Home Equity & HELOC Calculator

Home Equity vs. HELOC vs. Cash-Out Refinance

Your home equity is the difference between your home's current market value and your outstanding mortgage balance. There are three main ways to access it: a home equity loan (lump sum, fixed rate), a HELOC (revolving line of credit, variable rate), or a cash-out refinance (new first mortgage for more than you owe, taking the difference in cash).

HELOCs typically allow borrowing up to 80–85% of your home's value minus existing mortgage balance. They have a draw period (usually 10 years) when you can borrow and pay interest only, followed by a repayment period when you pay both principal and interest.

Frequently Asked Questions

• How much equity can I borrow against?
  Most lenders allow a combined LTV (existing mortgage + HELOC) of 80–85% of your home's value. If your home is worth $400,000 and you owe $250,000, you might qualify for a HELOC of up to $70,000–$90,000.
• Is a HELOC or home equity loan better?
  A HELOC is better when you need flexibility — borrow as needed, pay back, borrow again. A home equity loan is better for a one-time large expense at a fixed rate. HELOCs typically have variable rates, which can be risky if rates rise significantly.
• Are HELOC interest payments tax deductible?
  HELOC interest is deductible only if the funds are used to buy, build, or substantially improve the home securing the loan. Interest used for other purposes (like paying off credit cards) is generally not deductible. Consult a tax advisor.

How Home Equity and HELOCs Work

Your home equity is simply your home's current market value minus everything you still owe on it. If your house is worth $500,000 and your mortgage balance is $300,000, you have $200,000 in equity. But lenders won't let you borrow against all of it. Most cap your combined loan-to-value (CLTV) at 80–90%, meaning your first mortgage plus any new equity loan can't exceed that share of the home's value. This calculator computes both your raw equity and your actual borrowing power under a CLTV limit you choose.

Worked Example

Using the figures above with an 85% CLTV cap: 85% of $500,000 is $425,000. Subtract your existing $300,000 mortgage and you could access up to $125,000 through a home equity loan or line of credit. A home equity loan delivers that as a lump sum at a fixed rate with predictable payments, while a HELOC works more like a credit card — a revolving line you draw on as needed, usually at a variable rate, during a multi-year "draw period" before repayment begins.

HELOC vs. Home Equity Loan

The right choice depends on how you'll use the money. A fixed-rate home equity loan suits a one-time, known expense like a kitchen remodel or debt consolidation, because the payment never changes. A HELOC suits ongoing or uncertain costs — a phased renovation, tuition spread across years, or an emergency buffer — because you only pay interest on what you actually draw. The trade-off is rate risk: HELOC rates float with the prime rate, so your payment can rise. In either case you're putting your home up as collateral, so borrow only what you can repay even if your circumstances change.

• How much equity do I need to get a HELOC?
  Most lenders want you to retain at least 15–20% equity after the new line, which translates to a CLTV cap of 80–85%. You'll typically also need a credit score in the mid-600s or higher and a manageable debt-to-income ratio.
• Is HELOC interest tax-deductible?
  Interest may be deductible when the funds are used to buy, build, or substantially improve the home securing the loan, subject to IRS limits. It is generally not deductible when used for other purposes like paying off credit cards. Confirm your situation with a tax professional.
• What happens if my home value drops?
  Falling values reduce your equity and your borrowing power, and lenders can freeze or reduce an existing HELOC. This is why borrowing well under your maximum gives you a safer cushion.