Home Equity Loan and HELOC Calculator

A home equity loan is a specific amount of money borrowed against the equity in your home. You get it as a lump sum and repay it in equal monthly payments over a set term, often at a fixed rate. If you already have a mortgage, it is a second mortgage, and your home secures it. Equity is the home’s value minus what you owe.

Lenders cap the combined loan-to-value ratio (CLTV), your mortgage plus the new loan divided by the home’s value. Each lender sets its own limit, so ask yours; the examples here use 80%, 85% and 90%. Room = value × limit - mortgage balance. At 85%, a $400,000 home with a $240,000 mortgage supports up to $100,000.

You need enough equity that your mortgage plus the new loan stays under the lender’s CLTV limit. For a $40,000 loan at an 85% limit with a $200,000 mortgage, the home must be worth at least $282,353, because ($200,000 + $40,000) / 0.85 = $282,353. A higher value or a smaller mortgage lowers the bar.

On $150,000 at 8% the payment is $1,433.48 a month over 15 years, $1,819.91 over 10 years and $1,254.66 over 20 years. At 7% over 15 years it is $1,348.24, and at 9% it is $1,521.40. Interest over 15 years at 8% totals $108,026.

Sometimes. The IRS allows the interest only if you use the money to buy, build or substantially improve the home that secures the loan, and you itemize deductions. Total home debt must stay within the limit: $750,000, or $375,000 if married filing separately, for debt taken after December 15, 2017. Interest on money spent on other things, such as paying off cards, is not deductible. Ask a tax professional.

Pay more than the minimum. During the draw period the minimum may be interest only, so any extra goes straight to principal and cuts later interest. In the repayment period, add extra to each payment or make lump-sum payments, and check for prepayment or early closure fees. Paying down principal early also lowers the large step-up when repayment starts.

A home equity loan pays out a lump sum with fixed payments, often at a fixed rate. A HELOC is a line of credit, like a credit card secured by your home: you borrow during a draw period, often 10 years, usually at a variable rate, then repay over a repayment period of often 10 or 20 years, when payments are often significantly higher.

It depends on how you will use the money. A fixed loan suits a one-time cost because the payment never changes. A HELOC suits costs spread over time and gives flexibility, but its rate is usually variable, so payments can rise, and they step up when repayment starts. Either way your home secures the debt, so compare fees, rate caps and your budget.

No, it is an estimate. It assumes a fixed rate for the whole term, equal monthly payments and no fees. A HELOC rate is usually variable and you may draw less than the full amount, so the real payment changes. Closing costs, origination fees and annual fees are not included. Your lender’s loan estimate shows the exact figures.

It first finds how much you can still borrow: home value times the lender’s CLTV limit, minus your mortgage balance. It then applies the standard loan payment formula to the amount you want, using the rate and term. For a HELOC it also shows the interest-only payment of the draw period and the payment after repayment starts.