Use this comprehensive home equity mortgage calculator to instantly determine your available home equity, the maximum loan amount you may qualify for based on your target Loan-to-Value (LTV) ratio, and the estimated monthly payment for that potential loan.
Home Equity Mortgage Calculator
Please enter valid positive numbers for all five required fields.
Maximum Potential Loan Amount:
$0.00
Estimated Monthly Payment: $0.00
Home Equity Mortgage Calculator Formula
The calculation involves two main parts: determining the maximum available loan amount and calculating the payment for that loan.
1. Available Equity (E): E = V - P
2. Maximum Loan Amount (Lmax): Lmax = (V × LTV_Target) - P
3. Monthly Payment (M) on Lmax (Fixed-Rate Loan):
M = Lmax × [ r(1+r)^n / ((1+r)^n - 1) ]
Where:
V = Home Value
P = Current Mortgage Balance
LTV_Target = Maximum Loan-to-Value Ratio (as a decimal, e.g., 0.80)
r = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Loan Term in Years × 12)
Formula Source: Consumer Financial Protection Bureau (CFPB) Loan Disclosures
Variables Explained
- Current Home Value (V): The current market appraisal value of your home.
- Current Mortgage Balance (P): The remaining principal amount owed on your primary mortgage.
- Max Loan-to-Value (LTV) Target: The percentage of the home’s value (typically 75% to 90%) that lenders will use to calculate your maximum total debt (mortgage + equity loan).
- Estimated Annual Interest Rate (R): The annual percentage rate you expect for the home equity loan or HELOC.
- Loan Term (N): The number of years over which the home equity loan will be repaid.
Related Financial Calculators
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- Debt Consolidation Savings Calculator
- LTV & DTI Ratio Calculator
- Closing Cost Estimator
What is a Home Equity Mortgage Calculator?
A Home Equity Mortgage Calculator, sometimes referred to as a Home Equity Loan Calculator or HELOC Calculator, is a tool designed to help homeowners estimate their usable home equity. Equity is the portion of your home’s value that you actually own, calculated simply as the home’s current value minus the amount you still owe on your mortgage(s).
This calculator is crucial because it helps you determine two vital figures: the current equity available and, more importantly, the maximum loan principal you can borrow against that equity while satisfying a lender’s required Loan-to-Value (LTV) ratio. Lenders typically limit the total debt (mortgage + new loan) to a specific percentage of the home’s value, often 80%.
Beyond determining the potential loan size, the calculator also includes a payment calculation component. By incorporating the interest rate and loan term, it provides an estimate of your future monthly payments, allowing you to assess the financial feasibility of taking out a second mortgage, such as a Home Equity Loan or HELOC, for purposes like home renovation or debt consolidation.
How to Calculate Home Equity Mortgage (Example)
Let’s use an example with $600,000 Home Value, $250,000 Mortgage Balance, 85% LTV Target, 7% Rate, and a 20-Year Term.
- Step 1: Calculate Available Equity: Subtract the mortgage balance from the home value. $600,000 – $250,000 = $350,000.
- Step 2: Calculate Maximum Total Debt: Multiply the home value by the LTV target. $600,000 \times 85\% = $510,000.
- Step 3: Calculate Maximum Loan Principal: Subtract the current mortgage balance from the maximum total debt. $510,000 – $250,000 = $260,000. This is the maximum you can borrow.
- Step 4: Calculate Monthly Payment: Using the amortization formula with a $260,000 principal, 7% annual rate, and 240 months (20 years) results in an estimated monthly payment of $2,015.65.
Frequently Asked Questions (FAQ)
A Home Equity Loan is a fixed-rate, lump-sum loan repaid over a set term (like a mortgage). A HELOC (Home Equity Line of Credit) is a revolving line of credit with a variable rate, similar to a credit card, where you borrow money as needed up to a limit.
The LTV (Loan-to-Value) ratio is a primary measure of risk for lenders. A lower LTV (e.g., 75%) indicates you have more equity in the home, making the loan less risky. Most lenders set a maximum LTV, often 80-90%, to determine your borrowing limit.
No, this calculator provides the principal loan amount and estimated monthly payment based on that principal. Home equity loans and HELOCs often include closing costs and fees that will slightly increase your total cash needed or the total amount financed, which is not factored here.
In almost all cases, no. Lenders use the LTV ratio (typically 80% to 90%) to set the maximum combined debt you can carry against the home’s value. The difference between the maximum allowed debt and your current mortgage balance is your actual borrowing limit, which is less than your total available equity.