How It Works

A HELOC (Home Equity Line of Credit) is a line of credit that allows you to tap into your home’s equity and borrow against it.

This calculator will help you estimate the limit you could be approved for. Start by entering the value of your home. Next, enter the outstanding balance (what you have left to pay including interest) on your mortgage. Finally, adjust the LTV ratio to see your potential HELOC. The LTV ratio is a percentage, generally 80-90%, that is determined by your lender.

What is a HELOC loan?

A HELOC, or Home Equity Line of Credit, is a revolving line of credit that uses your home’s equity as collateral. This means you can borrow money repeatedly against the value of your home (specifically, the amount you’d gain after selling it), as long as you repay what you borrow before accessing more. Think of it like a credit card backed by your house: you can draw funds as needed during the draw period (usually 5–10 years), and repay over a longer repayment period (often 10–20 years).

HELOC Eligibility

There are a couple factors you have to keep in mind when looking to take out a HELOC. Like other loans/credit lines, lenders typically look at your credit score, debt-to-income ration, and the amount of equity you have in your home. The rule of thumb is that you should have roughly 15-20% equity in your home, a credit score of 620 or higher, and a steady/reliable income.This eligibility can vary per lender, though, so don’t forget to shop around!

How to calculate my HELOC payment?

With a HELOC, your payments can bounce around a bit. It all depends on how much cash you’ve actually taken out, what the interest rate is doing (since it often changes), and whether you’re still in the early ‘borrowing’ stage or the later ‘paying it back’ stage. When you’re just borrowing, you might only have to pay the interest. But once it’s time to really pay it off, you’ll be covering both the amount you borrowed and the interest. Good news is, a lot of financial institutions have online tools where you can play around with the numbers to get an idea of what your payments might look like based on how much you’ve used and the current interest rate.

Cash Out Refinance vs. HELOC

A cash-out refinance is exactly that, it gives you cash back for the equity in your home. The catch? It replaces your existing mortgage with a new, larger loan and gives you the difference in cash. A HELOC, on the other hand, is a separate line of credit you can draw from as needed that you have to pay back before drawing more.

There’s also a difference in rates/closing costs associated with both. While a cash-out refinance may come with a fixed rate and higher closing costs since it’s essentially a whole new mortgage loan, HELOCs typically have variable rates and lower upfront costs.

HELOC vs. Home Equity Loan

Okay, so both a home equity loan and a HELOC let you tap into the money tied up in your house. But here’s the deal: a home equity loan is like getting one big chunk of cash right away, and your interest rate and monthly payments stay the same. A HELOC is a bit different—it’s more like a credit card. You can borrow money whenever you need it, and the interest rate usually changes. Plus, during the first part, you mostly just pay interest on whatever you’ve actually borrowed.

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