HELOC Eligibility Calculator
Use this calculator to estimate the maximum Home Equity Line of Credit (HELOC) you might be eligible for based on your home's value, outstanding mortgage, and typical lender Loan-to-Value (LTV) limits.
Understanding Your Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a revolving line of credit, much like a credit card, but it's secured by your home's equity. This means your home serves as collateral. Lenders determine the maximum amount you can borrow based on several factors, primarily your home's current market value, your outstanding mortgage balance, and their internal Loan-to-Value (LTV) limits.
How Lenders Calculate HELOC Eligibility
Lenders typically don't allow you to borrow against 100% of your home's equity. Instead, they set a maximum combined Loan-to-Value (CLTV) ratio, often around 80% or 85%. This ratio represents the total amount of debt (your first mortgage plus the HELOC) they are willing to allow relative to your home's value.
The general formula used by lenders to determine your maximum HELOC amount is:
(Current Home Value × Lender's LTV Limit) - Outstanding Mortgage Balance = Maximum Available HELOC
For example, let's consider a home valued at $400,000, with an outstanding mortgage balance of $200,000, and a lender's LTV limit of 80%:
- First, calculate the maximum total loan amount allowed based on the LTV limit: $400,000 × 0.80 = $320,000
- Then, subtract your existing mortgage balance from this maximum allowed amount: $320,000 – $200,000 = $120,000
In this realistic scenario, you could potentially qualify for a HELOC of up to $120,000.
Key Factors Influencing Your HELOC
- Current Home Value: The higher your home's appraised market value, the more equity you likely have, which can increase your potential HELOC.
- Outstanding Mortgage Balance: The less you owe on your primary mortgage, the more equity is available for a HELOC.
- Lender's LTV Limit: This percentage varies by lender and economic conditions. A higher LTV limit (e.g., 85% compared to 80%) means more potential borrowing power.
- Credit Score and Income: While not directly part of this calculation, lenders will also assess your creditworthiness, debt-to-income ratio, and ability to repay the line of credit before approval.
Using the Calculator
Enter your home's estimated current market value, your remaining mortgage balance, and a typical LTV limit (e.g., 80 or 85, which are common for many lenders) to get an estimate of your potential HELOC amount. Remember, this is an estimate, and actual eligibility will depend on a full lender assessment, including an appraisal and review of your financial situation.