FAQ: How is the HCLTV Calculated?

What is HCLTV?

HCLTV (Home Equity Combined Loan-to-Value) is a mortgage metric that calculates the total outstanding loan balances secured by a property, including any Home Equity Lines of Credit (HELOC), compared to the property's appraised value. It gives lenders a clearer picture of the borrower's total indebtedness against the home.

How does Charlie calculate HCLTV?

Charlie calculates the HCLTV using the following formula:

HCLTV = (Total Loan Amount + HELOC Credit Limit) ÷ Property Value

• Total Loan Amount includes:

  • The original loan amount on the first mortgage.

  • Any outstanding balance on subordinate liens (second mortgages).

• HELOC Credit Limit is the maximum available line of credit for the Home Equity Line of Credit, regardless of the current balance drawn. This ensures the lender considers the full risk exposure.

• Property Value is determined by the appraised value of the property, as entered or updated in the loan file.

What is the difference between CLTV and HCLTV?

• CLTV (Combined Loan-to-Value) uses the current drawn balance of a HELOC:

  CLTV = (Total Loan Amount + Current HELOC Balance) ÷ Property Value

• HCLTV, in contrast, uses the total credit limit of the HELOC, which reflects the full potential borrowing power, not just the current usage.

When is HCLTV used instead of CLTV in Charlie?

HCLTV is typically used:

• When underwriting loans involving HELOCs.

• To assess the maximum potential liability a borrower could assume against the property.

• In cases where lenders require a conservative risk estimate by factoring in the full HELOC limit.

CLTV is used for scenarios that require the current actual debt exposure, while HCLTV focuses on maximum potential exposure.

Does Charlie automatically update HCLTV?

Yes. Charlie recalculates HCLTV automatically when any of the following fields are updated:

• Loan amounts (first or subordinate liens).

• HELOC credit limit.

• Property value.

Changes to these fields will trigger an updated calculation to ensure accuracy and compliance with underwriting guidelines.