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Home Equity Borrowing Power Calculator
Not how your equity grows, and not what a draw you have already decided on costs — but the question that comes first: how much can you actually borrow, what is stopping you, and which product is cheapest at today's rates?
Educational calculators — always consult a licensed professional before making financial decisions.
Current market value — the lender will order their own appraisal.
Your current first-mortgage balance.
We'll tell you whether it's achievable and what each option costs.
This is what a cash-out refinance would make you give up.
Used to compare your current payment against a refinanced one.
Sets the combined loan-to-value ceiling lenders will allow.
Up to about 85% combined LTV.
Before tax. Used for the debt-to-income check.
Include your mortgage, car, student loans, and card minimums.
Variable — usually prime plus a margin.
Fixed rate, fixed term second lien.
Compare this carefully against your current mortgage rate.
You could borrow up to
$125,000
Capped by your equity, not your income
HELOC
8.25% · 10-year interest-only draw, then 20-year repayment. Payment shown is the repayment-period figure.
$639
per month
Total interest: $140,247
Works when
- +Draw only what you need, when you need it — you pay interest on the balance, not the line.
- +Lowest cost if you repay quickly.
- +Leaves your existing first mortgage rate untouched.
Watch out for
- −Variable rate — your payment moves with the index.
- −Payment jumps sharply at the end of the draw period, which catches people out.
- −The lender can freeze or reduce the line if your home value drops.
Home equity loanlowest total interest
8.75% · Fixed rate, 15-year fully amortizing second lien.
$750
per month
Total interest: $59,926
Works when
- +Fixed rate and fixed payment — you know the number for the whole term.
- +Lump sum up front, useful when the cost is known.
- +Leaves your existing first mortgage rate untouched.
Watch out for
- −You pay interest on the entire amount from day one, whether you use it or not.
- −Usually a higher rate than a HELOC's teaser period.
- −Closing costs on a second lien.
Cash-out refinance
6.75% · Replaces your existing mortgage with a new 30-year loan of $375,000. Payment shown is the increase over your current payment.
$765
per month
Total interest: $500,607
Works when
- +One loan, one payment, at first-mortgage rates.
- +Makes sense when the new rate is at or below your current rate.
- +Longest term, so the lowest monthly cost.
Watch out for
- −You would give up your 4.5% rate for 6.75% — on the entire balance, not just the cash you take out. This is usually the deciding factor.
- −Full closing costs, typically 2–5% of the new loan.
- −Resets the clock to 30 years.
Your borrowing power is capped by equity, not income. At a 85% CLTV limit you can borrow about $125,000; your income would support $230,029.
Worth being blunt about the cash-out option: refinancing would move your whole $300,000 balance from 4.5% to 6.75%. Unless you are taking out a very large sum, the extra interest on the existing balance usually swamps any saving on the new money. A second lien leaves the first mortgage alone.
Interest on home equity borrowing is only tax-deductible when the funds are used to buy, build, or substantially improve the home securing the loan — not for debt consolidation or tuition. All of these products put your home up as collateral.
Educational estimate only — not a lending decision, a rate quote, or an offer of credit. CLTV limits and the 43% debt-to-income ceiling are typical rather than any specific lender's matrix, and underwriting considers factors we cannot see. Closing costs are not modeled. All of these products secure the debt against your home.
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Two limits, and the lower one wins
Having equity is not the same as being able to borrow it. Lenders apply two independent tests, and you are capped by whichever binds first.
- Combined loan-to-value. Typically 85%, reaching about 90% for strong credit and dropping to 80% for thinner credit. On a $500,000 home with a $300,000 mortgage, an 85% cap leaves roughly $125,000.
- Debt-to-income. Most lenders want total debts under about 43% of gross income after the new payment. Equity-rich but income-light households — retirees especially — are frequently capped here rather than by equity, and paying down a car loan raises borrowing power faster than waiting for appreciation.
The cash-out trap
A cash-out refinance replaces your entire mortgage. If you hold a 3% or 4% rate from a few years ago, refinancing reprices the whole balance at today's rate — not just the cash you take out. On a $300,000 balance, moving from 4% to 6.75% costs hundreds a month before you have borrowed a dollar of new money. That single fact is why second liens have dominated since rates rose, and the calculator above prices it explicitly rather than leaving you to spot it.
Which product, and when
- HELOC — when you do not know the final amount, or will repay quickly. Cheapest if drawn and repaid fast, but the rate is variable and the payment jumps at the end of the draw period.
- Home equity loan — when the cost is known and you want certainty. Fixed rate and payment, but you pay interest on the whole sum from day one.
- Cash-out refinance — only when today's rate is at or below your current one, or you are taking out a very large sum relative to the balance.
One tax note: interest is only deductible when the funds buy, build, or substantially improve the home securing the loan. Consolidating credit cards or paying tuition does not qualify, even though the loan is secured by your house.
Related calculators
- Home Equity Calculator — how your equity grows over time
- HELOC Calculator — draw and repayment on an amount you have chosen
- HELOC vs Cash-Out Refinance
- ADU Cost & ROI Calculator — a common use for the money
- True Cost of Homeownership
- DTI Calculator
Frequently asked questions
How much can I borrow against my home?+
Two limits apply and the lower one wins. First, lenders cap combined loan-to-value — typically 85%, rising to about 90% for strong credit and falling to 80% for thinner credit — so on a $500,000 home with a $300,000 mortgage, an 85% cap leaves roughly $125,000. Second, your debt-to-income ratio must stay under about 43% after the new payment. Equity-rich but income-light households are frequently capped by income rather than equity.
Is a HELOC or a home equity loan better?+
It depends on whether you know the amount and how fast you will repay. A HELOC lets you draw only what you need and pay interest only on the balance, which is cheaper if you repay quickly — but the rate is variable and the payment jumps sharply when the draw period ends. A home equity loan gives you a lump sum at a fixed rate with a fixed payment, so you know the number for the whole term, but you pay interest on the entire amount from day one.
Should I do a cash-out refinance or take a second mortgage?+
The deciding factor is usually the rate on your existing mortgage. A cash-out refinance replaces your whole loan, so if you hold a 3% or 4% rate from a few years ago, refinancing reprices your entire balance at today's rate — not just the cash you take out. The extra interest on the existing balance typically swamps any saving on the new money. A HELOC or home equity loan is a second lien and leaves the first mortgage untouched, which is why second liens have dominated since rates rose.
Is home equity loan interest tax deductible?+
Only when the funds are used to buy, build, or substantially improve the home that secures the loan. Borrowing against your house to consolidate credit card debt, pay tuition, or buy a car does not qualify, even though the loan is secured by the home. Deductibility also requires that you itemize, and the debt counts toward the overall mortgage interest limit. Confirm your specific situation with a tax professional.
What credit score do I need for a HELOC?+
Most lenders want 680 or above, with the best rates and the highest combined loan-to-value limits reserved for scores over 740. Credit affects two things here, not one: the rate you are offered, and how much of your equity the lender will let you access. On a $500,000 home, the difference between an 80% and a 90% combined loan-to-value cap is $50,000 of borrowing power.
Cost ranges and rates here are checked against contractor quotes and published industry data. If a number still looks off, email Support@RealCostIQ.com and we'll review and fix it.