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What is the HELOC Calculator
HELOC stands for Home Equity Line of Credit. This type of loan allows you to borrow funds up to a pre-approved limit based on the equity in your home mortgage. With a HELOC, you have the flexibility to access these funds whenever you need them.
How to calculate Home Equity Line of Credit
HELOC loan amount = (Home value × 80%) – Mortgage loan balance
Example:
Imagine your mortgage balance is $75,000 and your home is valued at $600,000. To calculate the amount available through a HELOC:
HELOC loan amount = ($600,000 × 80%) – $75,000 = $405,000
In this scenario, your LTV ratio is $75,000 / $600,000 = 0.125 or 12.5%, enabling you to access 67.5% of your home’s value through a HELOC. If you had no mortgage debt, you could utilize the full 80%.
When you contact a HELOC provider, you must specify how much you wish to borrow.
For example, if you request a credit line of $150,000, the provider will calculate your CLTV to assess qualification:
CLTV = ($150,000 + $75,000) / $600,000 = 0.375 or 37.5%
Provided your CLTV is under the 80% threshold and you satisfy other provider criteria, you will be approved for the HELOC. 🤝
If you hold a government-backed mortgage, such as FHA, VA, or USDA, you may qualify for up to a 100% LTV ratio with an excellent DTI ratio. The benchmark for an excellent DTI varies by lender, so it’s advisable to use a DTI calculator to gauge your standing.