Home Equity Loan Calculator
Calculate your borrowing power and estimated monthly payments
Understanding Home Equity Loans
A home equity loan, often referred to as a "second mortgage," allows homeowners to borrow against the value of their property. Unlike a Home Equity Line of Credit (HELOC), a home equity loan provides a lump sum of cash with a fixed interest rate and a set repayment term.
How This Calculator Works
To determine how much you can borrow, lenders look at your Combined Loan-to-Value (CLTV) ratio. Most lenders will allow you to borrow up to 80% or 85% of your home's total value, minus what you still owe on your primary mortgage.
- Home Value: The current market appraisal of your property.
- Mortgage Balance: The remaining principal on all existing liens.
- LTV Limit: The maximum percentage of value a lender will risk (typically 80%).
Example Calculation
Suppose your home is worth $500,000 and your current mortgage balance is $300,000. If a lender has an 80% LTV limit:
- Maximum total debt allowed: $500,000 × 0.80 = $400,000.
- Subtract current mortgage: $400,000 – $300,000 = $100,000.
- Your maximum equity loan: $100,000.
Factors That Influence Your Rate
While equity is the primary driver, lenders also consider your credit score, debt-to-income (DTI) ratio, and employment history. A higher credit score typically unlocks lower interest rates and higher CLTV limits.
Is a Home Equity Loan Right for You?
These loans are ideal for large, one-time expenses such as home renovations, debt consolidation, or major medical expenses. Because the loan is secured by your home, the interest rates are usually much lower than personal loans or credit cards. However, remember that your home serves as collateral; failure to repay could lead to foreclosure.