Home Equity Loan Calculator

What Is a Home Equity Loan?

A home equity loan is a fixed-rate second mortgage that lets you convert part of your home's paid-off value into cash. You receive the entire loan amount as a single lump sum at closing and then repay it with equal monthly principal-and-interest payments over a set term, typically 5 to 30 years. Because the loan is secured by your home — sitting in second position behind your primary mortgage — the interest rate is materially lower than what credit cards, personal loans, or other unsecured borrowing charge. The trade-off is that your house serves as collateral: if you stop paying, the lender can foreclose.

Home equity loans are sometimes called "second mortgages" because they are recorded after your first mortgage in county land records. The first mortgage keeps its priority lien position, which is why home equity loan rates run a bit higher than primary mortgage rates — in a foreclosure, the first mortgage gets paid first, and the home equity lender is repaid only from whatever proceeds remain. Most home equity loans carry fixed rates, which means the interest rate you lock in at closing never changes, even if market rates double over the next two decades. That rate certainty is the single biggest reason borrowers pick a home equity loan over the variable-rate alternative, a HELOC.

Home Equity Loan vs HELOC vs Cash-Out Refinance

Three products let you pull cash out of your home, and choosing the wrong one can cost thousands. A home equity loan adds a separate fixed-rate second mortgage on top of your existing first mortgage. A HELOC works like a credit card secured by your home — you draw and repay funds during an interest-only draw period, then amortize the remaining balance in a repayment phase. A cash-out refinance replaces your current first mortgage with a larger one and hands you the difference in cash, useful when today's refinance rate is attractive but costly when it means giving up a low rate you locked in years ago.

The decision usually comes down to three questions. Do you know the exact dollar amount you need up front? If yes, a home equity loan or cash-out refi wins; if the amount is uncertain or arrives in stages, a HELOC's revolving draw is more efficient. Do you already have a low first-mortgage rate you don't want to lose? If yes, a home equity loan or HELOC preserves it; a cash-out refi replaces it. Are you comfortable with a variable rate? If not, eliminate the HELOC and weigh the home equity loan against the cash-out refi based on closing costs and the rate difference.

How Lenders Decide How Much You Can Borrow

Four numbers drive every home equity loan approval. First is your home's appraised market value, which sets the ceiling on everything else. Second is the loan-to-value (LTV) ratio on your first mortgage and the combined loan-to-value (CLTV) ratio once the new home equity loan is layered on top — most lenders cap CLTV at 80% to 85% for fixed-rate second mortgages. Third is your debt-to-income (DTI) ratio, which measures how much of your monthly gross income goes toward debt payments including the new loan; a DTI under 43% is the standard cutoff. Fourth is your credit score, which both gates approval and sets the rate tier you fall into. Read our debt-to-income ratio guide for a detailed breakdown of how DTI is calculated and how to lower it before applying.

Worked illustration: a $500,000 home with a $300,000 first mortgage has $200,000 in equity and an LTV of 60%. At an 80% CLTV cap, total allowed debt is $400,000, so the maximum home equity loan is $100,000. At an 85% CLTV cap, the limit rises to $425,000, unlocking an extra $25,000 for a total home equity loan of $125,000. Lenders that go to 90% CLTV are rare for fixed-rate seconds and usually charge a meaningfully higher rate to compensate for the added risk.

Typical Home Equity Loan Rates

Home equity loan rates are not set by the Federal Reserve directly, but they track the same bond-market forces that move mortgage rates. As a rule of thumb, expect a home equity loan APR to sit 1 to 2 percentage points above the 10-year Treasury yield, with adjustments for the lender's overhead, the borrower's credit profile, and the CLTV. In 2026, borrowers with FICO scores of 700 or higher, CLTVs below 70%, and terms of 10 to 15 years are seeing APRs in the 7.5% to 9.5% range. Borrowers with scores in the 620 to 680 band typically face 9% to 12% APRs, reflecting the higher default risk at higher CLTVs and weaker credit files. Shorter terms (5 to 10 years) and lower CLTVs consistently earn the best rates within any credit band, because the lender's exposure is both smaller and shorter in duration.

Closing Costs and Fees

Home equity loans carry far lower closing costs than a primary mortgage, but the line items add up and some lenders fold them into the loan so you don't pay cash at closing — in exchange for a slightly higher rate. Expect an appraisal to run $300 to $600 (some lenders use automated valuation models and waive this), title search and insurance $200 to $400, origination fees 0% to 1% of the loan amount, and recording fees $50 to $200 paid to the county. Lenders that advertise "no closing cost" home equity loans are typically recovering those costs through a rate that is 0.25% to 0.50% higher than a comparable loan where you pay costs up front. Over a 15-year term, paying $1,500 in closing costs up front to lock a 0.375% lower rate usually wins, so run both scenarios. Our closing costs guide walks through each line item and shows when it makes sense to pay them versus accept a higher rate.

When a Home Equity Loan Makes Sense (and When It Doesn't)

A home equity loan shines when you need a known, one-time amount and value predictable payments. Common strong use cases include a major roof or foundation repair with a fixed contractor quote, consolidating credit-card debt that carries 20%+ APRs into a single 8% to 9% payment, or funding a one-time purchase such as a vehicle or medical bill where the total cost is locked in. In each case the borrower knows exactly how much to borrow, the fixed rate removes payment-shock risk, and the rate is dramatically lower than the unsecured alternatives. Homeowners sitting on a low first-mortgage rate locked during the 2020 to 2021 window often find a home equity loan far cheaper than a cash-out refinance, because refinancing would force them to give up a 3% first mortgage for a 6.5%+ replacement.

Where a home equity loan is the wrong tool: when the total cost is uncertain or arrives over time (use a HELOC instead, where you only pay interest on what you've drawn), when your income is volatile and a fixed monthly payment could become unaffordable (a HELOC's interest-only draw phase is more flexible), or when you're borrowing to invest in something speculative where the asset could lose value while your debt stays fixed. The biggest risk is common to all home-secured debt — if you cannot make the payments, the lender can foreclose. Borrowing against your home to fund consumption that doesn't outlast the loan term is the classic pattern that ends in lost equity. If you're considering a home equity loan to accelerate payoff of higher-rate debt, our loan payoff strategies guide compares the snowball, avalanche, and consolidation approaches.

Worked Example: $50,000 Home Equity Loan at 8.5% APR for 15 Years

Here is the home equity loan calculator's default scenario worked through step by step. Inputs: loan amount $50,000, annual rate 8.5%, term 180 months (15 years), no extra payments.

Step 1 — Convert the annual rate to a monthly rate

r = 0.085 ÷ 12 = 0.0070833. Number of payments: n = 180.

Step 2 — Apply the amortization formula

M = 50000 × [0.0070833 × (1.0070833)180] / [(1.0070833)180 − 1]

(1.0070833)180 ≈ 3.5627, so M ≈ 50000 × 0.0070833 × 3.5627 / 2.5627 ≈ $492.37/month.

Step 3 — Total cost over the 15-year term

Over 180 months you pay 180 × $492.37 = $88,626.56. Of that, $50,000 is principal you borrowed and $38,626.56 is interest — the cost of locking in a fixed rate for a decade and a half.

Step 4 — Verify in Excel or Google Sheets

=PMT(0.085/12, 180, -50000) → $492.37

Total interest check: $492.37 × 180 − $50,000 = $38,626.56. Match the home equity loan calculator's output above by leaving the extra-payment fields at $0.

Assumptions & Limitations

• Models a fixed-rate home equity loan for the full term. Real home equity loans are almost always fixed-rate, so this is realistic — but verify your rate type at closing.
• Excludes closing costs (appraisal $300–$600, title $200–$400, origination 0–1%). Add these to your all-in cost or roll them into the principal if the lender allows.
• Assumes no early payoff. The extra-payment fields above model additional principal payments; the base scenario assumes you pay only the scheduled $492.37/month for 180 months.
• Does not model early-closure fees (2–5% of balance in the first 24–36 months at some lenders).
• Does not account for tax deductibility. If the loan funds substantial home improvements, the interest may be deductible under IRS Publication 936 — consult a tax advisor.

Sources & Editorial Standards

this home equity loan calculator applies the standard amortization formula M = P × [r(1+r)n] / [(1+r)n − 1] to a fixed-rate home equity loan, where P is the lump-sum principal, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments. The output — monthly payment, total interest, total principal, and the full amortization schedule — is mathematically equivalent to Excel's =PMT(rate, nper, pv) function. Extra monthly and one-time payments are applied to principal starting in the month they are made, shortening the term and reducing total interest without changing the contractual monthly payment.

Primary sources for home equity loan data and consumer guidance:

• CFPB — What is a home equity loan? — federal definition, disclosure requirements, and consumer-protection rules for second mortgages.
• IRS Publication 936 — Home Mortgage Interest Deduction — rules for deducting interest on acquisition debt and home equity debt, including the $750,000 combined cap.
• Federal Reserve Senior Loan Officer Opinion Survey (SLOOS) — quarterly data on HELOC and home equity lending standards and tightening trends.
• HUD-approved Housing Counselors — free or low-cost guidance for homeowners comparing home equity loan, HELOC, and refinance options.
• CFPB Housing Data — aggregate home equity lending trends, average loan sizes, and borrower demographics.

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