Home Equity Loan Calculator — Free Online Tool

How to Use the Home Equity Loan Calculator

This calculator helps you understand how much equity is available in your home and what a home equity loan will cost in monthly payments and total interest. Use it to compare different loan amounts and terms before applying with a lender.

1. Enter your current home value. Input the estimated market value of your home. For the most accurate results, use a recent appraisal, a comparative market analysis from a real estate agent, or check home value estimates on Zillow, Redfin, or Realtor.com. Lenders will order their own appraisal, but having a realistic estimate helps you understand your borrowing capacity.
2. Enter your current mortgage balance. Input the remaining principal balance on your first mortgage. You can find this on your most recent mortgage statement or by logging into your loan servicer account. This number decreases with each payment you make, so use the most current balance available.
3. Set your desired loan amount. Enter how much you want to borrow with the home equity loan. The calculator shows whether this amount is within your available equity and the 85% CLTV limit. If the amount exceeds your maximum, you will need to borrow less or wait for your equity to grow through payments or appreciation.
4. Enter the interest rate. Input the rate from your lender quote or use the average home equity loan rate for your credit score range. In 2026, rates typically range from 7% to 12% depending on credit score, CLTV, and loan amount. Get quotes from at least three lenders to find the best rate.
5. Select the loan term. Enter the repayment period in years. Common terms are 5, 10, 15, or 20 years. Shorter terms have higher monthly payments but much lower total interest. A $50,000 loan at 8.5% costs $24,600 in interest over 10 years versus $57,000 over 20 years.
6. Review the complete results. The calculator displays your monthly payment, available equity, maximum loan amount, current LTV, combined LTV (CLTV), total interest, and total repayment amount. The pie chart shows how your home value is divided between mortgage balance, equity loan, and remaining equity.

Try different loan amounts and terms to find the balance between manageable monthly payments and minimal total interest cost.

Home Equity Loan Payment Formula

Home equity loans use the same amortization formula as standard fixed-rate mortgages. The loan is fully amortizing, meaning each payment includes both principal and interest, and the loan is fully repaid at the end of the term.

Where:

• M = Monthly payment
• P = Loan principal (amount borrowed)
• r = Monthly interest rate (Annual Rate ÷ 12 ÷ 100)
• n = Total number of monthly payments (Years × 12)
• CLTV = Combined Loan-to-Value ratio

Worked Example

Calculate the payment for a $50,000 home equity loan at 8.5% for 15 years on a home worth $450,000 with a $250,000 mortgage:

1. Available equity: $450,000 − $250,000 = $200,000
2. Maximum loan (85% CLTV): ($450,000 × 0.85) − $250,000 = $132,500
3. CLTV: ($250,000 + $50,000) ÷ $450,000 = 66.7%
4. Monthly rate: 8.5% ÷ 12 = 0.7083%
5. Number of payments: 15 × 12 = 180
6. Monthly payment: $50,000 × [0.007083 × (1.007083)¹⁸⁰] / [(1.007083)¹⁸⁰ − 1] = $492
7. Total repayment: $492 × 180 = $88,600
8. Total interest: $88,600 − $50,000 = $38,600

The 66.7% CLTV is well within the 85% threshold, leaving substantial equity cushion. If this borrower chose a 10-year term instead, the monthly payment would increase to $620 but total interest would drop to $24,400, saving $14,200.

Practical Home Equity Loan Examples

These scenarios demonstrate how homeowners use equity loans for different purposes and how the numbers work in realistic 2026 conditions.

Kitchen and Bathroom Renovation

Laura owns a home worth $520,000 with a $310,000 mortgage balance. She needs $75,000 for a major kitchen remodel and two bathroom renovations. Her available equity is $210,000, and at 85% CLTV her max loan is $132,000, so the $75,000 loan is well within range. With a credit score of 760, she qualifies for 7.75% APR over 15 years. Her monthly payment is $704, total interest is $51,700, and total repayment is $126,700. The renovation is expected to increase her home value by $50,000-60,000, partially offsetting the borrowing cost. Because the funds are used to improve the home, the interest is tax deductible under current law.

Debt Consolidation Strategy

Marcus has $40,000 in high-interest debt: $22,000 in credit cards at 22% APR, $12,000 in personal loan at 14%, and $6,000 in medical bills at 8%. His home is worth $380,000 with a $220,000 mortgage. He takes a $40,000 home equity loan at 8.5% for 10 years. His new single monthly payment is $496 compared to his current combined minimum payments of $1,100. More importantly, his total interest drops from approximately $28,000 (if he paid minimums on existing debt) to $19,500 on the equity loan, saving $8,500. He must be disciplined about not running up new debt on the freed-up credit cards, or he will be in a worse position with both the equity loan and new credit card balances.

College Tuition Funding

The Patel family needs $60,000 over two years for their daughter's college tuition. Their home is worth $480,000 with a $195,000 mortgage, giving them $213,000 in available equity. They choose a $60,000 home equity loan at 8.0% for 12 years instead of federal parent PLUS loans at 9.08% (2026 rate). Their monthly payment is $631, and total interest is $30,900 over the 12-year term. Compared to PLUS loans at the same amount and term, they save approximately $4,200 in total interest. The equity loan also offers a fixed rate, unlike variable-rate private student loans. This approach works best when parents have substantial equity and good credit.

Home Equity Loan Tips and Complete Guide

A home equity loan can be a powerful financial tool when used wisely, offering lower rates than most other borrowing options. These tips help you maximize the benefits while minimizing risk.

Shop Multiple Lenders for the Best Rate

Home equity loan rates can vary by 1-3% between lenders for the same borrower profile. Get quotes from at least three sources: your existing mortgage lender (who may offer loyalty discounts), a local credit union (which often has the lowest rates), and an online lender (which may have faster processing). When comparing offers, look at the APR (which includes fees) rather than just the interest rate. A loan with a 7.5% rate and $3,000 in closing costs may cost more than a loan with 8.0% rate and no closing costs, depending on the term and how long you keep the loan. Request a Loan Estimate from each lender for apples-to-apples comparison.

Use Equity Loans for Value-Adding Purposes

The wisest use of home equity is for purposes that create lasting value or reduce overall borrowing costs. Home improvements that increase property value are ideal because they build equity while you enjoy the upgrades. Debt consolidation makes sense when you are replacing high-interest debt (18-25% credit card APR) with a lower rate (7-9% equity loan), but only if you commit to not running up new balances. Education expenses can boost future earning power. Avoid using home equity for lifestyle spending (vacations, luxury items, depreciating assets) because you are putting your home at risk for temporary enjoyment. Every dollar borrowed against your home must eventually be repaid with interest.

Understand the Risks of Second Mortgages

A home equity loan is a second mortgage secured by your property. This means your home can be foreclosed if you default on either your primary mortgage or the equity loan. Before borrowing, stress-test your finances: can you afford both payments if your income drops by 20%? What if interest rates rise and you need to refinance? Could you handle an unexpected expense on top of both loan payments? Financial advisors recommend that your total housing costs (first mortgage + equity loan + taxes + insurance) not exceed 36% of gross income. If borrowing puts you above this threshold, consider a smaller loan amount or alternative financing.

Time Your Application Strategically

Your home equity borrowing capacity depends on your home value, which fluctuates with the market. Apply when your home value is strong and you can demonstrate high equity. If your neighborhood has had recent comparable sales at strong prices, the appraisal is more likely to reflect your expected value. Also time your application when your credit profile is strongest: low credit utilization, no recent late payments, and stable employment. Some homeowners improve their position by paying down their first mortgage faster for a few months before applying, which increases available equity and lowers the LTV ratio, potentially qualifying them for better rates.

Common Mistakes to Avoid

• Borrowing more than needed just because you qualify. Having $150,000 in available equity does not mean you should borrow $150,000. Borrow only what you need for a specific purpose. Every additional dollar comes with interest costs and increases your financial risk.
• Choosing the longest term for the lowest payment. While a 20-year term has a lower monthly payment than a 10-year term, the total interest can be double or triple. A $50,000 loan at 8.5% costs $24,400 in interest over 10 years versus $57,800 over 20 years. Choose the shortest term you can comfortably afford.
• Ignoring closing costs in your cost comparison. Closing costs of 2-5% add thousands to your total borrowing cost. A no-closing-cost loan may have a rate 0.25-0.5% higher, which costs more over the full term. Calculate the break-even point: if closing costs are $2,000 and the lower rate saves $20/month, it takes 100 months (8+ years) to break even.
• Consolidating debt without changing spending habits. Using a home equity loan to pay off credit card debt only works if you stop using credit cards for non-essential spending. Many borrowers consolidate their debt and then rack up new credit card balances, ending up with both the equity loan and new credit card debt, a worse position than before.
• Not considering a cash-out refinance as an alternative. If rates have dropped since you got your first mortgage, a cash-out refinance may give you a lower overall rate than keeping your existing mortgage and adding an equity loan. Compare the total monthly cost and total interest of both approaches before deciding.