Looking to see how much you can borrow with a second mortgage? Use the second mortgage calculator below to estimate how much of your home equity that you can access, and your monthly second mortgage payments.
The amount that you can borrow with a second mortgage depends on the amount of home equity that you have. Home equity is the difference between the current value of the home and the balance of all debt secured against the home, such as a mortgage.
When you make mortgage payments that reduce your mortgage principal, your home equity increases. Your equity will also increase if the value of your home rises. While you can ‘capture’ this equity by selling your home and paying off your mortgage, many homeowners want to use their equity while not selling their home.
Borrowing money using your home equity is a way to get access to a large amount of money at a low interest rate, since it is a secured loan. This second mortgage calculator first calculates the amount of equity that you have and then determines how much you can borrow with a HELOC as a second mortgage or with a second private mortgage.
With your existing mortgage, you can borrow up to a combined 80% of your home’s value with a HELOC or a home equity loan as a second mortgage. The maximum size of a HELOC on its own (not a second mortgage) is 65% of your home’s value. For private mortgages, you may be able to borrow up to 95% of your home’s value.
For example, let’s say that your home is valued at $500,000, and you currently have a mortgage of $300,000. Since $300,000 is 60% of $500,000, your current loan-to-value (LTV) is 60%. Since you can borrow up to 80% with a HELOC or home equity loan, you can borrow an additional 20% (80% maximum minus your 60% existing mortgage). This will allow you to borrow an additional $100,000, which is 20% of $500,000.
However, if your current mortgage is small enough, you may face the maximum limit for an individual HELOC, which is 65%. For example, if your mortgage balance is $50,000 on a home valued at $500,000, then your current LTV is 10%. This would normally mean that you can borrow another 70% ($350,000) based on the 80% limit, but in this case you will only be able to borrow 65%, or $325,000.
The 80% limit for HELOCs is a maximum, but it doesn’t mean that you’re guaranteed to be approved to borrow up to this limit. Your HELOC lender may approve you for a lower limit based on your income or credit score.
Many second mortgage lenders allow you to make interest-only payments on your HELOC or private second mortgage. Since you’ll only be making interest payments, the second mortgage principal will not decrease, which means that you will still owe as much as you started with at the end of your second mortgage term.
Home equity loans require principal payments just like a regular primary mortgage. This second mortgage calculator determines your second mortgage payments as a regular mortgage payment for home equity loans, and as interest-only payments for HELOCs and private mortgages.