Home Equity Loan Calculator
Available Equity: $0
Max Borrowable: $0
Monthly Payment: $0.00
Total Paid: $0.00
Total Interest: $0.00
What Is a Home Equity Loan and How Does It Work?
If you’re looking to convert your home’s equity into cash, a home equity loan could be a solid option. It’s essentially like a second mortgage, where your home serves as collateral. In today’s post, we’ll explain in detail what a home equity loan is, how it works, eligibility, and most importantly, how to use a home equity loan calculator to get an accurate figure. This article is specifically for homeowners in the US and Canada, so let’s get started.
What Is a Home Equity Loan?
In simple terms: A home equity loan is a loan you take against the “equity” of your home. Equity means the portion of your home you own outright. This means the home value minus the remaining mortgage.
Example: If your home is worth $500,000 and the mortgage balance is $300,000, your equity is $200,000. Lenders typically lend up to 80-85% of this, meaning you could get a lump sum of $160,000-$170,000.
This is different from a HELOC (Home Equity Line of Credit) – a HELOC is like a credit card (draw as needed), whereas a home equity loan provides the entire loan at one time with a fixed rate.
Related Tools You’ll Love
How to Use a Home Equity Loan Calculator? (Step-by-Step Guide)
If you own your home and need funds for it, such as for home renovation, education, or any other expense, then a Home Equity Loan can be a great option for you.
But how much will the bank lend you, and what will your monthly EMI be? Calculating this can be a bit difficult. That’s why we’ve created this simple Home Equity Loan Calculator.
Follow the steps below and check your loan estimate in seconds:
Step 1: Home Value (Current Home Value)
First, enter your home’s current market value in the ‘Home Value’ box. This is the price you would get if you were to sell your home today.
-Example: If your home is worth $400,000, then enter 400000.
Step 2: Current Mortgage Balance (Existing Loan)
If you already have a mortgage on your home, enter the remaining balance in the ‘Current Mortgage Balance’ field.
-Note: If your home is completely paid off (has no loan), enter 0 here.
Step 3: Max LTV Allowed (Loan-to-Value Ratio)
Banks never lend the full value of a home. They usually set a limit between 80% and 90% to minimize their risk.
-Select from the drop-down: Most banks allow up to 80% (0.80). If you have a very good credit score, you can also select 90%.
Step 4: Desired Loan Amount (How much loan do you need?)
Enter the amount of money you need here.
-The home equity loan calculator will automatically check if you can get that loan amount based on your equity (the remaining value of your home). If you are requesting more than the limit, the calculator will automatically correct it.
Step 5: Interest Rate & Loan Term (Interest Rate & Loan Term)
Interest Rate (%): Enter the interest rate offered by the bank (e.g., 7.5% or 8%).
Loan Term: Select how many years you want to repay the loan (5, 10, 15, or 20 years).
Step 6: Calculate Payment
Just click the “Calculate Payment” button (or change the value in the box), and the result will appear below instantly.
How to Understand the Results?
As soon as you calculate, you will see these details:
-Available Equity: The value remaining in your home’s total worth after subtracting the old loan.
-Max Borrowable: The maximum loan amount you can take based on the bank’s LTV rule.
-Monthly Payment: Your monthly EMI (Equated Monthly Installment) will be.
-Total Paid & Interest: The total amount you will pay back to the bank by the end of the loan, including the interest.
Pro Tip: Try selecting different “Loan Terms” (years) to see how extending the loan reduces the EMI, but increases the total interest. This will help you make the right decision based on your budget!
Home Equity Loan Requirements
Lenders have slightly different rules, but here’s what you typically need:
| Requirement | What You Need |
|---|---|
| Equity | 15–20% minimum (20%+ is ideal) |
| Credit Score | 620+ (680+ gets better rates) |
| DTI Ratio | 43% or lower |
| LTV Ratio | 80–85% max |
| Income Proof | Pay stubs, W-2s, tax returns |
How to Apply for a Home Equity Loan (5 Simple Steps)
- Check Your Credit Score – Free on Credit Karma or Experian
- Calculate Equity – Use a home equity loan calculator
- Shop Lenders – Compare Rocket Mortgage, TD Bank, BMO, Wells Fargo
- Gather Documents – ID, income proof, mortgage statement, insurance
- Submit Application – Takes 10–15 mins online
Timeline: 2–6 weeks (includes home appraisal)
Pros & Cons of Home Equity Loans (The Real Deal)
Pros
- Lower Interest Rates (6.5–8.5% vs 20%+ on credit cards)
- Fixed Monthly Payments – Easy budgeting
- Tax Deductible Interest (if used for home improvements – IRS Rule 163(h))
- Large Loan Amounts – $50K to $500K+
Cons
- Your Home Is at Risk – Miss payments → foreclosure possible
- Closing Costs – $2,000–$5,000
- Reduced Equity – Less profit when you sell
HELOC vs Home Equity Loan – Which Is Better?
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Interest Rate | Fixed | Variable |
| Funds | Lump sum | Draw as needed |
| Payments | Fixed EMI from Day 1 | Interest-only during draw period |
| Best For | One-time big expense | Ongoing projects |
How to Build Home Equity Faster
- Make a Larger Down Payment (start strong)
- Pay Extra on Mortgage (biweekly payments help)
- Renovate Smart (kitchen & bathroom = high ROI)
- Wait for Market Growth (location matters)
Common Uses for Home Equity Loans
- Home renovations (tax benefits!)
- Debt consolidation (pay off high-interest cards)
- College tuition
- Medical emergencies
- Starting a business
Warning: Avoid using it for vacations or luxury purchases — too risky.
Related Tools You’ll Love
Final Verdict: Should You Get a Home Equity Loan?
If you have:
- 20%+ equity
- Good credit (620+)
- A solid repayment plan
…then yes, it’s a smart financial tool.
Next Steps:
- Use a home equity loan calculator right now
- Get quotes from 2–3 lenders
- Crunch the numbers
This home equity loan calculator is designed to give you an estimate of monthly payments and equity. However, before taking out any loan, be sure to consult your financial advisor. To understand in detail the consumer rights, risks, and official guidelines related to home equity loans, we recommend that you read the Federal Trade Commission’s (FTC) official guide.
Frequently Asked Questions
How is a home equity loan calculated?
If you’re a homeowner, you’ve probably built up “home equity.” This is the value of your home that’s completely yours. Here’s how to calculate it: subtract your home’s current market value from your remaining debt (mortgage). You can then tap this equity through a loan. With a standard home equity loan, you get the full amount upfront. Another popular option is a HELOC, which is like a flexible line of credit that you can draw on at regular intervals.
What does 75% equity mean?
To put it simply, LTV is a number that tells you what percentage of your home’s value you’re borrowing. Suppose you own a house worth £200,000 and have £50,000 in savings, you’ll only need to borrow £150,000, which represents 75% of the total home’s value. Therefore, your LTV is 75%. This LTV percentage helps you find the right mortgage deal in the market.
What is one disadvantage of using a home equity loan?
A major risk of taking out a home equity loan is that you could lose your home. Because your home is used as security for this loan, the bank can take your home if you miss a payment.
Disclaimer: This is general info and just for educational purposes. Consult a licensed financial advisor before applying.