HELOC (Home Equity Line of Credit) Calculator
Your HELOC Summary
Understanding Your HELOC Limit
A Home Equity Line of Credit (HELOC) is a revolving credit line that uses your home as collateral. Unlike a standard home equity loan, a HELOC allows you to borrow as needed, repay, and borrow again during the "draw period."
How This Calculation Works
Lenders typically use a Combined Loan-to-Value (CLTV) ratio to determine how much you can borrow. Most lenders limit the CLTV to 80% or 85% of your home's appraised value.
The Formula:
(Home Value × Max LTV %) – Current Mortgage Balance = Available HELOC
Example Scenario
If your home is worth $500,000 and your lender allows an 80% CLTV, your total allowed debt is $400,000. If you currently owe $300,000 on your primary mortgage, your maximum HELOC limit would be $100,000 ($400,000 – $300,000).
Key Terms to Know
- LTV (Loan-to-Value): The percentage of your home's value that is encumbered by debt.
- Draw Period: The timeframe (usually 10 years) during which you can withdraw funds.
- Repayment Period: The phase after the draw period ends where you must pay back the principal and interest.
- Variable Rate: Most HELOCs have interest rates that fluctuate based on the Prime Rate.
Benefits of a HELOC
HELOCs are popular for home renovations, debt consolidation, or emergency funds because they often carry lower interest rates than personal loans or credit cards. Additionally, you only pay interest on the amount you actually use, not the total credit limit available.
Note: This calculator is for estimation purposes only. Actual credit limits and interest rates depend on your credit score, income verification, and a professional home appraisal.