## Home Equity Loan Calculator

This calculator will estimate how large of a credit line you may be able to qualify for, for up to four lender Loan-to-Value ratios (percent of value of home a lender is willing to loan out).

 Appraised value of property (\$): Total of mortgages owed against property (\$): Loan-to-value ratio 1 (%): Loan-to-value ratio 2 (%): Loan-to-value ratio 3 (%): Loan-to-value ratio 4 (%): Percent of Appraised Value: Max amount of loans possible: Less existing loans: Your credit limit:

## Credit Line Qualification

When diving in to the initial home ownership phase of meeting with a broker and choosing the appropriate loan for your anticipated finances, you will often find that the issue of home equity line of credit becomes of the utmost importance. The amount of the line of credit and associated mortgage rate that you will be offered is largely dependent on your loan to value ratio. Of course, there are other influential figures involved – such as credit score, age, tax bracket and style of loan desired – but the loan to value ratio remains one of the key players to decide just how large of a mortgage you can get over how many years and with how much interest.

### The Loan to Value Ratio

So what is the loan to value ratio and why is it so important? The LTV is a statistic contrasting the value of your loan to the value of your home. If you must obtain, for instance, a loan for the amount of \$50,000 and the cost of your new home is \$150,000, your LTV would be 1/3 or 33%. Actual purchase price rather than official appraisal value of the home is used when calculating the LTV because the purchase price is generally slightly lower, providing the home owner with a lower LTV altogether. As you will see, the lower LTV is what you are aiming for.

The lower your LTV, the more equity you already have in your home, and the less cash you must borrow via your mortgage. Accordingly, those with a lower LTV are considered less of a needy or risky case by the lender and therefore rewarded for their stability and positive equity by a fairly low interest rate on their loan. In contrast, those who have a higher LTV because they are purchasing a home well above their budget or because they have less net income to start with, typically get landed with a slightly higher annual interest rate on the terms of their loan. It is an unfair process, perhaps, to the prospective home owners, but one that keeps the lenders thriving in business.