How Do You Calculate Home Equity Line Of Credit Formula?
A home equity line of credit (HELOC) is a credit account similar to a credit card account. In fact, many lenders issue you a credit card when you open a HELOC. As with a credit card, you pay interest only on the money you borrow but at rates considerably lower than credit card issuers normally charge. However, you put your home up as collateral to secure the debt. A HELOC can be a good option if you face large expenses on an intermittent basis such as paying college tuition and making home improvements. Contact the lender you plan to open a home equity line of credit with and ask for a referral to have your home appraised. A HELOC is calculated using a formula based on the current market value of your home, so the appraisal is an essential first step. Ask your lender what percentage of the appraised value is allowed as a debt maximum for a HELOC. Typically the answer will be 75 percent or 80 percent. For example, if your home is appraised at $250,000 and the lender allows 75 percent as
