Home Equity Calculator
Find out how much equity you have in your home and how much a lender will let you borrow. Enter your home's value, mortgage balances, and loan terms to see your equity, CLTV, borrowing power, and estimated monthly payment.
Calculate Your Home Equity and How Much You Can Borrow
Home Equity Formula
Where:
- \(E\) — home equity ($)
- \(V\) — current home value ($)
- \(B_1\) — first mortgage balance ($)
- \(B_2\) — second mortgage / HELOC balance ($)
- \(c\) — the lender's maximum CLTV as a decimal (80% → 0.80)
- \(L\) — the maximum additional amount you can borrow ($)
Equity is what the home is worth minus everything still owed on it. Borrowing power is the room left between the lender's combined-loan-to-value cap and your current total mortgage debt.
Home Equity – Calculation Example
Example: a home worth $400,000 with a $280,000 first mortgage and no second lien; the lender caps combined debt at 80% CLTV, and a 10-year home equity loan is available at 8.5% APR.
\[ E = 400{,}000 - 280{,}000 = 120{,}000 \]
\[ \text{CLTV} = \frac{280{,}000}{400{,}000} \times 100\% = 70\% \]
\[ L = 0.80 \times 400{,}000 - 280{,}000 = 320{,}000 - 280{,}000 = 40{,}000 \]
Result: equity of $120,000 (30% of the home's value) and up to $40,000 available to borrow. A 10-year home equity loan for $40,000 at 8.5% APR costs about $495.94 per month. Projecting 5 years of 3% appreciation while paying $1,800/month P&I at 6.5% on the first mortgage, the balance falls to roughly $260,005 and the value grows to about $463,710 — projected equity ≈ $203,705.
How to use the calculator
- Enter your Current home value — use a recent appraisal or a realistic market estimate, not the purchase price.
- Enter the First mortgage balance (remaining principal, not the original loan) and the Second mortgage / HELOC balance. Enter 0 if you have no second lien.
- Choose the Lender max combined LTV — 80% is the most common cap; pick Custom to enter your lender's exact limit in the Custom max CLTV field.
- Optionally select a Credit score range; it only adds guidance on CLTV limits and pricing, it does not change the math.
- Enter the Loan rate (APR) and Loan term to estimate the monthly payment on the maximum borrowable amount.
- For the projection, fill in Years to project, Expected appreciation (% per year), your total Monthly P&I payment on the first mortgage, and the First mortgage rate — the last two are used to split each payment into interest and principal so the balance can be tracked year by year.
What home equity is and why it matters
Home equity is the portion of your home you actually own: its current market value minus every dollar owed against it. If your home is worth $400,000 and you owe $280,000 on the mortgage, you have $120,000 of equity. Equity grows two ways — the mortgage balance shrinks as you make payments, and the home's value may rise over time. It is often the largest single component of a household's net worth.
Lenders measure risk with loan-to-value ratios. LTV counts only the first mortgage against the home's value, while CLTV (combined loan-to-value) counts all liens, including second mortgages and HELOCs. Most home equity loans and HELOCs are capped at 80–85% CLTV, meaning the lender wants you to keep at least 15–20% of the value as your own stake. A few programs go to 90%, usually at higher rates.
Your borrowing power is the gap between what the lender allows as total mortgage debt and what you currently owe. A $400,000 home at an 80% CLTV limit supports up to $320,000 of combined liens; if you owe $280,000, about $40,000 of new borrowing is possible. Note that approving a loan involves more than equity — lenders also weigh credit score, income, and debt-to-income ratio, which you can check with the DTI ratio calculator.
The equity projection shows the compounding effect of paying down the mortgage while (hopefully) the home appreciates. Even modest appreciation of 3–4% per year produces meaningful gains because it applies to the full value of the home, not just your equity share.
Assumptions, limitations, and practical tips
- Value estimates are snapshots. A home is only worth what a buyer pays or an appraiser confirms. Your actual CLTV at closing depends on the lender's appraisal, which may differ from online estimates.
- CLTV is a cap, not a promise. Reaching the maximum CLTV also means the largest possible payment. Many borrowers take less than the full amount to keep payments comfortable — compare against your budget with the 50/30/20 budget calculator.
- HELOC rates are usually variable. The payment estimate assumes a fixed-rate home equity loan; a HELOC's rate and payment can rise after the draw period.
- The projection simplifies reality. It assumes the second mortgage balance stays flat (interest-only), appreciation compounds at a constant rate you choose, and the P&I payment never changes. Real appreciation swings year to year, and extra principal payments — which you can model with the mortgage payoff calculator — would reduce balances faster.
- Don't forget the other costs of ownership. Property taxes and insurance continue regardless of equity; the property tax calculator helps you budget for them.
- Negative equity (CLTV above 100%) means you owe more than the home is worth. No home equity borrowing is possible in that situation until values recover or balances fall.
Frequently Asked Questions
How do I calculate my home equity by hand?
Subtract everything you owe on the home from its current market value: equity \(E = V - (B_1 + B_2)\). Use the remaining principal balance on your mortgages, not the original loan amount, and a realistic current value, not your purchase price. Example: a $350,000 home with a $210,000 mortgage balance gives you $140,000 in equity, or 40% of the home's value.
What is a good amount of home equity to have?
Most lenders want you to keep at least 15–20% of your home's value as equity, which means a CLTV of 80–85% or lower. From day one, conventional loans often require 20% down (80% LTV). Many financial advisers suggest treating 50% equity or more as a comfortable cushion — it gives you a large borrowing reserve and protects you if home prices drop.
Why does my CLTV matter more than my total equity?
Lenders approve loans based on ratios, not dollar amounts, because the ratio measures risk. If you have $100,000 of equity in a $200,000 home, your CLTV is 50% and lenders will happily extend credit. The same $100,000 of equity in a $1,000,000 home is only a 90% CLTV, which most lenders consider too risky for a home equity loan. Same dollars, very different borrowing power.
What's the difference between a home equity loan and a HELOC?
A home equity loan is a lump sum repaid at a fixed rate with a fixed monthly payment. A HELOC is a revolving credit line you draw from as needed, usually at a variable rate — so the payment can rise after the introductory draw period ends. Both are capped by your CLTV, and both put a second lien on the home, so missing payments risks foreclosure.
How do I find my current home value for the calculator?
Use the most recent number you can get. In order of accuracy: a professional appraisal, a real estate agent's comparative market analysis, then online estimate tools like Zillow's Zestimate. Online estimates can be off by 10% or more, so treat the calculator's results as approximate. The lender will order its own appraisal before final approval, and its figure determines your actual CLTV.
Can I borrow against my home if I owe more than it's worth?
No. If your CLTV is above 100% — negative equity, often called being "underwater" — there is no equity to borrow against, and the calculator will show zero borrowing power. Options in that situation include waiting for values to recover, making extra principal payments, or government programs like FHA Streamline or VA IRRRL refinancing if you qualify for one.
Is home equity loan interest tax-deductible?
It can be, but only if the loan proceeds are used to buy, build, or substantially improve the home that secures the loan. Interest on money used for debt consolidation, tuition, or other expenses is not deductible under current U.S. tax rules. Combined mortgage debt limits also apply, so consult a tax professional before counting on the deduction.