Home Equity Calculator

How to use this calculator

1. Enter your Home value and current Mortgage balance.
2. Set the Maximum loan-to-value your lender allows, often 80% to 85% of the value.
3. Enter the Home equity loan rate and the Loan term in years.
4. Read You could borrow up to and the Monthly payment on the full amount.

What home equity is and how the limit works

Home equity is the part of your home you own outright: its value minus what you still owe on the mortgage. Lenders do not let you borrow all of it. They cap the total of all loans secured by the home as a percentage of the value, called the combined loan-to-value ratio.

Borrow = max(0, V · LTV − B)

• V = current home value
• LTV = maximum combined loan-to-value (for example 80% = 0.80)
• B = current mortgage balance
• Equity = V − B; current LTV = B ÷ V

The amount you could borrow is that cap minus your current mortgage balance. The payment is then a regular installment on the amount you borrow, using the same annuity formula as any fixed-rate loan.

Example: a $450,000 home with $220,000 owed

Your equity is $230,000 and your current loan-to-value is about 48.9%. At an 80% limit the lender allows total debt of $360,000, so you could borrow up to $140,000. At 8.5% over 15 years that full amount costs $1,378.64 a month.

If the lender allowed 85%, the figure would rise to $162,500. Note the equity kept as a cushion: even at the limit, you keep $90,000 of ownership in the home.

When there is little or nothing to borrow

Equity is not the same as borrowing power. For a $300,000 home with a $270,000 mortgage you hold $30,000 of equity, but an 80% limit is $240,000, which is below your balance, so you could borrow $0.

Equity builds through paying down principal and through price growth, and it can shrink if prices fall. See the mortgage calculator or the loan payoff calculator to see how quickly your balance drops.

How to decide whether to borrow

Your home is the collateral. If you cannot repay, the lender can foreclose, so borrow for things that build value or solve a real problem, such as renovations or consolidating higher-rate debt, rather than everyday spending.

Borrow less than the maximum. Compare the payment with your budget and income using the debt-to-income calculator, and compare a fixed-rate home equity loan with a variable-rate line of credit and with a cash-out refinance.

Ways to get a better deal

• Get quotes from at least three lenders and compare the APR, not only the rate.
• Ask about closing costs, appraisal fees and annual fees; some lenders waive them.
• Use a shorter term if you can afford it to cut total interest.
• Keep a cushion: a lower borrowed amount leaves protection if home prices drop.
• Check whether interest is tax-deductible in your situation with a tax professional; it often depends on how the money is used.

Assumptions and limits

The value you type in is only an estimate; the lender's appraisal decides. The calculator assumes a fixed rate and equal monthly payments on the full amount, and does not include closing costs, fees, a variable rate, interest-only periods or credit and income requirements.

Lenders also look at credit score and debt-to-income, so being eligible by equity does not guarantee approval. Confirm everything with the lender.

Frequently asked questions