Home Equity Loan Calculator

Home equity is the difference between your home’s current value and your mortgage loan balance.

Our home equity calculator will help you determine how much equity you have in your home so that you can decide if a home equity loan or a home equity line of credit (HELOC) is right for you.

How To Use Our Home Equity Calculator

To get the most out of our Home Equity Loan Calculator, follow these five important steps.

Step No. 1: Determine your home's worth

You can get an idea of how much your home is worth by entering your address in the home value estimator. Another way to get a good baseline for values in your neighborhood is to ask the real estate agent that helped you buy your home to provide a comparable market analysis (CMA).

A CMA is a list of similar homes near yours that have recently sold. It is similar to the information a home appraiser will use to determine the value of your home. Once you’ve got a value estimate with which you’re comfortable, you’re ready for the next step.

Step No. 2: Find out your current loan balance

The quickest way to get your loan balance information is to look at your current mortgage statement. It will show your current principal balance, giving you a pretty accurate figure to work with when you start running numbers on our calculator.

Step No. 3: Check your credit score

The rates on home equity loans and HELOCs are heavily impacted by your credit score. You can get your current score by signing up with My LendingTree. Keep in mind that your interest rate may be higher or lower depending on what your score is once the lender pulls a mortgage credit report.

Step No. 4: Learn how home equity loans and HELOCs work

Home equity loans and HELOCs allow you to access your equity in different ways.

Home equity loans

Home equity loans allow you to borrow a portion of your equity in a lump sum with fixed payments for the life of the loan. They work like the mortgage you took out to buy your home, with each payment reducing your loan balance until it’s at zero.

Home equity lines of credit

HELOCs work like a credit card, allowing you to charge as much as you need up to your limit and then pay the balance down to zero.

Your payment is based on the amount you charge. You may have an interest-only option, which allows you to pay just the interest charge each month, lowering your monthly payment. There is a limited time for you to use the line of credit — called a draw period — after which you’ll pay your remaining balance on a fixed schedule. The typical draw period for a HELOC is 10 years.

Step No. 5: Enter your information in the calculator

To figure out how much equity you might have access to with a home equity loan or HELOC, you’ll need to input the estimated value and current loan balance.

Our home equity calculator will show you how much equity you could borrow from your home.

Once you know the amount, you can shop home equity loan rates.

How our Home Equity Loan Calculator works

Now that you’ve gathered the information you’ll need in Steps Nos. 1 through 5, it’s time to put our Home Equity Loan Calculator to work to determine how much equity you may be able to access. As previously noted, input the estimated value and current loan balance and the calculator will provide you with how much equity you might be able to borrow with a home equity loan or HELOC.

How to qualify for a home equity loan or HELOC

Once you’ve got an idea of how much equity you can access, the next thing you’ll need to know is how to qualify for a home equity loan or HELOC. Below are the minimum requirements for a home equity loan or a HELOC.

Like any mortgage loan, you’ll need to qualify based on an analysis of your debt-to-income (DTI) ratio, loan-to-value (LTV) ratio and your credit score. We’ll briefly explain what each of these qualifying concepts mean.

DTI ratio

Lenders look at how much total debt you have compared to your pretax income, including your house payment and other monthly debt such as credit cards and car loans. The most common suggested DTI maximum is 43%, but some lenders may allow you to go up to 50% if you have a high credit score.

LTV ratio

LTV is a calculation based on the total loan amount you are taking out compared to your property’s total value. With a home equity loan or HELOC, you may need your combined loan-to-value (CLTV) ratio. This is how much equity you are borrowing between your current mortgage and your new home equity loan or HELOC.

For example, if you have a $200,000 home with a $100,000 current balance, your LTV is 50% ($100,000 divided by $200,000). However, if you borrow another $60,000 with a home equity loan or HELOC, your CLTV is 80% ($100,000 plus $60,000 = $160,000, divided by $200,000 = 80%).

Most lenders suggest a maximum CLTV of 80%, although some home equity loan lenders may allow you to borrow up to 100% of the value.

Credit score

Your maximum home equity loan or HELOC loan amount will vary depending on your credit score. You’ll get the best rates and maximum borrowing power with a score of 760 or higher. If you’re between 700 and 759, you’ll still get the maximum — but at higher interest rates.

If you’re between 620 and 700, you can expect further limits, which may significantly reduce the dollar amount of equity you can access.

How to use a home equity loan or HELOC

Understanding how to use a home equity loan versus a HELOC can help you choose the best strategy to meet specific financial needs.

Common home equity loan uses

When you take out a home equity loan, you receive a lump sum of money at a fixed interest rate for a set term. The payment stays the same for the life of the loan, making the expense predictable. Home equity loans can help you accomplish the following financial objectives.

Debt consolidation

If the monthly payments on your credit cards have gotten unmanageable or you took out a car loan that is not affordable, a home equity loan may give you some payment relief. By spreading the payment over a longer period or replacing revolving credit with fixed-rate credit, your total monthly expenses may drop substantially by taking out a home equity loan to consolidate other debt.

Home improvement

If you’re thinking about putting in a pool and don’t like the terms the pool company is offering for financing, a home equity loan may provide a more cost-effective alternative. Also, keep in mind, the interest on a home equity loan may be tax-deductible if you are using it for home improvements.

Common HELOC uses

Because of the flexibility that HELOCs give you to charge different amounts and pay them off, they can be a great tool for temporary projects or to cover sudden expenses. Here are some ways a HELOC can help with temporary financial needs.

Multiple home improvements

You may have several projects planned over several years and you don’t want to borrow a lump sum for all of them at once. A HELOC will give you the flexibility to fund each project — then pay it off — with much lower payments. You’d have the option to make interest-only payments, and you could pay off the balance before starting the next project.

Debt consolidation

A HELOC can also be used to pay off other debt and minimize the monthly payment. If you get paid quarterly bonuses or commissions, a HELOC will give you the lowest possible payments until you receive the income to clear out the balances.

You won’t be committed to a monthly payment like you would with a home equity loan, and you will have access to the line of credit to use as other purchase needs arise.

Final thing to remember

When you take out a home equity loan or HELOC, you are securing another lien on your home, which could be foreclosed upon if you get behind on payments. Home equity rises and falls, and although credit card debt and car loans may be expensive, you won’t end up losing your home if you default on them.

However, if you’re leaving a solid cushion of equity in your home (20% is best), a home equity loan or HELOC may help you improve your overall financial situation.

To determine whether a home equity loan or HELOC is best for you, weigh the pros and cons.