HELOC (Home Equity Line of Credit) Calculator
70%
75%
80% (Standard)
85%
90% (High)
Your Estimated HELOC Limit
Understanding Your Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows you to borrow against the equity you have built in your home. Unlike a home equity loan, which provides a lump sum, a HELOC works more like a credit card with a limit based on your home's value.
How the HELOC Limit is Calculated
Lenders typically use a specific formula to determine how much you can borrow. This formula takes into account your Loan-to-Value (LTV) ratio, which is the percentage of your home's value that the lender is willing to finance across all loans combined.
The HELOC Formula:
(Market Value of Home × Lender's LTV Limit) - Existing Mortgage Balance = Maximum HELOC Amount
Realistic Example Calculation
Suppose your home is currently worth $500,000 and your current mortgage balance is $300,000. If your lender allows an 80% LTV:
- Step 1: Calculate the maximum total debt allowed ($500,000 × 0.80 = $400,000)
- Step 2: Subtract your current mortgage ($400,000 – $300,000 = $100,000)
- Your Estimated HELOC Limit: $100,000
Factors That Influence Your HELOC Approval
- Credit Score: Most lenders require a score of 620 or higher. Higher scores often unlock lower interest rates and higher LTV limits.
- Debt-to-Income (DTI) Ratio: Lenders prefer a DTI ratio below 43% to ensure you can manage the monthly payments.
- Appraisal Value: The calculator uses your estimate, but a professional appraisal will be required by the lender to verify the current market value.