How to use the home equity loan calculator
Start with a realistic home value and the current payoff on your first mortgage, not the original loan amount. Add every other loan secured by the home, including the drawn balance on any HELOC.
The calculator won't shrink a request that's too large. It runs the full scenario and tells you how far above or below your chosen CLTV limit it lands, so you can see exactly what needs to change.
- Enter the estimated home value and your first mortgage balance.
- Add other balances secured by the home, like a second mortgage or HELOC.
- Enter the lender's maximum CLTV, or test a planning figure such as 80% or 85%.
- Enter the amount you want, the fixed rate, the term and estimated closing costs.
- Choose whether costs are added to the loan, deducted from your cash or paid at closing.
- Calculate, then check capacity, new CLTV, net proceeds, the payment and total cost.
Home equity loan example: $50,000 from a $420,000 home
Say your home is worth $420,000 and you owe $250,000 on the mortgage. Your equity is $170,000. At an 85% CLTV limit, total secured debt can reach $357,000, so you could borrow up to about $107,000 more.
You ask for $50,000 and add $1,500 of closing costs to the loan. The new loan is $51,500, your combined debt is $301,500 and the new CLTV is about 71.79%. At 8.25% for 10 years, the payment is $631.66 and interest totals $24,299.32. You're $55,500 under the 85% limit.
| Measure | Debt included | Ratio |
|---|---|---|
| First mortgage LTV | $250,000 | 59.52% |
| CLTV with the $50,000 request | $300,000 | 71.43% |
| CLTV with $1,500 costs financed | $301,500 | 71.79% |
| Selected maximum CLTV | $357,000 | 85.00% |
Home equity and CLTV formulas
Combined loan-to-value (CLTV) compares every loan secured by the home with its value. Lenders cap it, and the cap is what limits how much you can borrow. The payment then uses the standard fixed-rate formula on the new loan balance.
Current equity = home value - all secured debtBorrowing capacity = home value x max CLTV - existing secured debtNew loan principal = requested amount + financed closing costsNew CLTV = (existing secured debt + new loan principal) / home value x 100Monthly payment = P x r / (1 - (1 + r)^(-n)), where r = annual rate / 100 / 12
How much equity can I borrow?
Less than your full equity. Lenders leave a cushion by capping CLTV, so the amount you can borrow depends on the limit they use. In the example, $170,000 of equity becomes this much borrowing room:
- A lower appraisal shrinks capacity, even if nothing else changes.
- Credit, income, debts and property type also affect what a lender offers.
- Ask whether the lender counts an existing HELOC by its balance or its credit limit.
| Maximum CLTV | Maximum total debt | Estimated borrowing capacity |
|---|---|---|
| 80% | $336,000 | $86,000 |
| 85% | $357,000 | $107,000 |
| 90% | $378,000 | $128,000 |
Closing costs and the cash you receive
How you pay closing costs changes either the loan or your cash. Adding them to the loan raises the payment and the CLTV. Deducting them leaves less money in your hand. Paying at closing keeps both the same but costs cash upfront.
| Cost treatment | New loan | Cash received | Monthly payment | Total borrowing cost |
|---|---|---|---|---|
| Added to the loan | $51,500.00 | $50,000.00 | $631.66 | $25,799.32 |
| Deducted from proceeds | $50,000.00 | $48,500.00 | $613.26 | $25,091.58 |
| Paid at closing | $50,000.00 | $50,000.00 | $613.26 | $25,091.58 |
Paying a home equity loan off early
Adding $100 a month to the $631.66 payment ends the $51,500 loan in about 97 months instead of 120 and saves $5,159.40 of interest. Check the note for prepayment charges and tell the servicer to apply the extra to principal.
Keep your emergency savings intact first. Both the first mortgage and this loan are secured by your home, so falling behind on either puts the house at risk.
Before you borrow against your home
This estimate isn't an approval or an appraisal. Lenders set their own CLTV limits, value the home their own way and review credit and income. Daily interest, points and payment dates can also change the final numbers.
Home equity interest isn't automatically tax deductible. IRS Publication 936 says it qualifies only when the money is used to buy, build or substantially improve the home securing the loan, and other rules apply. For many refinances and second mortgages on a primary home, federal law also gives you a short window to cancel after signing.
- HELOCs, variable rates and cash-out refinances need different calculations.
- If a contractor pushes you toward a specific lender, shop around first.
- Enter the contract interest rate, not the APR.
- Check every figure against the lender's disclosures and closing documents.
Sources
These CFPB, FTC and IRS pages explain home equity loans, HELOCs, cancellation rights, contractor financing risks and tax rules.