HELOC (Home Equity Line of Credit) Calculator
What is a HELOC?
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity they have built in their property. Unlike a standard home equity loan, which provides a lump sum, a HELOC works more like a credit card: you have a maximum limit, and you can withdraw funds as needed, paying back only what you spend plus interest.
How is HELOC Availability Calculated?
Lenders typically use a calculation based on your Combined Loan-to-Value (CLTV) ratio. The common formula used in this calculator is:
(Home Value × LTV Percentage) – Current Mortgage Balance = Available HELOC
Most lenders will allow you to borrow up to 80% or 85% of your home's total value, though some specialty programs go higher. For example, if your home is worth $500,000 and your lender allows an 80% LTV, your total borrowing limit (mortgage + HELOC) is $400,000. If you still owe $300,000 on your mortgage, you would be eligible for a HELOC of $100,000.
Example Calculation
- Home Appraisal: $450,000
- Lender LTV Limit: 85% ($382,500)
- Current Mortgage: $250,000
- Resulting HELOC: $132,500
Key Factors Lenders Consider
Beyond the simple math of your home's value, lenders will also look at your credit score, your debt-to-income (DTI) ratio, and your employment history. A higher credit score often unlocks lower interest rates and higher LTV limits. Remember that since a HELOC is secured by your home, failing to make payments could put your property at risk of foreclosure.