Home equity is calculated by subtracting the amount of money you still owe on your mortgage from the total value of your home. For example, if your home is valued at $100,000 and you owe $40,000 on your mortgage, your current equity is $60,000.
$100,000 (home value) – $40,000 (mortgage balance owed) = $60,000 (current equity)
Most lenders consider your home equity in terms of a “combined loan-to-value ratio” or CLTV. CLTV is your outstanding mortgage loan debt and any other liens expressed as a percentage of your home’s fair market value. Given the example above, you would have a CLTV of 40%.
$40,000 (mortgage balance owed) / $100,000 (home value) = CLTV 40%
When you get a home equity line of credit (HELOC) or home equity loan (HELoan) through Prosper, depending on your creditworthiness and debt-to-income ratio, you may qualify for a HELOC with a CLTV as high as 90% or a HELoan with a CLTV as high as 95%3. In the example above, this means you could borrow as much as $90,000 combined between your existing mortgage and your new HELOC or HELoan.