Home Equity Loan Calculator Free Tool
Home Equity Loan Calculator
Loan Details
Monthly Payment
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Total Cost
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Total Interest
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Available Equity
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Loan-to-Value Ratios
Loan Balance vs Home Equity
Amortization Schedule
| Month | Date | Payment | Principal | Interest | Balance |
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Showing first 24 months of 180 total payments
A home equity loan lets you borrow against the equity you have built in your home, providing a fixed lump sum at a fixed interest rate with predictable monthly payments. Unlike a cash-out refinance, a home equity loan is a second mortgage that sits behind your primary mortgage. This calculator helps you estimate monthly payments, total interest cost, and how much equity you can access, so you can weigh whether tapping your home equity makes financial sense for your situation.
How Home Equity Loans Work
Your available equity is your home's current market value minus the outstanding balance on your mortgage. Most lenders permit borrowing up to 80-85% of your home's appraised value across all loans combined (this is called the combined loan-to-value ratio, or CLTV). The home equity loan sits as a second mortgage: if you default, the primary mortgage lender gets paid first from the foreclosure proceeds, making home equity loans slightly riskier for lenders and typically priced at a higher rate than primary mortgages.
Available Equity = Home Value - Mortgage Balance Max Loan = (Home Value × 0.85) - Mortgage Balance CLTV = (Primary Mortgage + Home Equity Loan) / Home Value
Example: $400,000 home, $200,000 mortgage balance. Max CLTV 85%: max total debt = $340,000. Max new loan = $340,000 - $200,000 = $140,000.
Home Equity Loan vs HELOC vs Cash-Out Refinance
All three options let you access home equity, but they work differently. A home equity loan provides a fixed lump sum at a fixed rate — ideal for a one-time large expense with a clear cost. A HELOC (Home Equity Line of Credit) is a revolving credit line at a variable rate, better for ongoing costs where the total amount is uncertain. A cash-out refinance replaces your entire mortgage with a new larger mortgage, which can make sense if you can lower your overall rate but involves refinancing costs.
| Feature | Home Equity Loan | HELOC | Cash-Out Refi |
|---|---|---|---|
| Disbursement | Lump sum | Draw as needed | Lump sum |
| Rate type | Fixed | Variable (usually) | Fixed or ARM |
| Monthly payment | Fixed | Varies with balance | Fixed |
| Affects primary mortgage? | No | No | Yes (replaces it) |
| Closing costs | 2-5% of loan | 0-2% | 2-5% of new loan |
| Best for | One large, defined expense | Ongoing or phased costs | Lowering overall rate + cash |
Common Uses for Home Equity Loans
The most financially sound uses are those that either improve the home's value (home renovations) or eliminate higher-cost debt (consolidating credit cards at 20%+ APR into a 7-8% home equity loan). Using home equity to fund college, medical bills, or business startup costs can make sense in some situations. Using it for vacations, cars, or everyday expenses is generally inadvisable because you are converting unsecured debt or current spending into a 10-20 year secured obligation backed by your home.
| Use Case | Financial Rationale |
|---|---|
| Kitchen or bathroom renovation | Often recovers 60-80% of cost in home value |
| High-interest debt consolidation | Trades 15-25% APR for 7-9% fixed rate |
| College tuition (supplement) | Lower rate than private student loans |
| Medical emergencies | May be lower rate than personal loans |
| Vacation or luxury purchase | Poor use: depreciating/intangible value, long repayment |
Monthly Payment Estimation
Home equity loans use standard amortization, identical to a primary mortgage. The payment covers interest first and then principal. Early payments are mostly interest; later payments shift toward principal reduction. Use the standard loan payment formula to estimate your monthly obligation before applying.
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1] P = loan amount, r = monthly rate (annual rate / 12), n = total payments Example: $50,000 at 8% for 10 years r = 0.08/12 = 0.00667, n = 120 Payment = $50,000 × [0.00667 × (1.00667)^120] / [(1.00667)^120 - 1] = $607/month Total paid = $72,840, Total interest = $22,840
Frequently Asked Questions
What credit score do I need for a home equity loan?⌄
Most lenders require a minimum credit score of 620, with better interest rates available at 700 and above. Lenders also evaluate your combined loan-to-value ratio (all outstanding mortgage balances divided by your home's appraised value — they typically want this below 85%) and your debt-to-income ratio (total monthly debt payments versus gross monthly income — most lenders want DTI below 43%). Having at least 15-20% equity in the home after the loan is a standard requirement.
Is interest on a home equity loan tax deductible?⌄
Under the Tax Cuts and Jobs Act of 2017, home equity loan interest is only deductible if the loan proceeds are used to "buy, build, or substantially improve" the home that secures the loan. Using a home equity loan for debt consolidation, medical bills, education, or personal expenses does not qualify for the deduction. If you use it for a qualifying home improvement, you may deduct interest on up to $750,000 of combined mortgage debt (primary + home equity). Consult a tax advisor for guidance on your specific situation.
What happens if I can't repay a home equity loan?⌄
Your home is the collateral for a home equity loan, which means the lender can initiate foreclosure proceedings if you default. Because it is a second mortgage, the primary mortgage lender has first claim on proceeds from a foreclosure sale. This makes home equity loans significantly riskier than unsecured personal loans — a default can result in losing your home. Only borrow what your cash flow can reliably service, and avoid using home equity to fund depreciating assets or discretionary spending.
How long does it take to get a home equity loan?⌄
The approval and closing process typically takes 2-6 weeks. It involves a loan application, credit pull, home appraisal (to establish current value), title search, and closing with notarized documents. Some lenders offer expedited timelines (2-3 weeks) for well-qualified borrowers. Unlike HELOCs, most home equity loans have a mandatory 3-day right-of-rescission period after closing during which you can cancel without penalty.
What is the difference between a home equity loan and a second mortgage?⌄
These terms mean the same thing. A home equity loan is a second mortgage — it is a loan secured by your home that sits behind (is subordinate to) your primary mortgage. Both terms describe the same financial product. "Second mortgage" is the legal/technical term; "home equity loan" is the marketing term used by most lenders. Any loan against your property that is not your first mortgage is technically a second mortgage, which includes both fixed home equity loans and HELOCs.