How to use the home equity loan calculator
- Enter your home value, from a recent appraisal or a realistic estimate of what it would sell for.
- Enter your mortgage balance, plus any other loans or credit lines secured on the home.
- Choose the lender's maximum combined loan-to-value (CLTV). 80% to 85% is common; some lenders go to 90%.
- Enter the loan amount you want.
- Enter the interest rate and choose the loan term.
- Read the monthly payment, whether the amount fits, and the tables of borrowing limits and terms.
How the borrowing limit and payment are calculated
Lenders don't let you borrow all of your equity. They cap the total of every loan on the home, old and new, at a share of its value, which is the combined loan-to-value. The rest of the equity is a cushion in case prices fall. A home equity loan is paid out as a lump sum and repaid at a fixed rate with equal monthly payments, like a mortgage.
Worked example
The defaults are a $450,000 home with a $250,000 mortgage, an 85% CLTV limit, and a $50,000 loan at 8.25% over 15 years:
- Equity: 450,000 − 250,000 = $200,000 (44.4% of the value)
- Maximum total debt: 85% × 450,000 = $382,500
- Available to borrow: 382,500 − 250,000 = $132,500, so $50,000 fits
- Combined LTV with the loan: (250,000 + 50,000) ÷ 450,000 = 66.7%
- Monthly rate: 0.0825 ÷ 12 = 0.006875, and n = 180 months
- Payment: 50,000 × 0.006875 ÷ (1 − 1.006875^−180) = $485.07
- Total interest over 15 years: $37,312.63
At a 90% limit you could borrow up to $155,000, which would cost $1,503.72 a month over 15 years. Asking for $200,000 would be over even the 85% limit by $67,500.
Choosing a term
For the same $50,000 at 8.25%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 5 years | $1,019.81 | $11,189 |
| 10 years | $613.26 | $23,592 |
| 15 years | $485.07 | $37,313 |
| 20 years | $426.03 | $52,248 |
| 30 years | $375.63 | $85,228 |
Stretching the loan from 10 to 30 years lowers the payment by about $238 a month but more than triples the interest. Match the term to what you're paying for: a short term for a car or a repair, a longer one only for something that lasts, like a major renovation.
Home equity loan, HELOC or cash-out refinance?
A home equity loan gives you a lump sum at a fixed rate, so it suits a one-time cost you know in advance. A home equity line of credit (HELOC) lets you draw as you need it, usually at a variable rate and with interest-only payments at first; the HELOC calculator shows how its payment changes. A cash-out refinance replaces your whole mortgage with a bigger one, which can make sense if today's mortgage rates are lower than your current rate; check that with the refinance calculator. Using home equity to pay off credit cards can cut the interest rate sharply, but it turns unsecured debt into debt secured on your home.
Frequently asked questions
How much can I borrow with a home equity loan?
Usually up to 80% to 85% of your home's value, minus what you still owe on the mortgage. With a $450,000 home and a $250,000 mortgage, that is $110,000 at 80% or $132,500 at 85%. Your credit score, income and debts also affect the amount and the rate.
What credit score do I need?
Many lenders look for a score in the mid-600s or higher, and the best rates go to scores above about 740. A lower score may mean a smaller limit, a lower CLTV cap or a higher rate.
Is home equity loan interest tax-deductible?
In the U.S., interest can be deductible if you itemize and use the money to buy, build or substantially improve the home that secures the loan, within the overall mortgage limits. Interest on money used for other purposes, such as paying off cards, isn't deductible. See IRS Publication 936 for the details.
Are there closing costs on a home equity loan?
Often, yes: appraisal, origination and title fees that can add up to a few percent of the loan. Some lenders waive them in exchange for a slightly higher rate, or if you keep the loan open for a minimum time. Include them when you compare offers.
Related calculators
- HELOC Calculator — HELOC payments during the interest-only draw period and the repayment period, the payment jump and total interest.
- Refinance Calculator — Whether refinancing pays off: new payment, monthly savings, break-even month and lifetime interest.
- Debt Consolidation Calculator — Compare up to four debts with one consolidation loan: monthly payment, total interest, payoff time.
- Loan Calculator — Monthly payment, total interest and a full amortization schedule, plus what extra payments save.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.