HELOC Borrowing Power Calculator
Estimate how much equity you can access from your home.
What is a HELOC and How Does This Calculator Work?
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows homeowners to borrow against the equity they have built up in their property. Unlike a standard home equity loan, a HELOC works more like a credit card: you have a limit, you can draw funds as needed, and you only pay interest on the amount you actually use.
This calculator uses the Combined Loan-to-Value (CLTV) method. Most lenders will allow you to borrow up to 80% or 85% of your home's total value, minus what you still owe on your primary mortgage.
The HELOC Formula
To calculate your borrowing power manually, use this specific formula:
Realistic Example
Imagine your home is currently worth $450,000. Your remaining mortgage balance is $250,000, and your bank allows for an 80% LTV limit.
- 80% of $450,000 = $360,000
- $360,000 – $250,000 (Current Debt) = $110,000
In this scenario, you would be eligible for a HELOC of up to $110,000. Keep in mind that factors like your credit score, debt-to-income ratio (DTI), and verifiable income will influence the final approval and the interest rate offered.
Factors That Influence Your HELOC Approval
1. Equity: You generally need at least 15% to 20% equity in your home to qualify.
2. Credit Score: While 620 is often the minimum, scores above 740 secure the most competitive interest rates.
3. Appraisal: The lender will likely require a professional appraisal to verify the current market value of the property.
4. Income Stability: Lenders look for a consistent employment history to ensure you can manage the variable monthly payments during the draw and repayment periods.