The equity in your home is its value minus what you owe on it, and for many households it is their largest asset. A home equity loan or a home equity line of credit (HELOC) lets you borrow against it, usually at lower rates than personal loans or credit cards, because the home secures the debt. This home equity calculator shows how much you can borrow under a lender’s combined loan-to-value limit. It then estimates the payments for a HELOC, through both its draw and repayment periods, or for a fixed-rate home equity loan.
How to use the home equity calculator
- Enter your home value, from a recent appraisal or a realistic estimate of comparable sales.
- Enter your mortgage balance and any other liens, such as an existing second mortgage or HELOC.
- Enter the lender’s maximum CLTV. 80% to 90% is common, and some credit unions go higher.
- Choose HELOC or home equity loan, then enter the amount to borrow and the interest rate.
- For a HELOC, set the draw and repayment periods. For a loan, set the term.
The formulas
During a HELOC’s draw period, the interest-only payment is the balance × rate ÷ 12. In the repayment period, and for a home equity loan, the payment is the standard amortizing formula:
Worked example
Your home is worth $450,000 and you owe $250,000, so you have $200,000 of equity (44.4%). Your lender allows 85% CLTV:
- Maximum borrowing: 0.85 × $450,000 − $250,000 = $132,500.
- A $60,000 HELOC at 7.75% costs $387.50 a month interest-only for the 10-year draw period. It then becomes $492.57 a month for 20 years. Total interest is about $104,717 if the rate never changes.
- A $60,000 home equity loan at 7.75% for 15 years costs $564.77 a month, with $41,658 in total interest.
- After borrowing, your CLTV is 68.9%.
Borrowing power at common CLTV limits
| CLTV limit | Available on this home |
|---|---|
| 75% | $87,500 |
| 80% | $110,000 |
| 85% | $132,500 |
| 90% | $155,000 |
Choosing between a HELOC, a home equity loan and a cash-out refinance
- HELOC: best for expenses spread over time, such as a renovation paid in stages, or as a standby reserve. You pay interest only on what you draw, but the rate usually floats with the prime rate.
- Home equity loan: best for a single known cost when you want a fixed rate and a predictable payoff date.
- Cash-out refinance: replaces your first mortgage with a larger one. It can make sense when current mortgage rates are at or below your existing rate. If your current rate is low, a second lien usually costs less overall. Compare with the refinance calculator.
Using home equity to pay off high-rate credit cards can save a lot of interest, but it turns unsecured debt into debt secured by your house. Run that scenario in the debt consolidation calculator, and avoid running the card balances back up.
Estimates only. Lenders also weigh credit score, income and debt-to-income ratio; HELOC rates and terms vary, and your home can be foreclosed on if you don't repay.
Frequently asked questions
How much home equity can I borrow?
Lenders cap the total of all loans on the home at a combined loan-to-value (CLTV) limit, often 80% to 90%. Multiply your home's value by the limit and subtract what you owe. With a $450,000 home, a $250,000 mortgage and an 85% limit, you could borrow up to $132,500.
What is the difference between a HELOC and a home equity loan?
A home equity loan pays you a lump sum at a fixed rate, with level payments over a set term, much like a second mortgage. A HELOC is a revolving line of credit you draw on as needed. It usually has a variable rate, interest-only payments during a draw period of about 10 years, then a repayment period during which the balance is paid down.
Why does a HELOC payment jump?
During the draw period many HELOCs require only interest. When the repayment period begins, the balance has to be repaid over the remaining years, so the payment rises. A $60,000 balance at 7.75% goes from $387.50 a month interest-only to $492.57 over 20 years of repayment, even if the rate never changes.
Is home equity interest tax-deductible?
Only if the money is used to buy, build or substantially improve the home that secures the loan, and you itemize deductions. Interest on home equity debt used for other purposes, such as paying off credit cards or buying a car, is not deductible under current IRS rules.