How are home equity line of credit payments calculated

A Home Equity Line of Credit (HELOC) allows you the flexibility of making interest-only payments for the first 10 years. How much would those payments be, and what impact would choosing to make additional principal payments have on your overall loan balance?

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Repayment of a home equity line of credit requires that the borrower makes a monthly payment to the lender. For some home equity lines of credit, borrowers can make interest-only payments for a defined period, after which a repayment period begins. Interest-only payments are based on the outstanding loan balance and interest rate. During the repayment period, the payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payments for the repayment period are amortized so that the monthly payment remains the same throughout the repayment period, but during that time, the percentage of the amount that goes towards principal will increase as the outstanding mortgage balance decreases.

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A Home Equity Line of Credit, or HELOC, is a one of the most popular and affordable ways to borrow money. But do you have enough home equity to qualify for one? And if so, how much can you borrow with your line of credit? This Home Equity Available Credit calculator is designed to help you answer those questions, based on the value of your home and current mortgage balance. The home equity loan calculator lets you take into account different equity requirements, which may vary depending on the lender and your credit score, and also makes it easy for you to see how the maximum credit line you can obtain might change if your home appraises for more or less than you expect.

By changing any value in the following form fields, calculated values are immediately provided for displayed output values. Click the view report button to see all of your results.

Appraised value of your home:*This entry is Required.Enter an amount between $0 and $10,000,000

Outstanding home loans:*This entry is Required.Enter an amount between $0 and $10,000,000

Loan to value ratio:*This entry is Required.Enter an amount between 1% and 200%

Home Equity Line of Credit Calculator FAQs

You can calculate home equity by subtracting the amount owed due to the mortgage from the current estimated value of the house. You may also make use of our Home Equity Line of Credit Calculator to determine further how much you can borrow based on your current home equity.

A home equity loan provides a line of credit from which you can borrow over time up until a specific limit. The loan, however, is secured by the equity of your home. The loan is to be repaid over a period, and failure to do so leads to foreclosure of the home used as collateral.

The amount of money you can get for a Home Equity Loan is chiefly determined by how much equity your home currently has. Your equity, in turn, is arrived at by subtracting the amount you owe in mortgage loans from the current value of your home. Most lenders offer only 75-90% of your current home equity up for borrowing.

An equity line of credit calculator shows you how much you can borrow based on your current home equity. It also clarifies how that amount will vary with a change in the value of your home.

To use an equity line of credit calculator, you feed in the current estimated value of your home, then the amount owed on your mortgage, and the loan-to-value ratio which your lender offers. The calculator provides you with the line of credit that would currently be available to you. The calculator also reveals what line of credit that will be available to you if the appraisal value of your home changes.

To qualify for a Home Equity Line of Credit (HELOC), you need at least 20% equity on your home. To calculate the equity on your home, subtract the amount owed in mortgage loans for the home from the current appraisal value of the home. You can then express this as a percentage of the appraisal value of the home to compare with the 20%.

To take out a home equity loan, you should first check to see that you're eligible for the loan based on your home equity and credit score. If you meet the criteria, you then find out exactly how much you qualify for. You can do this with our Home Equity Line Of Credit Calculator. After this, you should select the lender that offers the best rates for you, having gone through proposals from as many lenders as possible.

You need a credit score of at least 660 to qualify for most Home Equity Loans, while a score of 720 and above puts you in an excellent place to access the loans.

The amount you can get in a HELOC loan is dependent on your current home equity and the loan-to-value level that your lender is ready to offer. After ascertaining these parameters, you can feed them into our Calculator to arrive at how much you qualify to borrow.

To calculate home equity percentage, first get the equity by subtracting the amount currently owed in mortgage loans from the current appraisal value of the home. The percentage value is then arrived at by expressing this equity as a percentage of the appraisal a value of the home.

To calculate home equity percentage, first get the equity by subtracting the amount currently owed in mortgage loans from the current appraisal value of the home. The percentage value is then arrived at by expressing this equity as a percentage of the appraisal a value of the home.

Using the Home Equity Line of Credit calculator

This home equity loan calculator makes it easy to determine what you can borrow, as well as showing how that amount would vary if the appraised value of your home is more or less than you expect.

To use it, enter the estimated value of your home, the amount owed on your mortgage and any second liens, and the maximum loan-to-value ratio allowed by your lender in the boxes indicated. The line of credit available to you will be displayed in the blue box at the top.

Notice that you can vary these figures using the sliding green triangles on the chart if you want to explore a range of values.

The chart with the three colored lines shows you how your available line of credit would vary across a range of appraised home values, given the figures you entered into the calculator. The lines correspond to the loan-to-value ratio your lender will allow.

The home equity line of credit calculator automatically displays lines corresponding to ratios of 80%, 90% and 100%; it can also display one additional line based on any value you wish to enter. For example, if your lender will allow a 95% ratio, the calculator can draw that line for you, in addition to the other three.

The range of home values are listed along the bottom and are centered on the value you entered; the figures for the available line of credit are listed at left on the vertical axis.

Want to calculate your payments for a home equity line of credit? Then use our Line of Credit Payments Calculator to figure your payments during the draw phase or our Home Equity Loan and HELOC Calculator to estimate payments over the entire loan.

How much can you borrow with a HELOC?

The amount you can borrow with any home equity loan is determined by how much equity you have – that is, the current value of your home minus the balance owed on your mortgage. So if your home is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 in home equity.

That doesn't mean you'll be able to borrow up to $100,000, though. Few, if any, lenders these days will allow you to borrow against the full amount of your home equity, although that was common during the pre-crash days.

As a rule of thumb, lenders will generally allow you to borrow up to 75-90 percent of your available equity, depending on the lender and your credit and income. So in the example above, you'd be able to establish a line of credit of up to $80,000-$90,000 with a home equity line of credit.

A home equity loan calculator like this one takes that all into account to figure how just how much of a line of credit you may be able to obtain, depending on all those factors.

Of course, the line of credit you can set up will vary depending on the value of your home and the balance on your mortgage (including any second mortgages, if applicable).

Qualifying for a home equity line of credit

Having equity alone doesn't guarantee you'll be able to qualify for a home equity line of credit. You'll also need to have decent credit – most lenders want to see FICO scores of at least 660 or more, and many have even stricter requirements. But 720 or more should put you in good shape.

You also can't be carrying too much debt – your total monthly debts, including your mortgage payments and all other loans, should not exceed 45 percent of your gross monthly income.

Lenders consider all these factors together when you apply for a HELOC. For example, they may allow a lower credit score or more debt if you have a lot of home equity available. Similarly, if you have a lower credit score they might only allow you to use 75 percent of your total home equity rather than the 90 percent they might allow someone with strong credit.

About home equity lines of credit

A home equity line of credit, or HELOC, is a special type of home equity loan. Rather than borrowing a specific sum of money and repaying it, a HELOC gives you a line of credit that lets you borrow money as needed, up to a certain limit, and repay it over time. It's like having a credit card secured by your home equity.

How much can you borrow? That's where a home equity loan calculator comes in. It helps you figure how much of a line of credit you can secure with your available home equity.

All home equity loans and HELOCs are secured by the equity in your home – that is, you're using your home equity as collateral. That allows you to get a much lower interest rate than you can get with a credit card or other unsecured loan. And because home equity loans are a type of mortgage, the interest you pay is tax-deductible up to certain limits.

HELOCs and other home equity loans are considered second liens; that is, they are second in line behind your primary home loan when it comes to getting repaid in the event of a loan default or foreclosure. As a result, they are somewhat riskier for lenders than primary mortgages are, so they charge higher interest rates and generally have stricter qualification standards than regular mortgages do.

A HELOC has two phases. A draw period, during which you can borrow against the line of credit as you wish, and a repayment period, during which you must repay the money you've borrowed. HELOCs are usually set up as adjustable-rate loans during the draw period, but often convert to a fixed-rate during the repayment phase.

HELOCs typically function as interest-only loans during the draw phase, which is usually 5-10 years. In other words, you're only required to pay the interest charges during this time and don't have to repay any loan principle. The repayment phase is typically 10-20 years and you cannot borrow additional funds during this time.

While you do not have to repay principle during an interest-only draw phase of a HELOC, you can usually do so without penalty. This not only reduces what you have to eventually repay when the draw period ends, but also allows borrowers to use a HELOC for cash-flow management, borrowing as needed and repaying when they can. This is helpful for people who have irregular incomes or expenses and are seeking to smooth out the peaks and valleys of their finances.

Some borrowers choose to refinance into a new HELOC at the end of the draw period. This may be to avoid the payment shock of the higher monthly payments required to repay both loan principle and ongoing interest charges, but may also be done to just to keep the line of credit open.

Want to see what sort of rate you can get on a HELOC? Use the "Get Free Quote" tab at the top of this page.

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