HELOC Calculator
Estimate your maximum Home Equity Line of Credit limit based on your home value and existing mortgage.
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How a HELOC Calculator Works
A Home Equity Line of Credit (HELOC) is a revolving line of credit that allows you to borrow against the value of your home. Unlike a home equity loan, which provides a lump sum, a HELOC functions more like a credit card where you can draw funds as needed, repay them, and borrow again during the "draw period."
The HELOC Formula
Lenders determine your credit limit using the Combined Loan-to-Value (CLTV) ratio. The standard formula used by this calculator is:
(Home Value × CLTV Limit) – Current Mortgage Balance = Maximum HELOC Amount
Key Terms to Know
- Home Value: The current market appraisal of your property.
- CLTV (Combined Loan-to-Value): The total percentage of your home's value that lenders are willing to lend across all mortgages. Most lenders cap this at 80% to 85%.
- Equity: The difference between what your home is worth and what you owe on your mortgage.
- Draw Period: The timeframe (usually 5-10 years) during which you can access the funds.
Real-World Example
Suppose your home is worth $500,000 and you owe $300,000 on your primary mortgage. If your lender allows a CLTV of 80%:
- $500,000 x 0.80 = $400,000 (Maximum combined debt allowed)
- $400,000 – $300,000 = $100,000 (Your HELOC limit)
In this scenario, even though you have $200,000 in raw equity, the lender's risk requirements limit your credit line to $100,000 to ensure a 20% equity cushion remains in the home.