How to estimate home equity loan amount?


If you need to know the home equity loan amount on a home purchased 10 years ago for $300,000 there are several factors you will need to consider to arrive at working estimation as to how much you could borrow with a HEL, HELOC or a junior mortgage.

Factors Needed to Calculate Home Equity Loan Amount

Current home value - you will certainly need home appraisal. If you are aware of inflation levels in the preceding years, you could use your numbers to predict your home's current market price. Also, if you did any home improvements, this has to be reflected in the appraisal, or your own estimations.

Mortgage loan balances on the property - if you owe $220,000 on a house, which is currently worth $350,000 there is ($350,000 - $220,000)=$130,000 equity.

Combined Loan-To-Value - Some lenders will lend from 80% to 125% combined LTV (CLTV) to you. This determines in fact how much your lender will be willing to lend to you. For the above example, if your home equity loan program allows up to 110% CLTV, that means you could borrow (110% x $350,000 - $220,000) equals $165,000. Loan-related costs and any applicable fees would reduce this amount.

Purchase price - sometimes when applying for home equity loan no appraisal has been conducted yet, and the home equity loan amount is determined through supplying home purchase value, and house appreciation levels for the years you have owned the home.

Currently, very few home equity loan plans allow CLTV exceeding 100 per cent.

Due to recent and current crisis in the US mortgage and real estate market, few lenders will do no equity loans. Most often, the CLTV allowed will vary between 80% and 95%.

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