Home Equity Calculator
Calculate your current home equity, loan-to-value ratio, and how much you could borrow through a HELOC or home equity loan.
LTV Ratio Reference Guide
| LTV Range | Equity | Key Implication |
|---|---|---|
| ≤ 60% | 40%+ | Best rates; maximum HELOC access |
| 61–80% | 20–39% | No PMI; eligible for HELOC/HEL |
| 80.1–85% | 15–20% | PMI required; limited HELOC |
| 85.1–90% | 10–15% | PMI required; FHA territory |
| 90.1–97% | 3–10% | High PMI; limited options |
| > 97% | < 3% | Underwater risk; no HELOC |
PMI = Private Mortgage Insurance, typically 0.5–1.5% of loan per year. HELOC = Home Equity Line of Credit. HEL = Home Equity Loan.
Frequently Asked Questions
How is home equity calculated?
Home equity = Current Market Value − Outstanding Mortgage Balance(s). Example: $450,000 home value − $280,000 mortgage balance = $170,000 equity. If you have a first and second mortgage (or HELOC), subtract both: $450,000 − $280,000 (first mortgage) − $30,000 (HELOC balance) = $140,000 equity. Your equity grows in two ways: (1) Your home appreciates in value. (2) You pay down your mortgage principal over time. In the first years of a mortgage, most of your payment goes to interest, so equity builds slowly until mid-loan.
What is loan-to-value (LTV) ratio?
LTV = Mortgage Balance / Home Value × 100. Example: $280,000 balance on a $450,000 home = 62.2% LTV. LTV is critical for: (1) PMI removal: conventional loans remove PMI when LTV reaches 80% (20% equity). You can request cancellation at 80%; it must be removed at 78% by law. (2) HELOC/home equity loan eligibility: most lenders allow combined LTV up to 80–85%. (3) Refinancing: better rates below 80% LTV. (4) Cash-out refinance: typically limited to 80% LTV. A lower LTV means more equity, better rates, and more borrowing flexibility.
What can I do with home equity?
Home equity can be accessed through: (1) HELOC (Home Equity Line of Credit): revolving credit line, usually variable rate, draw period 5–10 years, repayment 10–20 years. Best for ongoing expenses. (2) Home equity loan: fixed rate, lump sum, fixed monthly payments. Best for a specific large expense. (3) Cash-out refinance: refinance for more than you owe, receive the difference. Best when rates are lower than your current mortgage. Common uses for equity: home renovations (adds value), debt consolidation (reduce high-interest debt), education costs, emergency fund, investment property down payment.
How much equity can I borrow against?
Most lenders allow you to borrow up to 80–85% of your home's value (combined loan-to-value, or CLTV) through a HELOC or home equity loan. Formula: Available equity = (Home Value × 0.85) − Current Mortgage Balance. Example: $450,000 home × 85% = $382,500 max. Minus $280,000 mortgage = $102,500 available to borrow. Some lenders (especially credit unions) allow up to 90% CLTV. VA-backed loans allow 100% CLTV for qualified veterans. Your actual credit limit also depends on your credit score, income, and debt-to-income ratio.
Is HELOC interest tax deductible?
HELOC interest is tax deductible only if the funds are used to 'buy, build, or substantially improve' the home securing the debt — per the Tax Cuts and Jobs Act of 2017. If you use a HELOC to renovate your kitchen, the interest is deductible (up to $750,000 combined mortgage debt for loans after Dec 15, 2017; $1M for older loans). If you use a HELOC to pay off credit cards or buy a car, the interest is NOT deductible. Always consult a tax professional and keep documentation of how HELOC funds are used. The deduction applies only if you itemize (Schedule A).