Home Equity Loan Calculator
Calculate your home equity loan payments, maximum borrowing amount, and total interest costs. A home equity loan provides a lump sum with fixed monthly payments, making it ideal for major expenses like home renovations, debt consolidation, or large purchases. See how much you can borrow based on your home value and current mortgage.
How to Use This Home Equity Loan Calculator
1. Enter your current home value (use recent comparable sales, an appraisal, or online estimates).
2. Input your current mortgage balance (the amount you still owe on your first mortgage).
3. Select the maximum combined loan-to-value ratio your lender allows (typically 80-85%).
4. Enter the amount you want to borrow (up to the maximum available).
5. Set the interest rate and loan term offered by your lender.
6. Click "Calculate Home Equity Loan" to see your monthly payment and total costs.
What is a Home Equity Loan?
A home equity loan, sometimes called a second mortgage, allows you to borrow a lump sum against the equity in your home. Unlike a HELOC (Home Equity Line of Credit), a home equity loan provides all the money upfront with a fixed interest rate and fixed monthly payments over the loan term. Your home serves as collateral, so the interest rate is typically lower than unsecured loans like personal loans or credit cards.
Home equity loans are popular for large, one-time expenses because they offer predictable payments and often lower rates than other financing options. Common uses include home renovations, debt consolidation, medical expenses, education costs, and major purchases. The interest may be tax-deductible if the funds are used for home improvements.
- Fixed Rate: Your interest rate and payment stay the same for the entire loan term
- Lump Sum: You receive all the money at once, unlike a HELOC's revolving credit
- Second Lien: The loan is secured by your home as a second mortgage
- Closing Costs: Expect 2-5% of the loan amount in fees and closing costs
Home Equity Loan Formula
The maximum you can borrow is calculated as:
Maximum Loan = (Home Value x Max LTV%) - Mortgage Balance
For example, with a $450,000 home, $250,000 mortgage, and 80% max LTV: ($450,000 x 0.80) - $250,000 = $110,000 maximum home equity loan.
Monthly payments are calculated using the standard amortization formula:
M = P[r(1+r)^n]/[(1+r)^n-1]
Where: M = Monthly payment, P = Principal (loan amount), r = Monthly interest rate, n = Total number of payments.