Choosing a Home Equity Loan - Check Your Options


  • Which type of home equity loan best fits your situation.
  • First, figure out how much equity you have in your home and your loan-to-value ratio.
  • Then choose between a cash-out refinance mortgage, home equity loan, or home equity line of credit.
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Choosing a Home Equity Loan - Which Option is Best for You?

A home equity loan is a special type of mortgage, which allows you to tap into your home’s value to take out cash. There are many reasons to take out a home equity loan, including debt consolidation, home improvements, or paying for college.'s  Choosing a Home Equity Loan Calculator helps you decide which is the best method to take out the funds you need. It factors in when you need the money and how you can repay the loan with the most affordable and cost-effective payment plan.

Before choosing a home equity loan, take the preliminary steps of figuring out how much home equity you have, and how large a loan you can take.


How Much Home Equity Do You Have:

When you financed your home purchase, you made a down payment and then took a mortgage to buy the home. Your down payment represents the amount of equity you have. However, some events occurred since you purchased your home. Firstly, you paid off part of your mortgage. Secondly, home prices changed, sometimes up and other times down. To calculate your current home equity, you need to know your current home’s value and the balance of your mortgage(s).

Here is a simple example. If your home is worth $400,000 and your current mortgage balance is $320,000, then you have $80,000 in equity. Can you take out a Home Equity Loan for $80,000? The answer is most likely, No, but in some circumstances possibly yes. 

Calculate Home Equity Value

Home Equity - How Much Can You Take Out

How large of a home equity loan can you take? That would depend on your Loan to Value ratio, and lenders’ rules and guidelines. Your LTV is easy to calculate. Using the previous example, your LTV is 80%: $320,000 / $400,000.

In general, lenders allow for a combined LTV (CLTV) of about 80%. It is essential that you align your cash needs with the amount of money that lenders will offer.

Home Equity Loan: LTV

Home Equity Loan Calculator - Choosing an Home Equity Loan Option

Is a HEL your best option? Use the calculator to see if a HEL, HELOC, or Cash-out Refinance best fits your situation.

Your home equity depends on the value of your home and your mortgage balance. If you have more than one mortgage, then use the total amount for your “Mortgage Balance.” The result box shows both your Loan to Value ratio (LTV) and the total amount of equity, in dollars, you have based on current values.
(Loan to Value Ratio)
My Equity is Now:
After completing step one you have a good idea of how much equity you have in your home. However, the amount of cash you can take out of your home depends on lenders underwriting rules. In general, lenders offer up a LTV up to 80%, although some lenders do offer higher ratios.
Maximum Cash Available Is:
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