Home Equity Loan Calculator
Calculate home equity loan monthly payments, total interest, and amortization from loan amount and APR.
Disclaimer: This calculator is for informational and educational purposes only and does not constitute financial advice. Results are estimates based on the inputs provided. Consult a qualified financial advisor before making any financial decisions.
What Is a Home Equity Loan?
A home equity loan, sometimes called a second mortgage, allows you to borrow a lump sum against the equity in your home. Unlike a HELOC, home equity loans come with a fixed interest rate and predictable monthly payments over a set term — typically 5 to 30 years. This makes them ideal for large, one-time expenses such as major home renovations, debt consolidation, or education costs where you want payment stability.
How Home Equity Loan Payments Are Calculated
Home equity loans use standard amortization, meaning each monthly payment covers both principal and interest. Early in the loan, a larger portion of your payment goes toward interest, with the principal portion gradually increasing over time. The monthly payment is calculated using the formula M = P[r(1+r)^n]/[(1+r)^n-1], where P is the loan amount, r is the monthly interest rate, and n is the total number of payments. This calculator automates that formula for you.
Benefits and Risks of Home Equity Loans
The main advantage of a home equity loan is its fixed rate, which provides payment predictability. Interest rates are also typically lower than unsecured loans or credit cards. However, your home serves as collateral — if you fail to make payments, the lender can foreclose. Additionally, taking on a second mortgage increases your total debt and reduces the equity available for future needs. Always ensure the monthly payment fits comfortably within your budget.
Frequently Asked Questions
How much equity do I need for a home equity loan?
Most lenders require you to maintain at least 15-20% equity in your home after the loan. For example, if your home is worth $300,000, you'd need to keep at least $45,000-$60,000 in equity, limiting how much you can borrow.
What is the difference between a home equity loan and a HELOC?
A home equity loan provides a lump sum with a fixed rate and fixed payments. A HELOC is a revolving line of credit with a variable rate. Choose a home equity loan for predictable payments on a one-time expense, and a HELOC for flexible, ongoing borrowing needs.
Are home equity loan closing costs significant?
Closing costs typically range from 2-5% of the loan amount and may include appraisal fees, origination fees, title search, and recording fees. Some lenders offer no-closing-cost options, but these usually come with higher interest rates.
Can I deduct home equity loan interest on my taxes?
Interest on a home equity loan may be tax deductible if the funds are used to buy, build, or substantially improve the home securing the loan. The total mortgage debt (including the home equity loan) must not exceed $750,000 for the interest to be deductible.
What happens if I sell my home with an outstanding home equity loan?
When you sell your home, both your primary mortgage and home equity loan must be paid off from the sale proceeds. If the sale price doesn't cover both balances, you'll need to pay the difference out of pocket or negotiate a short sale with your lenders.