Home equity line of credit loan to value calculator

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

A home equity loan calculator is a good way to start exploring price options for tapping the equity in your home. You can use this calculator to get an idea of whether you can qualify for a home equity loan, how much money you might qualify for and what it may cost you.

How to Calculate Home Equity

Home equity is the difference between how much your house is currently worth and how much you owe on it. To find out how much equity you have, first, get the most recent appraised value; then subtract your mortgage balance and any loans secured by your home—like a home equity loan or home equity line of credit (HELOC)—from that value. The remaining total is the amount of equity you have in your home.

How to Use the Home Equity Loan Calculator

To get started, you’ll need three main pieces of information:

• Your current home value
• The outstanding balance of your mortgage and any other loans secured by your home
• You FICO credit score

The calculator will estimate your loan amount based on this information. If you don’t have enough equity in your home or your credit score is low, you may not qualify for a home equity loan.

While the calculator can give an estimate of how much you can borrow, talk to your lender to get accurate results based on a wider range of information.

Related: Best Home Equity Loan Lenders

How Does a Home Equity Loan Work

Home equity loans are a type of loan that uses your home as collateral and allows you to borrow against that equity. They are considered a second mortgage.

Borrowers will receive their loan in one lump sum. The repayment timeline can range from five years to 30 years, depending on the terms of your loan. The longer you take to pay it off, the more interest you’ll end up paying. Interest rates on home equity loans are fixed and generally lower than rates for credit cards or personal loans.

How Hard Is It to Get A Home Equity Loan?

Qualifying for a home equity loan is similar to qualifying for a mortgage. You’ll have to prove creditworthiness, or that you can repay the loan. Lenders will check your credit score, income, debt-to-income (DTI) ratio and maximum loan-to-value (LTV) ratio. Lenders typically prefer your DTI to be less than 43% (though some will allow slightly higher) and an LTV of no more than 80%.

Lender requirements vary but, in general, you’ll need to have at least 20% equity in your home to qualify for a loan.

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

If you’ve been paying down your mortgage for a few years—especially in housing markets where home prices are shooting up—you’ve likely built up equity in your home that you can now access through a line of credit. To see if you might qualify, use this calculator to determine how much equity you might be able to borrow through a home equity line of credit (HELOC).

How to Calculate Your Home Equity

To calculate your home equity, you’ll need to find the current value of your home. To do this, you can quickly google your address on a real estate website, such as Zillow, to get a rough estimate. Then, take that number and deduct the outstanding balance on your mortgage as well as any loans secured by your home—like a home equity loan—to get an idea of how much equity you have.

Tip: Keep in mind that a lender might require you to get a professional appraisal when seeking any financing secured by your home—but checking the value online is a good first step.

How to Use This HELOC Calculator

To use this calculator, you’ll need three main pieces of information:

1. Your current home value
2. The outstanding balance of your mortgage, plus any other loans secured by your home
3. Your FICO credit score

The calculator will estimate how much you might be able to borrow through a HELOC. It will also display your current loan-to-value (LTV) ratio, which is a metric lenders use to determine how much more you can borrow against the home. Lenders typically require an LTV ratio of no more than 80%, though some might go up to 90%. If you don’t have enough equity in your home or your credit score is low, you may not qualify for a home equity loan.

While the calculator can give an estimate of how much you can borrow, talk to your lender to get accurate results based on a wider range of information.

How Does a HELOC Work?

Unlike home loans where you typically get a lump sum upfront and pay it off over time, HELOCs act as a credit line that you can tap into as needed. You can withdraw up to a certain amount for a set period of time (called the draw period). After your draw period, the repayment period begins.

Here’s how each period works:

• Draw period: During the draw period, you’re only responsible for paying the interest on the portion of credit that you use. You can repeatedly pay down and reuse credit during this draw period, which typically lasts 10 to 15 years depending on the lender and the borrower’s creditworthiness.
• Repayment period: After the draw period, you must start making payments on the outstanding balance and interest. This repayment period can last 20 years, but typically you’ll pay back the loan in full if you sell the house during this time. You can also voluntarily start paying the principal down during the draw period if you want to get a head start, but make sure to discuss this with your lender to ensure your payments go toward the principal.

Current HELOC Rates

Typically, HELOC rates change anytime the Federal Reserve adjusts the federal funds rate. And with the Fed increasing its rate several times in 2022, HELOC rates are likely to continue rising as well.

To give you an idea of what you might pay in interest, the 52-week high on a 10-year HELOC is 6.09%, while the 52-week low is 2.55%, as of August 24, 2022. For a 20-year HELOC, the rate ranged as high as 7.51% and as low as 5.14% in the past year.

Related: Best HELOC Rates

What Can I Use a HELOC For?

A HELOC can be used for nearly any expense but most borrowers use this credit line to repair or improve their home, which can also help boost the value down the road. Other common uses include paying off student loan debt, paying for medical expenses, consolidating other debt into a lower interest rate or covering a large unexpected expense.

How to Get a HELOC

Qualifying for a HELOC is similar to applying for other home loans in that you’ll need to prove your creditworthiness and ability to repay the debt. Lenders will check your credit score, earnings, debt-to-income (DTI) ratio and maximum LTV ratio. Typically, you’ll need a DTI of less than 43%, though some lenders will allow up to 50%. And your LTV should be less than 80%, but no higher than 90% to qualify for a HELOC.

While some lenders have more stringent requirements than others, most want you to have at least 20% equity in your home.

You’ll also need to have some cash on hand to cover potential upfront costs like loan processing or origination fees, and the cost of getting an appraisal, which can run from about $300 to $400 for a single-family home.

How to Find the Best HELOC Lender

In order to qualify for a HELOC and secure the best rate, it’s critical that you first shop around for HELOC lenders online, through your current mortgage lender or banks you have accounts with, and from referrals by friends or family. It’s always wise to get three to five quotes so you have a solid comparison.

Related: Best HELOC Lenders

Some lenders might also offer deals like no closing costs or they might waive the appraisal. Check on their website or call directly to ask about any special discounts or offerings.

How much can you take out with a home equity line of credit?

What is the monthly payment on a $50000 Heloc?

How is an 80% Heloc calculated?

How do you calculate loan