Home
Back
Formula Used:
| From: | To: |
The Home Equity Line of Credit (HELOC) formula calculates the maximum amount of credit available to a borrower based on their home equity. It considers the maximum loan-to-value ratio, appraised fair value of equity, and outstanding mortgage balance.
The calculator uses the HELOC formula:
Where:
Explanation: The formula determines the maximum credit line by first calculating the maximum allowable loan amount based on the property value and then subtracting any existing mortgage balance.
Details: Accurate calculation of the maximum line of credit is crucial for both lenders and borrowers to determine borrowing capacity, assess risk, and make informed financial decisions regarding home equity utilization.
Tips: Enter the maximum loan-to-value ratio as a decimal (e.g., 0.85 for 85%), the appraised fair value of equity in dollars, and the outstanding mortgage balance in dollars. All values must be valid and positive numbers.
Q1: What is Maximum Loan to Value Ratio?
A: Maximum Loan to Value Ratio is a financial term used primarily in mortgage lending to measure the ratio of a loan to the value of the asset being purchased.
Q2: What is Appraised Fair Value of Equity?
A: Appraised Fair Value of Equity represents the estimated market value of a company's equity, as determined by a qualified appraiser or valuation expert.
Q3: What is Outstanding Mortgage Balance?
A: Outstanding Mortgage Balance refers to the remaining amount of principal that a borrower still owes to the lender on a mortgage loan.
Q4: What is Maximum Line of Credit?
A: Maximum Line of Credit refers to the maximum amount of money that a lender is willing to extend to a borrower under a revolving credit agreement.
Q5: Can the result be negative?
A: Yes, if the outstanding mortgage balance exceeds the maximum loan amount based on the property value, the result may be negative, indicating no available equity for a line of credit.