Home Equity Loan Calculator

Say your home is worth $450,000 and you still owe $220,000 on your mortgage. Your equity is $230,000 - but you can't borrow all of it. If your lender caps combined loan-to-value at 85%, the math is $450,000 × 0.85 = $382,500, minus your $220,000 mortgage, leaving roughly $162,500 you could take as a home equity loan. At 8.5% over 15 years that's about $1,600 per month. This home equity loan calculator runs that exact math for your numbers and shows the monthly payment, total interest, and a full amortization schedule.

How the borrowing limit is calculated

The maximum loan is driven by your lender's combined loan-to-value (CLTV) cap:

The monthly payment on that loan is then a standard amortized payment, the same formula a mortgage uses: M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12). Early payments are mostly interest; later payments are mostly principal.

Home equity loan vs HELOC

A home equity loan gives you a single lump sum at a fixed rate with a predictable monthly payment - it behaves like a second mortgage and suits one-time costs such as a renovation or debt consolidation. A HELOC is a revolving line of credit, usually at a variable rate, that you draw from over time and repay as you go. Choose the equity loan when you know the amount and want payment certainty; choose the HELOC when you want flexible access and can handle a rate that moves. If a flexible line fits your situation better, run the numbers in our HELOC calculator and compare the two payment structures side by side.

What lenders look for

Beyond the CLTV cap, lenders weigh your credit score (often mid-600s and up), debt-to-income ratio, income stability, and the appraised value of your home. Most want you to keep at least 15%-20% equity after the new loan, which is why the LTV cap matters so much. A higher score and a lower CLTV typically earn a lower rate. Because the loan is secured by your home, missing payments can lead to foreclosure - borrow conservatively and keep the payment well within your budget.

Smart ways to use home equity

• Home improvements: projects that raise value can also make the interest tax-deductible if you itemize.
• Debt consolidation: swapping high-rate credit-card debt for a lower fixed rate can cut interest - but note this interest is generally not deductible. Our debt payoff calculator shows how fast a consolidated balance clears.
• Large one-time costs: a known expense like a medical bill or tuition fits the lump-sum structure well.
• Avoid: using your house as collateral for vacations, cars, or everyday spending you can't comfortably repay.

How to use this home equity loan calculator

You only need four numbers to get a realistic estimate. Work through the fields in order:

1. Home value: enter your home's current market value, ideally a recent appraisal or a conservative estimate. This is the base the lender's LTV cap is applied to.
2. Mortgage balance: type what you still owe on your first mortgage. The calculator subtracts this to find how much equity is actually borrowable.
3. Max LTV: set the combined loan-to-value cap your lender allows, commonly 80%, 85%, or 90%. A higher cap unlocks more cash but leaves less equity as a cushion.
4. Rate and term: enter a current quoted rate and the repayment term in years. Switch the term to see how the monthly payment and total interest move.

The result updates instantly. Read the maximum loan amount and monthly payment at the top, then scroll the amortization schedule to see how each year splits between principal and interest.

A second worked example: a paid-off home

Suppose you own a $320,000 home outright, with no mortgage left. Because there is no first lien to subtract, your full CLTV limit is available. At an 80% cap the math is $320,000 × 0.80 = $256,000 of borrowable equity. If you only need $60,000 for a kitchen remodel, you can borrow just that - you never have to take the maximum. At 8% over 10 years, a $60,000 loan runs about $728 per month and costs roughly $27,400 in total interest. Because the loan is secured by a debt-free home, the rate is usually far lower than an unsecured personal loan for the same amount, which is why a home equity loan is often the cheapest route to a large, one-time sum.

Who this calculator is for

This tool is built for anyone weighing whether to tap the equity they have built up. That includes:

• Homeowners planning a renovation who want to know the most they can borrow and what the payment would be.
• People consolidating debt comparing a fixed home equity payment against their current credit-card minimums.
• Owners of paid-off or low-balance homes deciding how much equity is safe to access.
• Borrowers deciding between a loan and a HELOC who want a concrete payment number for the lump-sum option.
• Anyone budgeting who needs to see the second monthly payment before committing to a project.

Home equity loan vs cash-out refinance

Both let you turn equity into cash, but they work differently. A home equity loan is a second loan added on top of your existing mortgage, so your original mortgage - and its rate - stays untouched. A cash-out refinance replaces your first mortgage with a new, larger one and gives you the difference in cash. If your current mortgage rate is low, a second loan usually wins because refinancing would reset your whole balance to today's higher rate. If today's rates are lower than your existing mortgage, a cash-out refinance may be cheaper overall. Compare the blended cost, not just the headline rate, before deciding - our cash-out refinance calculator shows the new payment and cash available so you can weigh it against the second-loan option here, and the mortgage calculator helps you re-price your first mortgage at today's rates.

What changes your borrowing limit the most

If you adjust the inputs and watch the maximum loan move, a few factors dominate:

• Home value: the base everything is calculated from - a higher appraisal directly raises your limit.
• Mortgage balance: every dollar you still owe is subtracted from what you can borrow, so paying down the first mortgage frees up equity.
• LTV cap: moving from 80% to 90% can unlock tens of thousands more, but leaves a thinner equity cushion.
• Interest rate: does not change how much you can borrow, but it drives the monthly payment and total interest sharply.
• Term length: a longer term lowers the payment but raises the lifetime interest you pay.

Key home equity terms explained

• Equity: your home's value minus everything you owe against it. It is what you own outright.
• Borrowable equity: the portion lenders will actually lend against - your value times the LTV cap, minus the first mortgage. It is always less than total equity.
• CLTV (combined loan-to-value): all loans secured by the home divided by its value. Lenders cap this, commonly at 80%-90%.
• Second lien: a home equity loan sits behind your first mortgage in repayment priority, which is part of why its rate is usually a bit higher.
• Right of rescission: a federal three-business-day window after closing on your primary residence during which you can cancel the loan.
• Closing costs: origination, appraisal, title, and recording fees - often 2%-5% of the loan - that reduce your net proceeds.

Closing costs and the true cost of borrowing

The borrowing limit and payment this tool shows are based on the loan amount itself, but a home equity loan also carries upfront costs that reduce the cash you actually pocket. Typical fees include an origination or application fee, an appraisal to confirm your home's value (often $300-$600), title search and title insurance, recording fees charged by your county, and sometimes points you can pay to buy down the rate. Altogether these commonly run 2%-5% of the loan. On a $160,000 equity loan, that is roughly $3,200-$8,000 deducted from your proceeds or rolled into the balance. Some lenders advertise "no closing cost" equity loans, but they usually recover the expense through a higher interest rate, so compare the all-in cost rather than the headline. When you budget a project, subtract these fees from the maximum loan figure above to see the net cash you can actually spend.

How home equity loan rates are set

Home equity loan rates are usually a few tenths of a percent to a full point higher than first-mortgage rates, because the loan is a second lien: if the home is ever sold or foreclosed, the first mortgage gets paid before the equity loan, so the lender takes on more risk. The rate you are offered depends heavily on your credit score, your combined loan-to-value (a lower CLTV signals a bigger equity cushion and earns a better rate), your debt-to-income ratio, and the broader interest-rate environment. Borrowers in the mid-700s with a CLTV under 70% see the sharpest pricing, while a thin credit file or a CLTV pushed to 90% lands at the high end. Because the rate drives the monthly payment far more than any other single input, it is worth getting quotes from several lenders and checking your debt-to-income ratio before you apply - a lower DTI can move you into a better pricing tier.

When a home equity loan makes sense - and when it doesn't

A home equity loan shines when you have a specific, one-time expense, a stable income, and a low rate on your existing first mortgage you do not want to disturb. Funding a value-adding renovation, consolidating high-interest debt into a single fixed payment, or covering a large planned cost like tuition all fit the lump-sum, fixed-rate structure well. It is a poor fit when your need is open-ended or ongoing (a HELOC's revolving credit is better), when your income is uncertain (you are putting your home on the line), or when the amount is small enough that an unsecured personal loan avoids the closing costs and the risk to your house. The core trade-off is simple: you are exchanging a lower rate for the chance of losing your home if you cannot pay. Borrow only what a comfortable monthly payment supports, and keep a cushion for the months when budgets get tight.

Limitations and assumptions

This calculator is a planning estimate, not a loan offer. Keep these assumptions in mind:

• It assumes a fixed interest rate for the entire term and a fully amortizing payment.
• It does not include closing costs, origination, appraisal, or title fees, which reduce the cash you actually receive.
• The LTV cap you enter is an assumption; your lender's real cap depends on your credit, the property type, and occupancy.
• It does not model tax effects - whether the interest is deductible depends on how you use the funds and whether you itemize.
• Your actual limit, rate, and approval depend on credit score, debt-to-income ratio, income, and a current appraisal.

Sources

• Consumer Financial Protection Bureau (CFPB) - What is a home equity loan?
• Consumer Financial Protection Bureau (CFPB) - Home equity loan vs. HELOC.
• Consumer Financial Protection Bureau (CFPB) - Right of rescission on home-secured loans.
• Internal Revenue Service (IRS) - Publication 936: Home Mortgage Interest Deduction.