Are you wondering how much home equity could you borrow? The amount varies depending on each person’s situation, but the maximum a person can borrow is about 80 to 85 percent of the home’s value minus the balance owed on the mortgage. You can use a heloc calculator payment tool to figure out the amount of equity you could borrow.
Factors Affecting the Amount of Home Equity You Qualify For
Your credit score and credit history, your lender, your income, the market value of your home, and how much equity you have in your home all affect how much home equity loan money you qualify for. For example, a higher credit score means you qualify for more money. Similarly, more equity in your home means you can borrow more money. Your income is important because it affects your ability to repay loans.
Your lender matters too because lenders use different criteria and have different risk tolerances. Lenders also have varying maximum amounts a person can borrow. Local credit unions sometimes tend to be more flexible in what they can offer than bigger banks, but it varies.
The loan-to-value ratio is the value of your mortgage balance compared with the market value of your home. A higher LTV represents a greater risk. Lenders generally want you to have an LTV of no more than 80 percent, maybe 85 percent. You can do napkin math to calculate LTV. Suppose your mortgage balance (what you
owe now, not the amount of money you originally borrowed when you bought the house) is $100,000, and your home is worth $200,000. You divide your mortgage balance by the home’s market value, or in this case, $100,000 by $200,000. That gives you an LTV of 50 percent.
How a Calculator Tool Helps
A HELOC calculator tool is a great asset when you’re trying to figure out home equity loan numbers. You can see different loan options and estimate maximum amounts, monthly payments, and interest rates. Using a calculator tool gives you insight into more options and helps you avoid math errors you may make when running the numbers yourself.
Some tools ask that you supply the home’s market value yourself, while others evaluate it themselves. You’ll need to plug in your current mortgage balance, credit score range, and preferred line of credit amount. The latter is how much money you would borrow ideally. If you are unsure about your credit score range, free reports are available every year from the major credit bureaus.
It is a good idea to run the numbers through a home equity calculator before you apply for a home equity loan. That way, you should not get any bad surprises. For example, your income and credit history might prevent you from getting a loan for a full 85 percent of your home equity. Arming yourself with information helps you set realistic expectations.
What Is a Home Equity Loan?
A home equity loan is a loan you secure using the equity in your home. You can use it for virtually anything, including debt consolidation, trips, and college tuition. Many homeowners use it for home upgrades, remodels, or repairs.
A few things of which to be aware of include:
- The loans are available for various types of homes, including single-family residences, condos, duplexes, and so on.
- Home equity loans are second mortgages.
- Your home becomes collateral for the loan. Lenders can foreclose on the home if
you do not make payments.
When homeowners consider loans to finance projects or renovations, they ask, “How
much home equity could you borrow?”; The answer varies but maxes out at 80 to 85
percent of the home’s value minus the mortgage balance.