Free Home Equity & HELOC Calculator

Understanding home equity borrowing

Home equity is the portion of your home you actually own — its current value minus what you still owe. Lenders will let you borrow against some of it, but not all, and the limit is set by a ratio rather than by your equity balance directly.

Why you can't borrow all your equity

You have $200,000 in equity but can only borrow about $110,000. Lenders cap combined loan-to-value — every loan against the home divided by its value — typically at 80–85%. The buffer protects them: if values fall and the property is foreclosed, they need room to recover the balance.

Borrowing the full $40,000 in the example puts combined LTV at about 64.4%, comfortably inside the limit. Raising the LTV cap raises what you can borrow, which is why lenders that allow 85% or 90% appear more generous — they're accepting more risk, and usually pricing it into the rate.

Interest-only versus amortizing payments

The difference between $300 and $506.70 a month isn't a better deal — it's a different one. The interest-only payment covers only the finance charge; the balance stays at $40,000 indefinitely. The amortizing payment retires the debt over ten years.

Most HELOCs work in two phases: a draw period (often ten years) where you can borrow and pay interest only, followed by a repayment period where principal payments begin and no further borrowing is allowed. That transition is where people get caught — a payment can jump substantially overnight at a point that was scheduled from the start.

HELOC versus home equity loan

• A home equity loan is a lump sum at a fixed rate with fixed payments — predictable, and suited to a known one-time expense.
• A HELOC is a revolving line you draw from as needed, usually at a variable rate. Flexible, but your payment can rise if rates do.

The variable-rate exposure deserves weight. On a long-lived balance, a few percentage points of rate movement changes the payment meaningfully, and unlike a fixed mortgage you can't simply wait it out.

The risk that makes this different from other borrowing

Your home secures the loan. That's why the rate is lower than a credit card or personal loan — and it's also the entire risk. Missing payments on unsecured debt damages your credit; missing payments here can ultimately mean foreclosure.

This is worth weighing carefully against the common use of consolidating credit card debt. The rate is genuinely better, but it converts debt that can't take your house into debt that can, and typically stretches it over a longer period, which can increase total interest even at a lower rate.

What negative equity means here

If your mortgage balance exceeds the home's value, available equity is negative and equity borrowing generally isn't available at all. That situation usually resolves through paying down the balance or through market recovery — but until it does, the option simply isn't on the table.

What this calculator doesn't include

It estimates borrowing capacity and payments from the figures you enter. It doesn't include closing costs or annual fees (some HELOCs charge both), rate caps or floors on variable products, credit-score-based pricing, or the tax deductibility of interest, which depends on how the funds are used and on current tax law. It also assumes your home's value is accurate — lenders order their own appraisal, and their number is the one that counts.