Understanding your home equity loan results
The table below shows how the combined loan-to-value ratio is typically viewed in home equity lending. Individual lender limits vary; the CLTV cap you enter drives the available-equity figure directly.
| Combined LTV after new loan | Typical lending context |
|---|---|
| Below 80% | Within the most common lender CLTV limits; more equity remains as a buffer against price declines |
| 80% to 85% | At or near typical maximum CLTV caps; some lenders lend in this range, often with stricter pricing or requirements |
| Above 85% | Above most conventional home equity lending limits; few lenders extend CLTV this high |
- This calculator estimates borrowing capacity from the CLTV cap alone. Actual approval also depends on credit history, income, debt-to-income ratio, and an appraisal — a lender may approve less than the CLTV math allows.
- The payment shown excludes closing costs, origination fees, and any escrow items; fees are commonly charged on home equity loans and reduce the net proceeds.
- Because the loan is secured by the home, missed payments can lead to foreclosure — the CFPB highlights this as the central risk of borrowing against home equity.
- This is an educational estimate, not a loan offer or financial advice.
What is a home equity loan?
A home equity loan is a second-lien installment loan secured by the borrower's home. The Consumer Financial Protection Bureau (CFPB) describes it as borrowing a fixed lump sum against home equity — the home's value minus what is still owed on it — repaid in equal monthly installments at a fixed rate over a set term, in contrast to a home equity line of credit (HELOC), which is a revolving credit line.
Lenders do not allow borrowing against all of a home's equity. Most set a maximum combined loan-to-value ratio — the existing mortgage balance plus the new home equity loan, divided by the home's appraised value — commonly in the region of 80% to 85%, though limits vary by lender and borrower profile. The amount available to borrow is therefore the home's value multiplied by the CLTV limit, minus the current mortgage balance.
Because the loan is secured by the home, the interest rate is usually lower than unsecured borrowing such as personal loans or credit cards, but the home itself is collateral: the CFPB notes that a borrower who cannot repay a home equity loan risks foreclosure. Interest may be tax-deductible only in specific circumstances defined by the IRS (generally when proceeds are used to buy, build, or substantially improve the home securing the loan, under current rules through 2025); a tax professional can confirm how the rules apply to a specific situation.
How to use this home equity loan calculator
- Enter your home's current market value (an estimate or a recent appraisal).
- Enter the balance still owed on your existing mortgage.
- Enter the lender's maximum combined loan-to-value percentage — 80% is a common benchmark, but confirm the actual limit with your lender.
- Enter the home equity loan amount you are considering, the quoted annual interest rate, and the repayment term in years.
- Read the equity available to borrow at that CLTV cap, the fixed monthly payment, the total interest over the term, and the combined LTV your mortgage plus the new loan would create.
- Worked example: a $400,000 home with a $250,000 mortgage balance at an 80% CLTV limit leaves $70,000 available ($400,000 × 0.80 − $250,000). Borrowing $50,000 at 8% over 15 years costs $477.83 per month, about $36,009 in total interest, and produces a 75% combined LTV.
The formulas behind home equity borrowing
Available equity is the home's value multiplied by the maximum combined loan-to-value percentage, minus the current mortgage balance (floored at zero). The monthly payment on the loan amount uses the standard fixed-rate amortization formula, and total interest is the sum of all payments minus the principal borrowed.
Combined loan-to-value adds the existing mortgage balance and the new loan, then divides by the home's value — this is the ratio lenders check against their CLTV cap when underwriting a home equity loan.
Common mistakes
- Assuming all equity is borrowable — lenders cap combined LTV (often around 80% to 85%), so a homeowner with $150,000 of raw equity may be able to borrow far less.
- Using an optimistic home value; the lender's appraisal, not the owner's estimate, sets the value used in the CLTV calculation.
- Comparing only the monthly payment across loan offers and ignoring the term — a longer term lowers the payment but raises total interest.
- Forgetting closing costs and fees, which are charged on most home equity loans and are not included in this payment estimate.
- Confusing a home equity loan (fixed lump sum, fixed payments) with a HELOC (revolving credit line, usually variable rate) — the products behave very differently.
Frequently asked questions
How much can I borrow with a home equity loan?
Lenders typically cap the combined loan-to-value ratio — the existing mortgage plus the new loan, divided by the home's value — commonly around 80% to 85%. The amount available is the home's value times that cap, minus the current mortgage balance. For example, a $400,000 home with a $250,000 mortgage at an 80% CLTV limit leaves $70,000 of borrowable equity. Actual approval also depends on credit, income, and an appraisal.
What is the difference between a home equity loan and a HELOC?
A home equity loan delivers a fixed lump sum repaid in equal monthly installments at a fixed rate over a set term. A home equity line of credit (HELOC) is a revolving credit line that can be drawn and repaid repeatedly during a draw period, usually at a variable rate. The Consumer Financial Protection Bureau describes both as second-lien products secured by the home, so both carry foreclosure risk if payments are missed.
What is combined loan-to-value (CLTV)?
Combined loan-to-value is the sum of all loans secured by the property — the first mortgage plus the home equity loan or line — divided by the home's appraised value, expressed as a percentage. Lenders use CLTV rather than plain LTV when underwriting second liens because it captures the total claim against the home. A $250,000 mortgage plus a $50,000 home equity loan on a $400,000 home is a 75% CLTV.
Is home equity loan interest tax-deductible?
Only in specific circumstances. Under current IRS rules (through tax year 2025 under the Tax Cuts and Jobs Act), interest on home equity borrowing is generally deductible only when the proceeds are used to buy, build, or substantially improve the home that secures the loan, and only within overall mortgage-debt limits. Interest on equity borrowed for other purposes, such as paying off credit cards, is generally not deductible. A tax professional can confirm how the rules apply to a specific situation.
What happens if I can't repay a home equity loan?
A home equity loan is secured by the home, so sustained non-payment can lead to foreclosure, even if the first mortgage is current. The Consumer Financial Protection Bureau identifies this as the key risk of converting unsecured obligations into home-secured debt. Borrowers experiencing payment difficulty are generally advised to contact the lender early, and HUD-approved housing counselors offer free assistance.
Does this calculator tell me whether I will be approved?
No. It computes the arithmetic of the CLTV cap, the amortized payment, and total interest from the numbers you enter. Lenders additionally evaluate credit history, income, debt-to-income ratio, property type, and an appraisal, and may approve a smaller amount or decline. The output is an educational estimate, not a loan decision or financial advice.
References
- Consumer Financial Protection Bureau (CFPB). What is a home equity loan? consumerfinance.gov.
- Consumer Financial Protection Bureau (CFPB). What you should know about home equity lines of credit (HELOC). consumerfinance.gov.
- Internal Revenue Service (IRS). Publication 936: Home Mortgage Interest Deduction. irs.gov.
- Federal Trade Commission (FTC). Home Equity Loans and Home Equity Lines of Credit. consumer.ftc.gov.
- Brueggeman WB, Fisher JD. Real Estate Finance and Investments. 15th ed. McGraw-Hill Education, 2019.