Home Equity Loan Calculator
Repayment Details
Monthly Pay
Lifetime Outline
| Total of Payments | -- |
| Total Interest | -- |
Amortization Schedule
Detailed breakdown of principal and interest reduction for each year.
| Year | Interest | Principal | Ending Balance |
|---|
The Loan Amount You Can Borrow
Use the calculator below to estimate the maximum home equity loan amount you may be able to borrow, based on the value of your home, your remaining mortgage balance, and the loan-to-value (LTV) ratio acceptable by the lender.
Result
You may borrow up to:
Note: There are other factors that may affect your final qualified home equity loan amount, such as your credit history. Applicants with a credit score below 630 may not qualify. Your other debts might also affect the amount you can qualify for. Lenders typically won't approve a loan for borrowers with a debt-to-income ratio of 43% or higher.
Understanding Home Equity Loans
The first calculator above is designed to compute the monthly payment and costs of a home equity loan. The second calculator estimates how much a borrower may qualify for based on the home's value, the outstanding mortgage balance, and the loan-to-value (LTV) ratio acceptable to lenders. Both calculators are primarily intended for use by U.S. residents.
What is a home equity loan?
A home equity loan (also called a second mortgage) is a one-time installment loan that lets you borrow using your home as collateral. The borrower receives a lump sum upfront and repays it over a fixed term with fixed monthly payments in most cases. Because the loan is backed by your home, its interest rate is typically lower than that of many other types of debt, such as credit cards or personal loans. The interest rate and the monthly repayment on a home equity loan are normally fixed. This gives the borrower a predictable repayment schedule.
Loan-to-Value Limits
Since a home equity loan uses your home as collateral, lenders usually limit how much you can borrow based on the value of the property. Most lenders set the borrowing limit at no more than 80% of the home's value, including your existing mortgage balance.
Home Value = $500,000
Outstanding Mortgage = $230,000
Max Amount at 80% LTV = ($500,000 × 0.80) - $230,000 = $170,000
Some lenders may accept different loan-to-value ratios—such as 70%, 85%, or even 90%. In addition to LTV requirements, lenders also impose absolute borrowing caps on home equity loans, typically $1 million.
Besides house value, lenders also have other limitations on qualifications, such as the borrower's credit history. In the U.S., applicants with a credit score below 630 may not qualify for a home equity loan. Lenders typically won't approve a loan for borrowers with a high debt-to-income ratio, such as 50% or 43%.
Upfront Costs
Upfront/closing costs typically include origination fees, appraisal fees, document fees, and title search costs. These run between 2-5% of the loan amount. Many lenders offer no-closing-cost loans, but the trade-off is typically higher interest rates or early payoff penalties.
Ongoing Costs
The fixed monthly payments include both principal repayment and interest. At the beginning, the interest payment portion is larger, gradually shifting towards principal over time as balance is paid down.
Usage and alternatives
A home equity loan allows borrowers to access a lump sum for a planned major expense, especially when they prefer a fixed interest rate and predictable monthly payments. Common uses include:
- Major home improvements and repairs: Remodels, roof replacement. Upgrades help maintain or increase home value.
- Debt consolidation: Paying off high-interest credit card balances.
- Education costs: Paying tuition or related expenses.
- Major events: Medical expenses, funding a business, weddings.
Alternatives to Home Equity Loans
Cash-out Refinance
Replaces your primary mortgage with a loan larger than your existing balance. You take out cash after closing. Good when the market interest rate is lower than your existing mortgage interest rate.
HELOC (Home Equity Line of Credit)
A HELOC has a draw period where you can access funds flexibly over time as you need them. But it normally has a variable interest rate, creating financial uncertainty.
Overall, a home equity loan is a relatively low-cost option for those who need it. However, it is a financial burden and should be used responsibly—for a clear need, with affordable payments, and with an awareness of the risk, as it can put your homeownership in danger if not maintained.