What is Home Equity Line of Credit?
Home Equity Line of Credit represents the maximum amount of funds that a borrower can draw down from the credit line at any given time.
In a revolving credit agreement, the borrower has the flexibility to borrow up to the maximum line of credit, repay it, and then borrow again without having to apply for a new loan each time. The borrower is only charged interest on the amount they have drawn down, not on the entire maximum line of credit.
The maximum line of credit is determined by the lender based on the borrower's creditworthiness, financial health, and other factors such as cash flow, profitability, and collateral. It serves as a safety net for the borrower to manage short-term liquidity needs, fund working capital requirements, or finance growth opportunities.
While the maximum line of credit represents the highest borrowing limit, it doesn't necessarily mean that the borrower will always utilize the full amount.
How to Calculate Home Equity Line of Credit?
Home Equity Line of Credit calculator uses Maximum Line of Credit = Maximum Loan to Value Ratio*Appraised Fair Value of Equity-Outstanding Mortgage Balance to calculate the Maximum Line of Credit, The Home Equity Line of Credit refers to the highest amount of credit that a lender is willing to extend to a borrower under a revolving credit agreement. Maximum Line of Credit is denoted by MLC symbol.
How to calculate Home Equity Line of Credit using this online calculator? To use this online calculator for Home Equity Line of Credit, enter Maximum Loan to Value Ratio (MLVR), Appraised Fair Value of Equity (AFVE) & Outstanding Mortgage Balance (OMB) and hit the calculate button. Here is how the Home Equity Line of Credit calculation can be explained with given input values -> 14940 = 6.5*3000-4560.