Often acquired as secondary, or "junior" loans, home equity loans allow homeowners to borrow a portion of their home's equity. You access home equity loan funds as a lump sum. Lenders limit the home equity loan amount you can borrow by setting a maximum loan-to-value ratio, or LTV. When combined with a first loan, the home equity loan has a combined LTV, or CLTV. When standing alone, a home equity has an LTV that you can calculate by finding your home's current value and your home equity loan balance. Your equity loan's LTV ratios determine what percentage of equity is left in your home.
Determine your home's value by using an online home evaluation tool or contacting a real estate professional who can provide an estimate. Real estate companies and data providers offer free valuation tools on their websites. To arrive at a value, your home is compared to similar homes in your area that have recently sold.
Find your current home equity loan balance by checking your most recent mortgage statement. The document shows the principal balance owed. You can access a statement online with most lenders, call your lender, or review the monthly statement that the lender mails to you. If applicable, also access your primary mortgage balance by following one of these procedures.
Divide your home equity loan balance by your home's value to get the equity loan's LTV. For example, if your home equity balance is $50,000, and your home has an estimated value of $200,000, the home equity LTV is 25 percent. In the event you have a primary mortgage balance, add this indebtedness to the home equity loan amount and divide the sum by the home's value. The result is your home equity loan's CLTV. For example, with a primary mortgage balance of $100,000, your total indebtedness of $150,000 results in a CLTV of 75 percent.
- To determine the percentage of equity left in your home, subtract the LTV -- or CLTV if you have two loans -- from 100. For example, a 75-percent CLTV means that your have 25 percent equity left in your home. To convert this figure into a dollar amount, multiply the percentage of equity in your home by the home's current value. In the example, 25 percent of $200,000 equals $50,000 equity in the home.