The formula
How it works
See how much you can borrow with a home equity loan and what it would cost. Enter your home value, mortgage balance and the lender’s loan-to-value limit to find your available equity and the monthly payment.
FAQ
How much equity can I borrow?
Lenders cap the combined balance of your mortgage plus the new loan at a percentage of your home’s value — commonly 80–85%. Your available equity is that limit minus what you still owe on your mortgage. So a home worth more, or a smaller remaining mortgage, means more you can borrow.
How is a home equity loan different from a HELOC?
A home equity loan is a lump sum at a fixed rate, repaid in equal instalments like a second mortgage — which is what this calculator models. A HELOC is a revolving line of credit you draw on as needed, usually at a variable rate. The loan suits a one-off expense; the line suits ongoing or uncertain needs.
Are there closing costs on a home equity loan?
Yes — expect fees similar to a first mortgage, such as appraisal, origination and title costs, typically a few percent of the loan amount. Some lenders roll these into the loan or waive them in exchange for a slightly higher rate.
Is the interest tax-deductible?
In some countries interest may be deductible if the loan is used to buy, build or substantially improve the home securing it — rules vary and change over time, so check current tax law or a tax professional rather than assuming it applies.
What happens if I can’t make the payments?
Because the loan is secured against your home, missed payments can put the property at risk of foreclosure, just as with a first mortgage. It’s worth stress-testing the fixed payment against your budget before borrowing.
Can I pay off a home equity loan early?
Many lenders allow early repayment, though some charge a prepayment penalty during an initial period — check your loan terms. Paying it off sooner reduces the total interest shown by this calculator.
What credit score do I need to qualify?
Lenders typically want good to excellent credit, often 680 or higher, plus enough equity and income to support the fixed payment. A stronger score and lower combined loan-to-value usually bring a better rate.
About the home equity loan calculator
This calculator shows how much you can borrow against the equity in your home and what the monthly payment would be. A home equity loan is a fixed-rate second mortgage: you receive a lump sum based on your available equity and repay it in equal instalments. The calculator works out that available amount from your home value, current mortgage and the lender’s loan-to-value limit, then computes the payment.
How to use it
Enter your home’s value, the balance remaining on your mortgage, and the maximum combined loan-to-value the lender allows — often around 85%. Then enter the interest rate and term for the home equity loan. The calculator shows your available equity, the monthly payment on that amount, and the total interest. For example, a $400,000 home with a $220,000 mortgage at an 85% limit leaves about $120,000 to borrow.
The formula
Your available equity is , where is the home value, the maximum combined loan-to-value ratio and the current mortgage balance. The monthly payment on that amount uses the standard amortization formula, , with the loan, the monthly rate and the number of payments.
Where it is used
Homeowners use it to fund big one-off costs — a renovation, debt consolidation, education or a major purchase — by tapping the value they have built up. It helps decide whether enough equity is available and whether the fixed monthly payment fits the budget. Because a home equity loan is secured against the house, seeing the cost clearly before borrowing is especially important.