π¦ Home Equity Loan Calculator
Lump sum, fixed rate: your payment and your borrowing limit.
Fixed monthly payment
Estimates for planning only, not financial advice.
A home equity loan gives you a lump sum secured by your home, paid back in fixed monthly payments over 5 to 30 years. Most lenders cap total borrowing at 80 percent of your home's value minus your first mortgage balance. It is ideal for a single known expense like a renovation, and risky for anything you are not sure you can repay, because your home is the collateral.
How to Use This Calculator
Enter your home's current market value and your remaining first-mortgage balance, then pick the CLTV limit your lender allows (80 percent is standard). The calculator shows the maximum you can borrow. Enter the amount you actually want, plus the rate and term you were quoted, to get your fixed monthly payment, total interest, and total cost.
Enter your Home Value (a realistic current market value, not what you paid) and your First Mortgage Balance.
Pick the CLTV Limit and read your maximum loan. Enter the Amount to Borrow, which cannot exceed the maximum.
Enter the APR and Term to see the fixed monthly payment, total interest, and your combined loan-to-value after borrowing.
How the Borrowing Limit Works
Lenders protect themselves with the CLTV cap: they will not let your combined debt exceed, say, 80 percent of the home's value, keeping a 20 percent equity cushion against price drops and foreclosure costs. Note the cap applies to combined debt, not to your equity alone. With $200,000 of equity on a $500,000 home, you cannot borrow $200,000; at an 80 percent CLTV cap you can borrow $100,000, leaving $100,000 of equity untouched. The monthly payment uses the same amortization formula as any fixed loan.
What Lenders Check Before Approving You
Equity alone does not get you approved. Lenders underwrite a home equity loan almost like a first mortgage, and four things decide the outcome.
First, the CLTV cap: most lenders stop at 80 percent combined loan-to-value, though some stretch to 85 or 90 percent for strong borrowers. Second, your credit score: 620 is a common floor, and 700-plus gets you the best rates. Third, your debt-to-income ratio: total monthly debts including the new payment usually must stay under 43 percent of gross income, so run yours through our debt-to-income ratio calculator before you apply. Fourth, the appraisal: the lender values your home, and a low appraisal shrinks or kills the loan.
My advice: pull your credit reports and fix errors a few months before applying. A 20-point score bump can move your rate enough to save thousands over the life of the loan, and it costs nothing but patience.
Worked Example
Home value $500,000, first mortgage balance $300,000, CLTV limit 80 percent. Maximum loan = ($500,000 x 0.80) - $300,000 = $100,000. Borrow the full $100,000 at 8 percent APR for 15 years: monthly rate 0.6667 percent, 180 payments, payment = $955.65 a month. Total paid = $172,017, so total interest = $72,017. Combined LTV after borrowing = ($300,000 + $100,000) / $500,000 = 80 percent, exactly at the cap. If you borrowed only $50,000 for the actual project cost, the payment would be $477.83 and total interest $36,009, which is why borrowing only what you need matters.
Home Equity Loan vs HELOC vs Cash-Out Refinance
Three ways to tap equity, three different trade-offs. The home equity loan is best when you know the exact cost upfront and want payment certainty: fixed rate, fixed payment, done. A HELOC is best for ongoing or uncertain spending, like a renovation in phases, because you draw only what you need and pay interest only on what you draw, but the rate floats and payments jump when the draw period ends. A cash-out refinance replaces your first mortgage entirely, which only makes sense when current first-mortgage rates are at or below your existing rate; refinancing a 3 percent first mortgage into a 7 percent loan just to pull cash is an expensive way to borrow. Compare all three on total cost, not just the monthly payment.
| Home equity loan | HELOC | Cash-out refinance | |
|---|---|---|---|
| How you get money | Lump sum | Draw as needed | Lump sum |
| Rate type | Fixed | Variable | Fixed or adjustable |
| Payment | Fixed | Changes over time | New first-mortgage payment |
| Best for | One known cost | Ongoing or phased costs | Low rates and a big cash need |
| Watch out for | Borrowing more than the project needs | Repayment shock | Resetting a good first-mortgage rate |
Price each option before you commit: our HELOC calculator models the draw and repayment phases, and our refinance break-even calculator tells you whether a cash-out refi earns back its costs.
Smart Uses and Costly Mistakes
The best uses add value or cut higher costs: renovations that genuinely raise the home's value, consolidating credit card debt at 20 percent-plus into an 8 percent secured loan, or funding education. The costly mistakes: borrowing the maximum for lifestyle spending, which converts unsecured wants into debt secured by your home; ignoring closing costs of 2 to 5 percent, which can make small loans uneconomical; and consolidating credit cards without fixing the spending that created the balances, which leaves you with the equity loan and new card debt. Since your home secures the loan, treat every borrowed dollar as seriously as the mortgage itself.
Borrow Less Than the Maximum
Lenders offer maximums; wisdom sets the actual number. Every extra $10,000 you borrow at 8 percent over 15 years costs about $96 a month and $7,200 in total interest. Get contractor bids in writing, add a 10 percent contingency, and borrow that number, not the round number the lender dangles.
And never finance lifestyle spending with your house as collateral. A vacation paid off over 15 years at 8 percent is not a vacation, it is a very expensive memory. If the spending would not survive the question "would I borrow against my home for this," do not.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is a home equity loan?
A home equity loan is a lump sum you borrow against the equity in your home, paid back in fixed monthly installments over a fixed term, usually 5 to 30 years. It is often called a second mortgage because it sits behind your first mortgage in lien priority. You receive the full amount at closing, the rate is fixed, and the payment never changes, which makes it ideal for one-time expenses like a renovation or debt consolidation.
How much can I borrow with a home equity loan?
Lenders cap total borrowing with a combined loan-to-value (CLTV) limit, typically 80 percent, though some go to 85 or 90 percent. Maximum loan = (home value x CLTV limit) - first mortgage balance. On a $500,000 home with a $300,000 first mortgage and an 80 percent CLTV cap, you can borrow up to $100,000. Your available equity above the cap is a cushion the lender will not let you touch.
What is the difference between a home equity loan and a HELOC?
A home equity loan gives you a lump sum at a fixed rate with a fixed payment, best for a known one-time cost. A HELOC is a revolving credit line with a variable rate that you draw from as needed, best for ongoing or uncertain costs like a phased renovation. The loan offers payment certainty; the HELOC offers flexibility but exposes you to rate changes and a payment jump when the draw period ends.
Are home equity loan rates fixed or variable?
Fixed. The rate is locked at closing and your payment stays identical for the life of the loan, typically 5 to 30 years. Rates run higher than first-mortgage rates because the lender is in second position: if the home were sold at a loss, the first mortgage gets paid before the equity loan. As of recent markets, expect rates roughly 1 to 3 percentage points above 30-year first-mortgage rates, varying with your credit score and CLTV.
Is home equity loan interest tax deductible?
Sometimes. Under current US tax law, the interest is deductible only if the loan is used to buy, build, or substantially improve the home securing the loan, and only if you itemize deductions. Using the money for a kitchen remodel can qualify; using it to pay off credit cards or buy a car does not. Tax rules change, so confirm your specific situation with a tax professional before counting on the deduction.
What are the risks of a home equity loan?
The big one is that your home is the collateral: fall behind and the lender can foreclose, even if your first mortgage is current. Borrowing also shrinks your equity cushion, so if home prices dip you could owe more than the home is worth. Closing costs of 2 to 5 percent apply, and some loans carry prepayment penalties. Never borrow the maximum just because it is offered; borrow what the project actually needs.
How long does it take to get a home equity loan?
Typically two to six weeks from application to funding. The appraisal and underwriting set the pace. You can speed things up by applying online, uploading documents the same day you are asked, and responding fast to underwriting questions. After closing, federal law gives you three business days to cancel, so the money usually lands a few days after you sign.
What credit score do you need for a home equity loan?
Most lenders want at least 620, and the best rates go to scores of 700 or higher. Because the loan is secured by your home, approvals are more forgiving than unsecured lending, but a low score means a higher rate or a tighter CLTV cap. If your score sits under 660, it is worth spending a few months improving it before you apply.
Can I pay off a home equity loan early?
Usually yes, and doing so saves you all the remaining interest. Most home equity loans carry no prepayment penalty, but some do, so read your agreement before you sign. Even without a formal early payoff, making extra principal payments each month shortens the loan the same way. Just confirm extra payments apply to principal, not future interest.
What are the closing costs on a home equity loan?
Expect 2 to 5 percent of the loan amount: appraisal, origination, title work, and recording fees. On a $50,000 loan that is $1,000 to $2,500, which is why small loans can be uneconomical. Some lenders advertise no-closing-cost equity loans, but they typically bake the cost into a higher rate, so compare the APR, not the headline offer.