This home equity line of credit (HELOC) calculator can calculate the maximum amount of loan a homeowner is eligible to borrow. A HELOC is similar to a mortgage as both types of loans uses a house as collateral. However, there are no fixed principal repayments or pre-set interest rates for a home equity line of credit. This template includes the calculations for:
  • Maximum line of credit for a hybrid loan
  • Maximum line of credit for a traditional loan

Overview of HELOC

As state before, HELOC is similar to a mortgage and uses a house as collateral. For a mortgage, the entire sum of the loan is given up front. Also, both principal and interest payments are required usually on a monthly basis. On the other hand, HELOC is a line of credit, which means that the borrower can take out any amount at any time. This is similar to a credit card in which the user only uses it when needed. Also, for a HELOC, only interest payments are required. The principal payment is only necessary when the HELOC expires.

Hybrid HELOC

A hybrid HELOC is a mix of a traditional HELOC with a mortgage. For this type of loan, the borrower is eligible for a line of credit worth 80% of the home's appraised value. To calculate the maximum amount of the line of credit, multiply the value of the house by 80%. After determining the maximum amount available, subtract the amount of an outstanding mortgage if any. This ensures the total amount of loan using the house as collateral does not exceed 80%. In a hybrid loan, the mortgage portion amortizes while the other portion is the same as a traditional HELOC.

Traditional HELOC

For a traditional HELOC,  borrowers can only borrow up to 65% of a house's value. The borrower also needs to own at least 20% of the house. To determine the maximum amount of line of credit available, multiple the house's appraised value by 65%. Like the hybrid HELOC, it is also necessary to subtract the outstanding mortgage already on the house.

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