Home Equity Loan Calculator
See what a fixed-rate home equity loan costs each month, how much you can borrow against your equity, and how it compares with leaving the debt on cards.
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A fixed-rate loan against your equity
A home equity loan is a second mortgage: a lump sum, a fixed rate, a fixed term, and a payment that never changes. That last part is the difference from a HELOC, which is a revolving line with a variable rate. If you know the amount you need and you want the payment to be predictable, the fixed loan is the simpler instrument.
How much you can borrow is set by the combined loan-to-value ratio. Lenders add your existing mortgage to the new loan and cap the total, usually at 80 or 85 percent of the appraised value. On a 500,000 dollar home with a 250,000 dollar mortgage at an 85 percent cap, the ceiling is 425,000 dollars, leaving 175,000 dollars available. Borrowing 60,000 of that takes your total loan-to-value to 62 percent.
The payment on 60,000 dollars at 8.5 percent over 15 years is 590.84 dollars. The same balance left on a credit card at 22 percent, paying the typical 2.5 percent minimum, takes over 57 years to clear and costs 163,069 dollars in interest. The equity loan costs 46,352. That gap — 116,717 dollars — is the strongest argument for consolidating expensive debt against a home.
But it is not a free argument, because the security changes. Credit card debt is unsecured; if you cannot pay it, the consequences are bad credit and collection calls. A home equity loan is secured on your house, so the consequence of failure is losing it. Converting unsecured debt into secured debt lowers the cost and raises the stakes, and that trade deserves to be made deliberately rather than in response to a lower monthly figure.
How the loan and its limits are calculated
The borrowing ceiling comes from the combined loan-to-value cap. The payment comes from the standard amortisation formula on the amount you actually borrow.
| Symbol | Meaning |
|---|---|
Value |
The appraised value of the home |
maxLTV |
The lender's cap on all borrowing against the home combined |
Mortgage |
What is still owed on the first mortgage |
P |
The amount borrowed on the equity loan |
i |
Monthly interest rate: the annual rate divided by 12 |
The credit card comparison models the typical minimum payment of a percentage of the balance with a fixed floor. That structure is why card balances persist so long: as the balance falls, so does the payment, so the principal barely moves.
Worked example: 500,000 dollar home, borrowing 60,000 dollars
A 250,000 dollar first mortgage, an 85 percent combined cap, 8.5 percent over 15 years, with 2 percent closing costs.
| Figure | Result |
|---|---|
| Maximum total debt allowed | $425,000.00 |
| Remaining mortgage balance | $250,000.00 |
| Equity available to borrow | $175,000.00 |
| Amount borrowed | $60,000.00 |
| Loan-to-value after borrowing | 62.00% |
| Monthly payment | $590.84 |
| Total interest over 15 years | $46,351.87 |
| Closing costs | $1,200.00 |
| Total cost of the borrowing | $47,551.87 |
| Credit card interest, minimum payments | $163,068.87 |
| Months to clear on minimum payments | 685 |
| Interest saved versus cards | $116,717.00 |
Consolidating saves 116,717 dollars of interest and finishes the debt in 15 years instead of 57. That is a genuine and large difference. The cost is that your home now secures the debt — which is worth accepting only if the payment is comfortably affordable, not merely lower than the cards.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Borrowing against equity without losing the house
Compare the total cost, not the monthly payment
Consolidating a card balance into a 15-year loan lowers the monthly figure and can still cost more if you stretch the term and keep using the cards. The comparison that matters is total interest paid, and the calculator shows both.
Close the cards, or at least stop using them
The most common way consolidation fails is that the cards get used again and the borrower ends up with both the loan and the balance. If you consolidate, treat the cleared cards as closed. Otherwise you have not solved the problem, you have doubled it and secured it on your home.
Check what the closing costs add
Home equity loans carry closing costs, typically 2 to 5 percent of the amount borrowed. On 60,000 dollars at 2 percent that is 1,200 dollars, which is small against 116,717 dollars of saved interest — but it matters if you are borrowing a smaller amount over a short term.
Ask whether a HELOC suits you better
If you need the money gradually or expect to repay it quickly, a HELOC's revolving structure costs less because you pay interest only on what you draw. A fixed loan is better for a single known expense you will repay over years, because the payment cannot rise.
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Frequently asked questions
How much can I borrow with a home equity loan?
It depends on the value of the home, what you owe on the first mortgage, and the lender's combined cap. At 85 percent on a 500,000 dollar home with a 250,000 dollar mortgage, the ceiling is 425,000 dollars, so 175,000 dollars is available. Many lenders cap at 80 percent, which would reduce that to 150,000.
Is a home equity loan better than a HELOC?
A fixed loan suits a single known expense repaid over years, because the rate and payment cannot change. A HELOC suits borrowing you will draw gradually, because you pay interest only on what you use. The fixed loan is the safer instrument if predictability matters more than flexibility.
Should I consolidate credit card debt with a home equity loan?
It can save a great deal: on the example here, 116,717 dollars of interest and 42 years of payments. But it converts unsecured debt into debt secured on your home, so failure now risks the house. Only do it if the new payment is comfortably affordable and you will not run the cards up again.
Are home equity loan interest payments tax deductible?
In the United States, interest is generally deductible when the loan is used to buy or substantially improve the home that secures it, and not when it is used to consolidate consumer debt. This changes with legislation, so confirm your own position with a tax adviser.
What happens if I cannot repay a home equity loan?
The loan is secured on your home, so a default can lead to foreclosure, exactly as with a first mortgage. That is the essential difference from credit card debt and the reason this decision deserves more care than a comparison of monthly payments.