innerText = formatter.format(maxLtvAmount) + " (" + ltvPercentage + "%)";
// Show result
resultArea.style.display = 'block';
// Smooth scroll to results on mobile
if (window.innerWidth < 600) {
resultArea.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}
}