Your home equity is the difference between what your home is worth and the mortgage debt secured by it. The amount you could actually borrow is usually lower because lenders generally require you to keep some equity in the property.
That distinction is useful when reading the calculator result above. One number tells you how much equity you've built. A separate borrowing-capacity estimate can show how much might be available through a home equity loan or home equity line of credit, or HELOC, under different combined loan-to-value assumptions.
Home Equity Calculator Basics
| Input Or Result |
What It Means |
| Home Value |
Your estimate of the property's current market value |
| Mortgage Balance |
What you currently owe on your first mortgage |
| Other Home-Secured Debt |
Any existing HELOC, home equity loan or other mortgage lien secured by the property |
| Current Equity |
Home value minus mortgage debt secured by the property |
| LTV |
Your first mortgage balance divided by the home's value |
| CLTV |
Your first mortgage plus other home-secured loans or credit lines divided by the home's value |
| Potential Borrowing Capacity |
An estimate of additional debt that could fit within the selected CLTV scenario |
| Projected Equity |
An estimate of future equity based on assumptions about home value and mortgage balance over time |
Home Equity vs. How Much You Can Borrow
Having equity does not mean you can convert all of it into cash.
Suppose your home is worth $500,000 and you owe $300,000 on your only mortgage. Your current home equity is:
$500,000 − $300,000 = $200,000 of home equity
A lender evaluating a HELOC or home equity loan may limit the total debt secured by the home to a percentage of its value. That means some of the $200,000 generally remains in the property rather than becoming available to borrow.
The CFPB explains that HELOCs let you borrow against available home equity, with the lender determining the amount of credit available.
How Much Equity Could You Borrow?
One way to estimate potential borrowing capacity is to test different combined loan-to-value ratios.
The basic calculation is:
Potential additional borrowing = (Home value × assumed maximum CLTV) − existing home-secured debt
Using the $500,000 home with a $300,000 mortgage:
| CLTV Scenario |
Maximum Total Home-Secured Debt |
Existing Mortgage |
Potential Additional Borrowing |
| 80% |
$400,000 |
$300,000 |
$100,000 |
| 85% |
$425,000 |
$300,000 |
$125,000 |
| 90% |
$450,000 |
$300,000 |
$150,000 |
The homeowner has $200,000 of total equity in every row. What changes is the amount of equity left in the home under each hypothetical CLTV limit.
The 80%, 85% and 90% figures are comparison scenarios, not universal lender limits. A lender can use a different maximum CLTV, and the amount you qualify to borrow can also depend on your income, existing debt, credit profile, property, loan structure and confirmed property value.
What Is Combined Loan-To-Value Ratio?
Combined loan-to-value ratio, or CLTV, measures all mortgage debt secured by your home relative to its value.
CLTV = Total home-secured debt ÷ Home value
Suppose your home is worth $500,000, your first mortgage balance is $300,000 and you already have a $25,000 home equity loan. Your CLTV would be:
($300,000 + $25,000) ÷ $500,000 = 65%
If you're evaluating another home equity loan or HELOC, that existing $25,000 second mortgage needs to be included when estimating how much additional borrowing could fit within a particular CLTV limit.
You can use the CLTV calculator when you want to focus specifically on the relationship between your home's value and multiple mortgage liens.
LTV vs. CLTV
Loan-to-value ratio, or LTV, generally compares one mortgage with the property's value. CLTV adds the balances of multiple loans secured by the same home.
If you have a $300,000 first mortgage on a $500,000 home, the first mortgage has a 60% LTV. If you also have a $50,000 HELOC balance, the combined $350,000 of secured debt produces a 70% CLTV.
The distinction becomes particularly useful when you're considering a second mortgage because the new loan adds debt without replacing the existing first mortgage.
How Home Equity Can Change Over Time
Home equity can change from both sides of the calculation. Your mortgage balance can decline as you repay principal, while your home's market value can rise or fall.
Mortgage Principal Paydown
On a standard amortizing mortgage, part of each scheduled payment reduces principal. As the balance falls, you build equity even if the home's value stays exactly the same.
A future-equity projection should therefore account for the expected remaining mortgage balance rather than automatically assuming today's balance stays unchanged.
The exact balance depends on your loan structure. A fixed-rate amortizing mortgage will follow a different path from an interest-only mortgage or another loan with nonstandard payment terms.
Home Appreciation
You can also test an assumed annual change in the home's value. For example, a $500,000 home modeled at 3% annual appreciation would have an estimated value of about $546,364 after three years:
$500,000 × 1.03³ = $546,364
That is a scenario rather than a forecast. Actual home prices can rise, fall or remain relatively flat, and appreciation can differ substantially even between nearby properties.
How To Estimate Your Equity In Three Years
A more complete future-equity calculation combines the projected property value with the projected remaining mortgage debt:
Projected equity = Projected home value − Projected mortgage debt
If your home appreciates while you also pay down principal, both changes increase estimated equity. If the home's value falls, some or all of the equity created through principal repayment can be offset.
Use several appreciation assumptions rather than relying on one long-term estimate. Comparing a flat-value scenario with moderate appreciation and a declining-value scenario gives you a wider view of how your equity could change.
How To Read Your Borrowable Equity Estimate
The highest amount shown by a CLTV scenario should be treated as a mathematical ceiling for that scenario, not a loan approval.
For example, a calculation may show that another $125,000 of debt would bring your CLTV to 85%. A lender could still approve a smaller amount after reviewing your credit, income, monthly obligations, property value and other underwriting requirements.
A property valuation can also change the result. If you estimate your home at $500,000 but an accepted appraisal or other valuation comes in at $475,000, the available borrowing amount at the same CLTV falls.
The CFPB's HELOC guidance describes borrowing capacity as generally based on a percentage of the home's appraised value minus the existing mortgage balance. Actual terms are determined by the lender. (The CFPB)
HELOC vs. Home Equity Loan
Once you've estimated how much equity could be available, the next question is how you want to access it.
| Feature |
HELOC |
Home Equity Loan |
| How You Borrow |
Draw from an approved credit line as needed during the draw period |
Receive the borrowed amount as a lump sum |
| Interest Rate |
Usually variable, although some products offer fixed-rate features |
Can be fixed or adjustable depending on the loan |
| Balance |
Changes as you borrow and repay funds |
Starts with the amount borrowed and generally declines through repayment |
| Access To Additional Funds |
You can generally borrow again during the draw period as available credit replenishes |
Additional borrowing generally requires another loan |
The CFPB distinguishes a home equity loan from a HELOC primarily by how you access the borrowed money. A home equity loan provides a specific amount, while a HELOC is a revolving line that lets you draw repeatedly up to the available limit.
The broader HELOC vs. home equity loan comparison can help you compare the payment and borrowing structures after you've estimated how much equity may be available.
What About A Cash-Out Refinance?
A cash-out refinance accesses equity differently. Instead of adding a second mortgage, it replaces your current mortgage with a new, larger first mortgage and provides the difference in cash after applicable costs and payoff amounts.
That can change the interest rate and terms on your entire first-mortgage balance. A HELOC or home equity loan generally leaves the existing first mortgage in place and adds a separate debt secured by the property.
If your existing mortgage has terms you want to preserve, that distinction can significantly affect the comparison. If you're already considering replacing the first mortgage, a cash-out refinance gives you a different way to access equity.
What Can Reduce The Amount Of Equity You Can Borrow?
Available equity is only one part of home equity underwriting. Your potential borrowing amount can also be affected by:
- Your home's confirmed value: A lower valuation increases CLTV and reduces estimated borrowing capacity.
- Existing mortgage debt: A larger first mortgage, HELOC or other home-secured loan leaves less room under a given CLTV limit.
- Credit and payment history: Lenders use credit information when evaluating eligibility and pricing.
- Income and existing obligations: Having enough equity does not establish that you can support the additional payment.
- Property and occupancy: Underwriting requirements can differ based on the property and how it is used.
A calculator can estimate the equity side of the equation, but the final credit line or loan amount depends on the lender's underwriting and valuation.
What A Home Equity Calculator Cannot Predict
A home equity calculator cannot know what your property will be worth several years from now. Appreciation assumptions are useful for comparing scenarios, not predicting a future sale price or appraisal.
It also cannot determine an approved HELOC or home equity loan amount from equity alone. The maximum CLTV permitted by a lender, the accepted property value and your overall qualifications can change the amount available.
Future mortgage-balance estimates also depend on the loan information entered. Extra principal payments, refinancing, payment changes or nonstandard mortgage terms can cause your actual balance to differ from a projection.
Finally, both HELOCs and home equity loans are secured by your home. If you cannot repay the debt, your home can be at risk. The CFPB describes both products as forms of borrowing against home equity secured by the property. (The CFPB)
The Bottom Line
Your total home equity and the amount you could potentially borrow are separate figures. Start by subtracting your home-secured debt from the property's estimated value to calculate equity. Then use CLTV scenarios to see how much additional borrowing could fit while leaving part of that equity in the home.
Comparing 80%, 85% and 90% CLTV can show how sensitive the estimate is to different lending limits, but those percentages do not establish what a lender will approve. Your final borrowing capacity depends on the lender's requirements, your finances and an accepted property valuation.
If you're projecting equity several years into the future, consider both potential changes in home value and the expected mortgage balance. That gives you a more complete estimate than appreciation alone.
Frequently Asked Questions
How Do You Calculate Home Equity?
Subtract the mortgage debt secured by your home from its current value. If a $500,000 home has a $300,000 mortgage and no other liens, the homeowner has an estimated $200,000 of equity.
How Much Of My Home Equity Can I Borrow?
You generally cannot assume that all of your equity is available to borrow. Lenders typically limit home equity borrowing based partly on the percentage of the property's value that will be covered by the first mortgage and other home-secured debt after the new loan. Credit, income, existing debts, property value and lender requirements can further limit the amount available.
What Is An 80% CLTV?
An 80% CLTV means your combined home-secured debt equals 80% of the property's value. On a $500,000 home, an 80% CLTV corresponds to $400,000 of total mortgage debt. If you already owe $300,000, another $100,000 would bring the combined debt to 80% in a simplified scenario.
Is 80% Or 85% CLTV Required For A HELOC?
No universal federal CLTV cap applies to every HELOC or home equity loan. Individual lenders establish lending limits based on their product and underwriting requirements. The 80%, 85% and 90% figures in the calculator are useful for comparing scenarios rather than predicting a specific lender's maximum.
What Is The Difference Between Equity And CLTV?
Equity is the dollar value of your ownership stake in the property. CLTV is a percentage showing how much of the home's value is covered by the first mortgage and other home-secured debt. The two calculations describe the same property from different perspectives.
Does Home Appreciation Increase How Much I Can Borrow?
A higher property value can increase your estimated equity and reduce your CLTV when mortgage balances stay the same. That can increase mathematical borrowing capacity under a given CLTV scenario. A lender will use the property value it accepts during underwriting rather than relying solely on your estimate.
How Much Equity Will I Have In Three Years?
Future equity depends on both the future value of the home and the mortgage debt remaining at that time. A projection can model assumed appreciation and scheduled principal repayment, but neither result is guaranteed. Home prices can change unexpectedly, and your actual mortgage balance depends on your loan terms and payments.
Is A HELOC The Same As A Home Equity Loan?
No. A HELOC is a revolving line of credit that generally lets you borrow repeatedly during a draw period up to the available limit. A home equity loan provides a specific borrowed amount, generally as a lump sum. Both use your home as collateral.
Can I Borrow Against My Home If I Already Have A HELOC?
Potentially. An existing HELOC or home equity loan increases your combined loan-to-value ratio and reduces the amount of additional debt that can fit under a lender's CLTV limit. Eligibility also depends on the lender's underwriting requirements and the home's accepted value.
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