A home equity loan is a fixed-rate second mortgage that provides a single lump-sum payout at closing with equal monthly payments from month one. Our home equity loan calculator computes your exact monthly payment, total interest charges, and total loan cost based on your home value, current first mortgage balance, and target loan term. It also calculates your maximum borrowing capacity using lender Combined Loan-to-Value (CLTV) thresholds, giving you a complete financial picture before you apply.
Unlike combined equity tools that blend different products, this calculator focuses exclusively on a fully amortizing fixed-rate loan. Every payment you make immediately reduces your principal balance, protecting you from rate fluctuations or unexpected payment increases down the road.
What This Calculator Does, and What It Leaves Out
A home equity loan operates under strict parameters: you borrow a fixed dollar amount, lock in a fixed interest rate, and repay the balance over a set timeline (typically 5 to 30 years). Your monthly payment never changes during the life of the loan.
This calculator performs three core calculations:
- Borrowing capacity: Determines how much cash you can withdraw based on your home's appraised value and existing mortgage balance.
- Fixed monthly payment: Calculates the exact monthly payment needed to fully retire the debt over your chosen term.
- Amortization breakdown: Shows how much of your money goes toward interest versus principal reduction each month.
This tool does not model variable-rate lines of credit, interest-only draw periods, or fluctuating prime rates. If you need a flexible line of credit that lets you draw funds in stages over time, see our dedicated HELOC calculator.
How to Use the Home Equity Loan Calculator
- Enter home value: Input your property's estimated or appraised market value.
- Enter current mortgage balance: Input the remaining principal balance on your primary mortgage (enter 0 if your home is fully paid off).
- Set maximum CLTV limit: Select your target Combined Loan-to-Value cap (80% is standard; 85% to 90% is available for higher credit tiers).
- Enter desired loan amount: Input the specific fixed lump-sum amount you wish to borrow (validated against your available home equity).
- Enter interest rate (% p.a.): Input the annual fixed interest rate offered by your lender.
- Select loan term: Choose your preferred repayment period (such as 5, 10, 15, 20, or 30 years).
- Click Calculate: Review your fixed monthly payment, maximum borrowing capacity, total interest cost, and month-by-month amortization schedule.
How Much Equity Can You Borrow?
Lenders do not let you borrow 100% of your home's market value. Instead, they cap your total debt using a metric called Combined Loan-to-Value (CLTV). CLTV adds your existing first mortgage balance to your proposed home equity loan and divides the total by your home's appraised value.
The standard maximum CLTV for most US mortgage lenders is 80% to 85%, though borrowers with top-tier credit scores (740+) may qualify for up to 90% CLTV.
To calculate your maximum borrowing capacity manually, use this formula:
Maximum Loan Capacity = (Appraised Home Value × Maximum Allowed CLTV) - Current Mortgage BalanceThe table below shows how borrowing capacity changes across common CLTV limits for a home appraised at $500,000 with an existing first mortgage balance of $300,000:
| Appraised Home Value | Existing Mortgage Balance | CLTV Limit | Maximum Total Debt Allowed | Maximum Home Equity Loan Capacity |
|---|---|---|---|---|
| $500,000 | $300,000 | 80% | $400,000 | $100,000 |
| $500,000 | $300,000 | 85% | $425,000 | $125,000 |
| $500,000 | $300,000 | 90% | $450,000 | $150,000 |
Retaining at least 15% to 20% equity in your property acts as a safety cushion against real estate market downturns and helps you secure lower interest rates from underwriters.
How to Calculate a Home Equity Loan Payment
A home equity loan uses standard fixed-rate amortization arithmetic. The monthly payment calculation relies on three main inputs: the loan principal ($P$), the monthly interest rate ($r$), and the total number of monthly payments ($n$).
The standard monthly payment formula is:
M = P × [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]Where:
- M: Monthly payment in dollars
- P: Principal loan amount borrowed
- r: Monthly interest rate (annual rate divided by 12)
- n: Total number of monthly payments (years × 12)
When you take out a loan, your lender provides three primary figures: the loan amount, the note interest rate, and the loan term. Plugging these numbers into our calculator generates your monthly obligation and complete schedule instantly.
Worked Example: $50,000 at 8.10% Over 10 Years
Consider a borrower taking out a $50,000 home equity loan at an interest rate of 8.10% per year over a 10-year repayment term (120 months).
The fixed monthly payment for this loan is $609.28. Over the 10-year lifetime of the debt, total interest charges equal $23,113.98, bringing the total paid to $73,113.98. Interest accounts for 31.6% of all payments sent to the lender.
Because the loan is fully amortizing, the ratio of interest to principal shifts significantly over time. In month 1, more than half of your monthly payment goes directly to interest. By month 120, interest accounts for less than 1% of your payment.
| Month | Monthly Payment | Interest Paid | Principal Paid | Remaining Balance | Interest Share of Payment |
|---|---|---|---|---|---|
| 1 | $609.28 | $337.50 | $271.78 | $49,728.22 | 55.4% |
| 12 | $609.28 | $316.63 | $292.66 | $46,614.76 | 52.0% |
| 36 | $609.28 | $265.35 | $343.94 | $38,966.49 | 43.6% |
| 60 | $609.28 | $205.08 | $404.20 | $29,978.09 | 33.7% |
| 84 | $609.28 | $134.26 | $475.03 | $19,414.73 | 22.0% |
| 108 | $609.28 | $51.02 | $558.26 | $7,000.47 | 8.4% |
| 120 | $609.28 | $4.09 | $605.20 | $0.00 | 0.7% |
As a benchmark comparison, U.S. Bank published a 10-year home equity loan rate of 7.15% APR for borrowers with low CLTV ratio limits (60% or less). On a $50,000 loan balance, that rate produces a monthly payment of $584.42, saving $24.86 per month compared to the national average rate.
Rate and Term: What Each Choice Actually Costs
Choosing your loan term is the single most influential financial decision when taking out a second mortgage. Extending your term lowers your monthly payment, but dramatically increases your overall interest burden.
The table below compares payment sizes and interest totals for a $50,000 loan at a fixed 8.10% rate across five standard loan terms:
| Loan Term | Monthly Payment | Total Interest Paid | Total Amount Paid | Interest Share of Total |
|---|---|---|---|---|
| 5 Years | $1,016.21 | $10,972.86 | $60,972.86 | 18.0% |
| 10 Years | $609.28 | $23,113.98 | $73,113.98 | 31.6% |
| 15 Years | $480.72 | $36,529.06 | $86,529.06 | 42.2% |
| 20 Years | $421.34 | $51,120.92 | $101,120.92 | 50.6% |
| 30 Years | $370.37 | $83,334.58 | $133,334.58 | 62.5% |
Moving from a 10-year term to a 15-year term reduces your monthly payment by $128.56, but adds $13,415.08 in extra interest (a 58% increase in interest cost). Term length has a far greater impact on total cost than small variations in interest rates. Negotiating a 0.95% rate reduction on a 10-year loan saves roughly $2,984, whereas shortening your term from 15 to 10 years saves over $13,400.
Closing Costs Are a Rate Decision, Not a Line Item
Home equity loan closing costs typically range between 2% and 5% of the total loan amount. These fees cover origination, property appraisal ($300 to $600), title search, credit reporting, document preparation, and county recording fees.
Borrowers often choose to roll closing costs directly into their loan balance rather than paying them out of pocket. However, rolling fees into your balance increases your effective cash-out Annual Percentage Rate (APR).
The financial impact of closing fees depends heavily on your loan term. Because fees are amortized over the life of the debt, shorter terms concentrate the fee penalty, while longer terms spread it out.
| Loan Term | Closing Fee Percentage | Fee Amount on $50,000 | Effective Cash-Out APR | APR Spread Over Note Rate (8.10%) |
|---|---|---|---|---|
| 5 Years | 2.0% | $1,000 | 9.810% | +1.71% (+171 bp) |
| 5 Years | 5.0% | $2,500 | 12.433% | +4.33% (+433 bp) |
| 10 Years | 2.0% | $1,000 | 9.029% | +0.93% (+93 bp) |
| 10 Years | 5.0% | $2,500 | 10.455% | +2.36% (+236 bp) |
| 15 Years | 5.0% | $2,500 | 9.804% | +1.70% (+170 bp) |
A 5% closing fee adds 433 basis points to your effective rate on a 5-year loan, but only 170 basis points on a 15-year loan. To understand how upfront costs impact effective borrowing rates across different financing structures, try our APR calculator.
Paying Extra Principal
Because home equity loans do not carry prepayment penalties from most traditional lenders, adding extra funds toward principal each month shortens your repayment timeline and cuts interest costs significantly.
On our benchmark $50,000 loan (8.10% rate over 10 years with a $609.28 base payment):
- Adding $50 per month ($659.28 total) retires the loan in 107 months (saving 13 months) and cuts interest by $2,674.45.
- Adding $100 per month ($709.28 total) retires the loan in 97 months (saving 23 months) and cuts interest by $5,009.98.
- Adding $200 per month ($809.28 total) retires the loan in 82 months (saving 38 months) and cuts interest by $8,745.82.
Making systematic extra principal payments transforms a 10-year commitment into a less than 7-year debt payoff schedule.
Home Equity Loan or HELOC?
Choosing between a fixed home equity loan and a Home Equity Line of Credit (HELOC) depends on how you plan to use the funds and your comfort level with variable interest rates.
A home equity loan is ideal for single, upfront expenses with fixed budgets—such as a major home remodeling project, roof replacement, or debt consolidation. You receive all cash at once, lock in a fixed interest rate, and make predictable monthly payments.
A HELOC functions more like a credit card. It provides a revolving credit line with a variable interest rate. You draw funds as needed during an initial draw period (usually 10 years) while making interest-only minimum payments, followed by a 20-year principal-and-interest repayment period.
When using home equity for debt consolidation, remember that replacing high-interest credit card debt with home-secured debt transfers the risk to your property. Before consolidating, evaluate your debt structure using our debt consolidation calculator and analyze your revolving balances with our credit card payoff calculator.
What Lenders Actually Check
Underwriters evaluate four main criteria when reviewing home equity loan applications:
- Credit Score (FICO): Most lenders require a minimum FICO score of 620 to 680. Major institutions like Rocket Mortgage publish tiered requirements: a 680 score permits up to 80% CLTV, 700 permits 85% CLTV, and 740+ is required for 90% CLTV.
- Debt-to-Income (DTI) Ratio: Your total monthly debt obligations (including your first mortgage and proposed second mortgage) generally cannot exceed 43% to 50% of your gross monthly income. You can check your current ratio using our DTI calculator.
- Home Equity Cushion: Lenders require you to retain at least 15% to 20% equity in your property after factoring in both mortgages.
- Income Verification: Underwriters require W-2s, recent pay stubs, and two years of tax returns to verify stable, recurring income.
Current Rates, with Dates
Home equity loan rates shift in response to Federal Reserve benchmark rate changes and broader economic trends. Below are published benchmarks from national financial institutions as of late 2026:
- Bankrate National Average Survey (July 2026): 5-year fixed loan average at 8.10%; 10-year average at 8.25%; 15-year average at 8.22%. National overall average benchmark sits at 8.10%.
- Wall Street Journal Rate Monitor (August 2026): Reported fixed home equity loan rates ranging from 5.90% to 10.75%, depending on credit tier and CLTV ratio.
- U.S. Bank Disclosed Benchmark (August 2026): 7.15% fixed APR for a 10-year second mortgage on balances of $50,000 to $99,999 with CLTV ≤ 60%.
- Mortgage Research Center / Fortune (September 2026): Average 10-year home equity loan rate recorded at 8.159%; 15-year rate recorded at 8.498%.
Lenders adjust their rates weekly. Always obtain official Loan Estimates from multiple banks or credit unions to compare quotes for your specific credit profile.
What This Calculator Leaves Out
While our calculator provides accurate mathematical estimates, it includes specific scope limitations:
- Property taxes and insurance: It computes principal and interest only. It does not include escrow amounts for property taxes, homeowners insurance, or HOA dues.
- Variable rate adjustments: It assumes a fixed interest rate for the entire loan term.
- Lender-specific fee structures: Actual closing costs vary by county recording office, title company, and lender policy.
Last verified: October 2026. Formulas and calculations verified against standard mortgage amortization benchmarks.