How to calculate home equity
Borrowing limit = max(0, home value × combined LTV ÷ 100 − mortgage balance) Draw payment = P × r Repayment payment = P × r ÷ (1 − (1 + r)⁻ⁿ) r = annual interest rate ÷ 1200; n = repayment years × 12. At 0% interest, repayment = P ÷ n.
Worked example. Estimated borrowing limit: $90,000.
Example inputs — Home value: $400,000; Mortgage balance: $250,000; Maximum combined LTV: 85%; Amount to borrow: Enter an amount; Loan amount: $50,000; Interest rate: 8%; Draw period: 5 years; Repayment period: 15 years; Closing costs and fees: Exclude. Starting values are illustrative.
Estimate only — lender approval is required.
From George Guju, founder of Calculyn · Educational calculator guidance, not professional advice.
How it works
Estimate borrowing room from your home value, existing mortgage debt and lender’s combined loan-to-value cap. Then model monthly payments on a chosen amount or the estimated limit. The draw period is interest-only; afterward, principal and interest repay the balance over the repayment period. Optional closing costs can be paid upfront or deducted from proceeds, and annual fees are shown separately from loan installments.
Using the home equity estimate
Home equity and borrowing room are different amounts. Equity compares the property's value with outstanding mortgage debt; borrowing room also applies a modeled lender cap to total debt. This calculator shows both estimated HELOC capacity and monthly payments on the amount you draw. Interest-only payments keep the balance unchanged during the draw period; principal-and-interest payments retire it during repayment. It does not verify property value, credit eligibility or lender rules, and the home secures this additional debt.
Step-by-step inputs
- Home value. Enter a realistic current property-value estimate. A lender's valuation may differ from a listing price, online estimate or purchase price. Starting example: $400,000 .
- Mortgage balance. Enter outstanding mortgage principal. If other liens count toward the lender's combined debt cap, account for them in the debt total for your scenario rather than ignoring them. Starting example: $250,000 .
- Maximum combined LTV. Enter the lender's assumed maximum total debt as a percentage of property value. The calculation uses this as a combined cap after subtracting existing debt, not as a percentage of your equity. Starting example: 85% .
- Amount to borrow. Replace the starting value with your own, keeping the displayed unit and period. Starting example: Enter an amount .
- Loan amount. Enter the amount you plan to draw, or choose Use estimated limit to calculate payments on all modeled borrowing room. An unused portion of a credit line is not charged interest in this model. Starting example: $50,000 .
- Interest rate. Use the lender's annual interest rate. The estimate holds it constant through both periods, so test a higher rate separately to see the potential payment risk. Starting example: 8% .
- Draw period. Choose the interest-only draw period in whole years. The full amount is assumed drawn at the beginning with no further withdrawals or principal repayments. Starting example: 5 years.
- Repayment period. Choose the years available to repay the remaining principal after the draw period. This is not the combined length of both periods. Starting example: 15 years.
- Closing costs and fees. Replace the starting value with your own, keeping the displayed unit and period. Starting example: Exclude .
Worked example with the starting values
Using the starting inputs, the estimate is Estimated borrowing limit: $90,000 .
Property value multiplied by the percentage cap gives maximum modeled total debt. Subtracting the outstanding mortgage leaves potential additional borrowing, floored at zero. The payment rows use the selected loan amount, which can be less than that limit. Monthly interest is annual interest divided by 12 times the drawn balance; the repayment calculation then amortizes that same balance over the repayment months. Current equity is floored at zero, while current loan-to-value can exceed 100%.
Estimate only — lender approval is required.
- Draw period monthly payment
- $333.33
- Repayment monthly payment
- $477.83
- Loan amount modeled
- $50,000.00
- Current home equity
- $150,000
- Current loan-to-value
- 62.5%
Compare maximum combined ltv scenarios
Property value and existing mortgage debt remain fixed while the assumed total-debt cap changes. These are sensitivity scenarios, not lender offers or credit approvals.
| Maximum combined LTV | Estimated borrowing limit |
|---|---|
| 75% | $50,000 |
| 80% | $70,000 |
| 85% | $90,000 |
Make a useful comparison
Compare a conservative and a higher property valuation while keeping debt and the cap fixed. Borrowing capacity can depend heavily on the valuation, but an increased estimated value does not reduce the amount you already owe. Wait for the lender's accepted valuation before relying on a particular credit limit.
Compare percentage caps rather than assuming every lender uses the same one. The cap is applied to all modeled debt, leaving some equity outside the borrowing estimate. Check existing liens, lender minimums, fees and underwriting requirements alongside the arithmetic.
Budget for the repayment-phase amount, not only the lower interest-only draw payment. Add your existing mortgage and other household expenses separately. Include fees if your offer has them, then test a higher interest rate before treating the credit limit as affordable spending money.
Common mistakes to avoid
- Do not multiply equity by the maximum percentage. This engine applies the cap to property value and then subtracts debt, which is a different calculation.
- A zero borrowing result can mean debt already reaches or exceeds the selected cap. It is not proof that all equity is zero, and this calculator floors negative equity instead of displaying the shortfall.
- Available capacity is not approval or a sensible spending target. A custom loan amount above the estimate still produces illustrative payments but shows a warning. The constant-rate model cannot forecast future resets, and tax treatment requires a separate assessment.
Sources
Assumptions & limitations
- Borrowing capacity is not guaranteed eligibility. Credit, income, other debts, appraisal, existing liens and lender-specific limits are not assessed; your home secures the debt.
- The full modeled amount is drawn immediately, with no further draws or extra principal payments. The interest rate stays constant through both phases; actual HELOC rates and minimum-payment rules may differ.
- Loan installments exclude fees, taxes, insurance and your existing mortgage payment. Annual-fee budgets spread a yearly charge across 12 months, not a lender billing schedule.
- Deducted closing costs reduce cash proceeds, not the amount owed. Annual fees are assumed to continue through both periods; confirm your contract.
Formula and assumptions reviewed October 2026 by the Calculyn team. How we build our calculators
Frequently asked questions
HELOC or home equity loan?
A HELOC is a revolving credit line with a draw period, often at a variable rate. A home equity loan is usually a lump sum repaid with principal and interest from the start. This calculator models the HELOC’s two phases.
Why does my payment increase after the draw period?
Interest-only payments do not reduce principal. During repayment, you must pay off that remaining principal as well as interest. A variable-rate change can also affect actual payments.
Is the interest tax-deductible?
Tax treatment depends on current rules, how proceeds are used and your circumstances. Do not assume a deduction; confirm with a tax professional.
Why is available borrowing less than my home equity?
The model limits total debt to your chosen percentage of property value, then subtracts the outstanding mortgage. Equity above that debt cap is not available to borrow under the scenario.
Does this estimate a HELOC monthly payment?
Yes. It shows interest-only monthly payments during the draw period and principal-and-interest payments during repayment, using your selected amount and a constant annual rate. Fees are separate, and your lender's billing rules may differ.