Home Equity Loan Calculator
Determine how much cash you can borrow against your home value.
*Estimation based on selected LTV. Lenders also consider Debt-to-Income (DTI) ratios and proof of income.
How to Calculate Your Home Equity Loan Potential
A home equity loan, often referred to as a "second mortgage," allows homeowners to borrow a lump sum of money using their home as collateral. The amount you can borrow is primarily determined by your Loan-to-Value (LTV) ratio and your current mortgage balance.
Lenders generally allow you to borrow up to 80% or 85% of your home's total value, including your existing mortgage. To find your borrowing capacity, use this formula:
(Home Value × Max LTV %) – Current Mortgage Balance = Potential Loan Amount
Example Calculation
If your home is worth $500,000 and your lender allows an 80% Combined Loan-to-Value (CLTV) ratio:
- Total Allowable Debt: $500,000 × 0.80 = $400,000
- Existing Mortgage: $250,000
- Available Home Equity Loan: $400,000 – $250,000 = $150,000
Key Factors Affecting Your Approval
| Factor | Impact |
|---|---|
| LTV Ratio | The primary ceiling for how much you can borrow. Higher equity equals higher loan potential. |
| Credit Score | Higher scores (740+) secure lower interest rates and higher LTV limits (up to 90%). |
| Debt-to-Income (DTI) | Lenders usually require a DTI below 43% to ensure you can afford the monthly payments. |
| Appraisal | The lender will require a professional appraisal to verify the current market value of your property. |
Frequently Asked Questions
What is the difference between a Home Equity Loan and a HELOC?
A home equity loan provides a one-time lump sum with a fixed interest rate. A Home Equity Line of Credit (HELOC) works like a credit card, where you can borrow as needed with a variable interest rate.
Is home equity loan interest tax-deductible?
Under current IRS rules, interest is generally only deductible if the funds are used to buy, build, or substantially improve the home that secures the loan.