Finance
Home Equity Loan Calculator
M = P·i/(1−(1+i)^−n) turns a home equity loan into one level monthly payment: P is the lump sum, i is the rate divided by 12, n is the number of payments. Enter your home value, what you still owe, and the amount you want — or flip the mode and solve back for the most your lender's combined loan-to-value cap allows.
Your home and the loan
Solve for
What the property would appraise for today
USD
What is left on the first mortgage, not the original amount
USD
A second mortgage or an existing HELOC draw already against the home
USD
Lender CLTV limit
The combined loan-to-value ceiling your lender writes to. Most cap at 80% or 85%.
The lump sum you want to draw
USD
Fixed for the whole term on a home equity loan
%
Term
How long you repay the lump sum over
Principal and interest on the first mortgage, for a blended housing cost
USD
Monthly payment · 15y
$873.13
$90,000 at 8.25% over 15y
Combined loan-to-value
85.00%Tightcap 85%
Inside the 85% ceiling but above 80%, where pricing and underwriting get stricter.
Owed $250,000New loan $90,000Equity left $60,000
The vertical mark is the 85% cap. Colour reaching past it is borrowing your lender will not write.
Max at 85%
$90,000
Equity today
$150,000 · 38%
Equity left after
$60,000
First-mortgage LTV
62.5%
Total interest
$67,163
Total repaid
$157,163
Try a scenario
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The basics
What a home equity loan actually is
A home equity loan is a second mortgage. The lender records a lien against your house behind the one already there, hands you the whole amount at closing, and you repay it in equal monthly instalments at a rate fixed for the entire term. Nothing about your first mortgage changes — its rate, its balance, and its payoff date stay exactly as they were. Two ideas explain everything the product does.
equity = value − what you owe
Equity is the raw material
Equity is the slice of the property that is yours rather than the bank's: what the home would sell for today, minus every loan already secured by it. It rises when you pay the mortgage down and when the market moves in your favour, and it falls when either goes the other way. It is what a lender lends against — but, as the next section shows, it is not what you get to borrow.
$400,000 home − $250,000 mortgage = $150,000 of equity, 37.5% of the value
M = P·i ÷ (1 − (1 + i)^−n)
One draw, one fixed payment
The lump sum P amortizes over n monthly payments at the monthly rate i. The payment never moves, every instalment covers the interest due plus a slice of principal, and the balance reaches zero on the final scheduled payment. That fixed shape is the whole appeal — and the clearest difference from a HELOC, where you draw as you go and the rate floats.
$90,000 at 8.25% over 15 years = $873.13 a month
Cltv
Combined loan-to-value: the number that sets your limit
Ask a lender how much you can borrow and they will not answer with your equity. They will answer with a ratio. Combined loan-to-value adds up every loan secured by the property — the first mortgage, any second, and the new loan you are asking for — and divides by what the home is worth. Every lender publishes a ceiling on it, and that ceiling is what actually caps your cheque.
CLTV = (all liens + new loan) ÷ value
Why lenders underwrite the ratio, not the equity
A second lien is repaid only after the first mortgage is made whole. If the house sells in distress for less than it is worth today, the second-lien lender absorbs the shortfall first. Capping the combined ratio is how they buy themselves a cushion of value that has to evaporate before their loan is at risk.
($250,000 + $90,000) ÷ $400,000 = 85.00%
max loan = value × cap − liens
How a cap becomes a dollar figure
Multiply the value by the ceiling to get the total debt the property will carry, then subtract what it already carries. Whatever is left is the loan. If the subtraction goes negative there is no borrowable equity at that cap, however much raw equity the arithmetic shows.
$400,000 × 85% = $340,000, − $250,000 = $90,000
The consequence is that two lenders looking at the same house can offer very different amounts. At an 80% ceiling the example home supports $70,000; at 85% it supports $90,000; at 90% it supports $110,000. The equity is $150,000 in all three cases. Asking for $120,000 against an 85% cap puts the combined ratio at 92.50% — $30,000 more than the lender will write, and the reason applications get cut rather than declined outright.
How much you can borrow, by home value and mortgage balance
The lookup below is the whole calculation in one grid: pick your lender's cap, find your home value down the side and what you still owe across the top. The cell is the largest loan that cap allows.
Max loan
| Home value | owe $0 | owe $50,000 | owe $100,000 | owe $150,000 | owe $200,000 | owe $250,000 | owe $300,000 |
|---|---|---|---|---|---|---|---|
| $200,000 | $160,000 | $110,000 | $60,000 | $10,000 | — | — | — |
| $300,000 | $240,000 | $190,000 | $140,000 | $90,000 | $40,000 | — | — |
| $400,000 | $320,000 | $270,000 | $220,000 | $170,000 | $120,000 | $70,000 | $20,000 |
| $500,000 | $400,000 | $350,000 | $300,000 | $250,000 | $200,000 | $150,000 | $100,000 |
| $600,000 | $480,000 | $430,000 | $380,000 | $330,000 | $280,000 | $230,000 | $180,000 |
| $750,000 | $600,000 | $550,000 | $500,000 | $450,000 | $400,000 | $350,000 | $300,000 |
| $1,000,000 | $800,000 | $750,000 | $700,000 | $650,000 | $600,000 | $550,000 | $500,000 |
| Home value | owe $0 | owe $50,000 | owe $100,000 | owe $150,000 | owe $200,000 | owe $250,000 | owe $300,000 |
|---|---|---|---|---|---|---|---|
| $200,000 | $170,000 | $120,000 | $70,000 | $20,000 | — | — | — |
| $300,000 | $255,000 | $205,000 | $155,000 | $105,000 | $55,000 | $5,000 | — |
| $400,000 | $340,000 | $290,000 | $240,000 | $190,000 | $140,000 | $90,000 | $40,000 |
| $500,000 | $425,000 | $375,000 | $325,000 | $275,000 | $225,000 | $175,000 | $125,000 |
| $600,000 | $510,000 | $460,000 | $410,000 | $360,000 | $310,000 | $260,000 | $210,000 |
| $750,000 | $637,500 | $587,500 | $537,500 | $487,500 | $437,500 | $387,500 | $337,500 |
| $1,000,000 | $850,000 | $800,000 | $750,000 | $700,000 | $650,000 | $600,000 | $550,000 |
| Home value | owe $0 | owe $50,000 | owe $100,000 | owe $150,000 | owe $200,000 | owe $250,000 | owe $300,000 |
|---|---|---|---|---|---|---|---|
| $200,000 | $180,000 | $130,000 | $80,000 | $30,000 | — | — | — |
| $300,000 | $270,000 | $220,000 | $170,000 | $120,000 | $70,000 | $20,000 | — |
| $400,000 | $360,000 | $310,000 | $260,000 | $210,000 | $160,000 | $110,000 | $60,000 |
| $500,000 | $450,000 | $400,000 | $350,000 | $300,000 | $250,000 | $200,000 | $150,000 |
| $600,000 | $540,000 | $490,000 | $440,000 | $390,000 | $340,000 | $290,000 | $240,000 |
| $750,000 | $675,000 | $625,000 | $575,000 | $525,000 | $475,000 | $425,000 | $375,000 |
| $1,000,000 | $900,000 | $850,000 | $800,000 | $750,000 | $700,000 | $650,000 | $600,000 |
| Home value | owe $0 | owe $50,000 | owe $100,000 | owe $150,000 | owe $200,000 | owe $250,000 | owe $300,000 |
|---|---|---|---|---|---|---|---|
| $200,000 | $190,000 | $140,000 | $90,000 | $40,000 | — | — | — |
| $300,000 | $285,000 | $235,000 | $185,000 | $135,000 | $85,000 | $35,000 | — |
| $400,000 | $380,000 | $330,000 | $280,000 | $230,000 | $180,000 | $130,000 | $80,000 |
| $500,000 | $475,000 | $425,000 | $375,000 | $325,000 | $275,000 | $225,000 | $175,000 |
| $600,000 | $570,000 | $520,000 | $470,000 | $420,000 | $370,000 | $320,000 | $270,000 |
| $750,000 | $712,500 | $662,500 | $612,500 | $562,500 | $512,500 | $462,500 | $412,500 |
| $1,000,000 | $950,000 | $900,000 | $850,000 | $800,000 | $750,000 | $700,000 | $650,000 |
Each cell is home value × 85% − what you still owe, floored at zero. A dash means the mortgage already meets or exceeds the cap, so there is nothing left to lend against even where raw equity exists.
Method
How to work it out by hand
Five steps take you from a house and a mortgage statement to a monthly payment, in the order a lender does it.
- 1
Find your equity
Start with what the home is worth today, not what you paid for it, and subtract every loan already secured by it — the first mortgage plus any second lien or outstanding HELOC draw. What is left is your equity E.
$400,000 − $250,000 = $150,000 - 2
Turn the lender cap into a dollar ceiling
Multiply the value by the combined loan-to-value limit the lender writes to. That product is the total debt the property is allowed to carry, across all liens together.
$400,000 × 85% = $340,000 - 3
Subtract the existing liens for the available amount
The property is already carrying debt, and that debt eats into the ceiling first. Take it off and what remains is the largest loan you can be advanced. If the answer is negative, there is nothing available at that cap.
$340,000 − $250,000 = $90,000 - 4
Convert the rate to a monthly rate and count the payments
Divide the annual rate by twelve for the periodic rate i, and multiply the term in years by twelve for the payment count n.
i = 8.25% ÷ 12 = 0.006875 · n = 15 × 12 = 180 - 5
Apply the level-payment formula
The payment M is the amount that clears the balance in exactly n instalments. Multiply it by n and subtract the principal to see the interest the loan costs over its life.
$90,000 × i ÷ (1 − (1 + i)^−180) = $873.13 · interest $67,163
Worked examples
One house, four lender caps
The same $400,000 home with the same $250,000 mortgage, taken to four lenders with four different ceilings. Switch tabs to watch the working, the cheque, and the payment move — while the equity never changes.
Given home value = $400,000, mortgage balance = $250,000, lender cap = 85%, rate = 8.25%, term = 15 years
Equity today: $400,000 − $250,000 = $150,000 (37.5% of the value)
The cap in dollars: $400,000 × 85% = $340,000
Most a lender will advance: $340,000 − $250,000 = $90,000
Payment on that amount: $90,000 × i ÷ (1 − (1 + i)^−180) = $873.13
Combined loan-to-value after: ($250,000 + $90,000) ÷ $400,000 = 85.00%
Borrow up to $90,000 · $873.13 a month
interest over the term $67,163 · equity left $60,000| Term on $90,000 | Monthly payment | Total interest |
|---|---|---|
| 10 years | $1,103.87 | $42,465 |
| 15 years | $873.13 | $67,163 |
| 20 years | $766.86 | $94,046 |
Same house, same debt, same rate. Every five points of extra cap is worth $20,000 on a $400,000 home — which is why the cap, not the rate, usually decides whether the project gets funded.
Compare
Home equity loan vs HELOC vs cash-out refinance
Three products turn equity into cash, and they are not interchangeable. The lump-sum loan fixes everything and leaves your first mortgage alone. The line of credit trades that certainty for flexibility. The cash-out refinance replaces the first mortgage entirely, which is either the cheapest route or the most expensive depending on one thing: the rate you are already paying.
| Home equity loan | HELOC | Cash-out refinance | |
|---|---|---|---|
| What it is | A second mortgage alongside your existing one | A revolving credit line secured by the home | A brand-new first mortgage that replaces the old one |
| Rate type | Fixed for the whole term | Usually variable, tied to an index | Fixed or adjustable, like any first mortgage |
| How you get the money | One lump sum at closing | Draw what you need, when you need it | One lump sum — the cash above the old payoff |
| Payment shape | Level payment, principal and interest from day one | Interest-only during the draw, then it amortizes | Level payment on the whole new balance |
| First mortgage | Untouched — rate and term stay as they are | Untouched | Replaced, so today's rate applies to all of it |
| Closing costs | Low — often a few percent, sometimes waived | Lowest — frequently waived entirely | Highest, because it is a full mortgage origination |
| Best when | You know the exact amount and want a fixed payment | Spending is staged or the total is uncertain | Today's rate is at or below the rate you already have |
The deciding question is usually not which product is cheapest in the abstract but what happens to the mortgage you already have. If your first mortgage is fixed at a rate well below what is available today, refinancing to pull cash out reprices the entire balance at the new rate — a very expensive way to raise a small sum. A second lien leaves that rate untouched and charges a higher rate on the new money only, which is almost always the better trade when the amount is modest relative to the mortgage. When you want the money in stages rather than all at once, the revolving line is the shape that fits; our /finance/heloc-calculator page covers the draw-period arithmetic that goes with it.
Where it shows up
What people actually borrow against equity for
A fixed lump sum suits a known cost. The three uses below cover most of the applications lenders see — and the reasoning differs sharply between them.
a quoted number
Renovation and repair
A contractor's quote is a fixed figure, which is exactly what a lump-sum loan is built for. It is also the use most likely to add value back to the security, and the only one that can make the interest deductible.
rate arbitrage
Consolidating expensive debt
Swapping card balances for a secured loan at a fraction of the rate is real arithmetic, not a trick. The catch is that unsecured debt becomes secured debt — a missed payment now threatens the house rather than your credit file.
a cost with a deadline
A large one-off bill
Tuition, a medical bill, a business injection. The rate beats almost any unsecured alternative, and the fixed payment makes the cost plannable — but nothing about the loan is easier to unwind than the bill was.
Schedule
Where every payment goes
A $90,000 home equity loan at 8.25% over 15 years, payment by payment. The first instalment is $618.75 interest and $254.38 principal; the last is $5.96 interest and $867.16 principal. The payment never changes — only the split does.
180 payments · 15y
| Payment | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $873.13 | $254.38 | $618.75 | $89,745.62 |
| 2 | $873.13 | $256.13 | $617.00 | $89,489.50 |
| 3 | $873.13 | $257.89 | $615.24 | $89,231.61 |
| 4 | $873.13 | $259.66 | $613.47 | $88,971.95 |
| 5 | $873.13 | $261.44 | $611.68 | $88,710.51 |
| 6 | $873.13 | $263.24 | $609.88 | $88,447.27 |
| 7 | $873.13 | $265.05 | $608.07 | $88,182.22 |
| 8 | $873.13 | $266.87 | $606.25 | $87,915.34 |
| 9 | $873.13 | $268.71 | $604.42 | $87,646.63 |
| 10 | $873.13 | $270.56 | $602.57 | $87,376.08 |
| 11 | $873.13 | $272.42 | $600.71 | $87,103.66 |
| 12 | $873.13 | $274.29 | $598.84 | $86,829.37 |
| Payment | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 169 | $873.13 | $804.21 | $68.91 | $9,219.73 |
| 170 | $873.13 | $809.74 | $63.39 | $8,409.99 |
| 171 | $873.13 | $815.31 | $57.82 | $7,594.68 |
| 172 | $873.13 | $820.91 | $52.21 | $6,773.77 |
| 173 | $873.13 | $826.56 | $46.57 | $5,947.22 |
| 174 | $873.13 | $832.24 | $40.89 | $5,114.98 |
| 175 | $873.13 | $837.96 | $35.17 | $4,277.02 |
| 176 | $873.13 | $843.72 | $29.40 | $3,433.29 |
| 177 | $873.13 | $849.52 | $23.60 | $2,583.77 |
| 178 | $873.13 | $855.36 | $17.76 | $1,728.41 |
| 179 | $873.13 | $861.24 | $11.88 | $867.16 |
| 180 | $873.13 | $867.16 | $5.96 | $0.00 |
| Year | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $10,477.52 | $3,170.63 | $7,306.89 | $86,829.37 |
| 2 | $10,477.52 | $3,442.32 | $7,035.19 | $83,387.05 |
| 3 | $10,477.52 | $3,737.30 | $6,740.21 | $79,649.75 |
| 4 | $10,477.52 | $4,057.56 | $6,419.96 | $75,592.19 |
| 5 | $10,477.52 | $4,405.26 | $6,072.25 | $71,186.92 |
| 6 | $10,477.52 | $4,782.76 | $5,694.76 | $66,404.17 |
| 7 | $10,477.52 | $5,192.60 | $5,284.91 | $61,211.56 |
| 8 | $10,477.52 | $5,637.57 | $4,839.95 | $55,574.00 |
| 9 | $10,477.52 | $6,120.66 | $4,356.85 | $49,453.33 |
| 10 | $10,477.52 | $6,645.16 | $3,832.36 | $42,808.18 |
| 11 | $10,477.52 | $7,214.59 | $3,262.92 | $35,593.58 |
| 12 | $10,477.52 | $7,832.83 | $2,644.69 | $27,760.75 |
| 13 | $10,477.52 | $8,504.04 | $1,973.48 | $19,256.71 |
| 14 | $10,477.52 | $9,232.77 | $1,244.75 | $10,023.94 |
| 15 | $10,477.52 | $10,023.94 | $453.57 | $0.00 |
156 payments sit between the two windows.
Over the full term this loan costs $67,163 in interest on $90,000 borrowed — 75% of the amount, spread across 180 payments. Extra principal paid early removes interest from every month that follows it.
Quick chart
Payment on a home equity loan, by rate and term
Second-lien rates run above first-mortgage rates, so this chart covers the band they actually trade in. Pick an amount and read the monthly payment — or switch to total interest to see what the longer terms really cost.
Home equity loan amount
Show
Monthly payment on $50,000, by rate and term.
| Rate | 5 years | 10 years | 15 years | 20 years | 30 years |
|---|---|---|---|---|---|
| 5.00% | $944 | $530 | $395 | $330 | $268 |
| 5.50% | $955 | $543 | $409 | $344 | $284 |
| 6.00% | $967 | $555 | $422 | $358 | $300 |
| 6.50% | $978 | $568 | $436 | $373 | $316 |
| 7.00% | $990 | $581 | $449 | $388 | $333 |
| 7.50% | $1,002 | $594 | $464 | $403 | $350 |
| 8.00% | $1,014 | $607 | $478 | $418 | $367 |
| 8.50% | $1,026 | $620 | $492 | $434 | $384 |
| 9.00% | $1,038 | $633 | $507 | $450 | $402 |
| 9.50% | $1,050 | $647 | $522 | $466 | $420 |
| 10.00% | $1,062 | $661 | $537 | $483 | $439 |
| 11.00% | $1,087 | $689 | $568 | $516 | $476 |
| 12.00% | $1,112 | $717 | $600 | $551 | $514 |
| 13.00% | $1,138 | $747 | $633 | $586 | $553 |
Principal and interest only. Closing costs, and the payment on your existing mortgage, sit on top of every figure here.
Costs
What closing a second lien costs
A home equity loan is a real mortgage, so it closes like one — just a much cheaper one than a first mortgage, because the loan is smaller and much of the paperwork is a rerun. Expect roughly two to five percent of the amount in total, and expect a good share of lenders to waive most of it outright.
| Line item | Typical range | What it is for |
|---|---|---|
| Appraisal or valuation | $0 – $600 | Many lenders accept an automated valuation on smaller loans and skip the visit entirely. |
| Origination fee | 0% – 2% of the loan | Charged by some lenders as points, by others not at all — it is the line worth shopping. |
| Title search and title insurance | $100 – $500 | The lender has to confirm nothing else is already claiming the property. |
| Recording and county fees | $25 – $250 | Set by the county, not the lender, so this one is not negotiable. |
| Credit report and flood certification | $20 – $100 | Small, fixed, and almost always passed straight through. |
| Early-closure clawback | Waived costs repaid | Where costs were waived, closing the loan inside about three years usually repays them. |
The waiver is the line to read closely. Many lenders advertise no closing costs and then attach a clawback: pay the loan off inside a stated window — commonly two or three years — and the waived costs become due. That is not a penalty for paying early in the usual sense, it is a repayment of fees the lender fronted, but it lands the same way. If there is any chance you will sell or refinance soon, price the clawback into the decision.
Tax
When the interest is deductible
Home equity interest is not automatically deductible in the United States, and the rule that decides it is about what you spent the money on, not what secured the loan. This is general information rather than tax advice — the details depend on your own return, and a professional should confirm them.
buy, build, or substantially improve
The use test
Interest qualifies only when the funds go into the home that secures the loan — an extension, a new roof, a rebuilt kitchen. Ordinary repairs and decoration generally do not clear the “substantially improve” bar, and money spent on anything other than the property does not qualify at all, however the loan is secured.
Interest on the $90,000 example is only in play if the money went into the home securing it
within the mortgage-interest limits
And it still has to fit the cap
Qualifying interest is added to the interest on your first mortgage and tested against the overall limit on deductible mortgage debt, so a large first mortgage can absorb the allowance on its own. It is also worth nothing unless your itemized deductions beat the standard deduction.
Deductible interest is claimed only by taxpayers who itemize
The practical consequence is that the two most common uses split cleanly: borrowing to renovate the home may produce deductible interest, while borrowing to consolidate credit cards or cover tuition does not. Keep the invoices either way — the burden of showing where the money went sits with you.
The risk
Your house is the collateral
This is the part that belongs above the fine print rather than inside it. A home equity loan is cheaper than unsecured credit for exactly one reason: the lender can take the house. Everything else on this page is arithmetic; this is the trade you are actually making.
a recorded lien
Default means foreclosure
The lender records a claim against the property and can move to foreclose on default, even sitting behind the first mortgage. A payment you could have missed on a credit card is now a payment you cannot miss.
value can fall
Negative equity cuts both ways
Combined loan-to-value is measured against today's value, and today's value is an estimate. Borrowing to the top of a high cap leaves almost no room for a market decline before the loans exceed what the house would fetch.
Borrowing to 90% leaves 10% of cushion before the debt exceeds the value
two payments, one house
The debt-to-income squeeze
The new instalment stacks on top of the mortgage payment you already make. Model the blended figure, not the new loan alone — that is the number that has to survive a lost job or a rate shock elsewhere in your budget.
Worth knowing
Things that decide the answer
Six things that move the outcome more than the rate you were quoted, none of which appear on a rate sheet.
score and DTI are gates, not dials
What underwriting actually checks
Lenders want a credit score in the middle of the range and a debt-to-income ratio below roughly forty-odd percent once the new payment is counted. Fail either and the cap you are offered drops before the rate does.
second lien, second in line
Why the rate is higher than your mortgage
A second-lien lender is repaid only after the first mortgage in a forced sale, so it carries strictly more risk on the same house. The rate gap is the price of that queue position, not a markup you can negotiate away.
8.25% on the second lien against a far lower rate on a first mortgage taken out years earlier
lump sum vs revolving draw
Take only what you need
You pay interest on the entire lump sum from the first month, whether or not you have spent it. If the spending is staged, a revolving line charges you only on what you have actually drawn.
fixed beats floating for certainty
Fixed rate, fixed payment
The rate on a home equity loan does not move, so a rate rise cannot reach your budget. A variable line is cheaper when rates fall and unpredictable when they do not.
shorter term, larger payment
The term is the biggest lever you control
Stretching the term lowers the payment and raises the total cost, and the effect is far from linear. Pick the shortest term whose payment you can carry through a bad year, not the one that looks comfortable today.
$90,000 at 8.25%: $1,103.87 a month over 10 years costs $42,465 in interest, $766.86 over 20 years costs $94,046
paid off at closing
Selling settles it automatically
The loan is discharged out of the sale proceeds along with the mortgage. Keeping a margin of equity is what makes sure the sale covers both loans plus commission and costs with something left over.
How we calculate this
The formula and our assumptions
We size the loan from the home's combined loan-to-value ceiling, then amortize it at a fixed rate. We show the working so you can check it.
max loan = value × CLTV cap − balances owed
How much you can borrow
The lender sizes the loan on combined loan-to-value: the home's value times the cap, minus every lien already on the house. If that comes out negative, nothing is available at that cap.
M = P·i ÷ (1 − (1 + i)^−n)
The fixed monthly payment
A home equity loan is a lump-sum second lien. The balance Pamortizes at rate i over n months, and the payment is fixed for the life of the loan.
- The rate is fixed for the life of the loan — unlike a HELOC, which floats.
- The loan size is capped by the combined loan-to-value (CLTV) limit the lender writes to.
- Closing costs are shown as ranges; they vary by lender and state.
- Interest is deductible only when the funds improve the home securing the loan — confirm with a tax adviser.
Where to get the loan
Where to shop for the loan
Rows are ordered by borrower fit, not by any payout — the type that suits your situation comes first for you. Rates are shown as ranges only; get an exact quote from the lender, because pricing depends on your credit, your equity and the day.
| Where | Examples | Best for | Typical pricing |
|---|---|---|---|
| Online marketplace | LendingTree | Comparing several equity lenders at once | Market range |
| Credit union | Member-owned lenders | Lower fees and member pricing | Often below market |
| Bank | Your mortgage holder | An existing mortgage relationship | Market range |
| HELOC (variable line) | Same lenders, revolving product | Borrowing as you go instead of a lump sum | Market range |
CalculateThis.io is not a lender and does not make credit decisions. When we add lender links they will be marked as sponsored, and we may earn a commission if you apply through one — it does not change the rate you are offered.
Sources
Where the method comes from
- Consumer Financial Protection Bureau — home equity loans and second mortgages.
- IRS Publication 936 — the home mortgage interest deduction.
- Standard amortization formula for a fixed-rate, fully amortizing loan.
FAQ
Common questions
Take what the home is worth, multiply by your lender's combined loan-to-value cap, and subtract everything already secured by the property. At an 85% cap, a $400,000 home with $250,000 left on the mortgage supports $90,000: $400,000 × 0.85 = $340,000, minus the $250,000 mortgage. Drop the cap to 80% and the same house supports only $70,000; raise it to 90% and it supports $110,000. Your equity is $150,000 either way — the cap, not the equity, is what decides the cheque.
CLTV is the combined loan-to-value ratio: every loan secured by the home, added together, divided by what the home is worth. A first mortgage of $250,000 plus a new $90,000 home equity loan against a $400,000 house is a CLTV of 85%. Lenders underwrite second liens on CLTV rather than on your equity because in a foreclosure the first mortgage is repaid before they see a cent, so the only thing protecting them is the slice of value left underneath every other claim.
Effectively yes, at most lenders — but the rule is really about what is left after borrowing, not what you have before. A lender capping at 80% CLTV needs 20% of the value untouched once the new loan is in place, so you need more than 20% equity to start with or there is nothing to draw. Lenders that write to 85% or 90% exist and let you keep less, and they price the extra risk into the rate.
Most lenders start at a FICO score around 620, the best pricing lands around 700 to 740 and up, and a score in the high 500s will usually only find a lender writing to a low CLTV cap at a high rate. Score is not the only gate: lenders also want a debt-to-income ratio below roughly 43% once the new payment is included, verified income, and enough equity left after the draw to satisfy their combined loan-to-value limit.
It is a standard amortizing loan payment: M = P·i ÷ (1 − (1 + i)^−n), where P is the lump sum, i is the annual rate divided by 12, and n is the number of monthly payments. On $90,000 at 8.25% over 15 years, i is 0.006875 and n is 180, which gives $873.13 a month. Because the loan fully amortizes, that payment never changes and the balance reaches zero on the last scheduled payment.
They answer different questions. A home equity loan hands you the whole amount at closing at a fixed rate with a level payment, which suits a known cost — a quoted renovation, a payoff figure, a specific bill. A HELOC is a revolving line you draw on as you need it, usually at a variable rate, with interest-only payments during the draw period, which suits staged spending or a total you cannot pin down. If the amount is certain and you want the payment to be certain too, the fixed-rate lump sum wins.
In the United States, interest on home equity debt is deductible only when the money is used to buy, build, or substantially improve the home that secures the loan, and only within the overall limits on mortgage interest — and only if you itemize rather than take the standard deduction. Borrowing against the house to consolidate credit cards or pay tuition does not qualify, even though the loan is secured by the property. This is general information, not tax advice.
It is paid off at closing out of the sale proceeds, exactly like the first mortgage. The title company pulls a payoff figure for every lien on the property, settles them in order, and you receive what is left. That is why keeping a margin of equity matters: if the two loans together are close to the sale price, agent commission and closing costs can leave you writing a cheque instead of receiving one.
Yes. A home equity loan is a mortgage — the lender records a lien against the property and can foreclose if you default, even though it sits behind the first mortgage in priority. That is the whole reason the rate is lower than an unsecured personal loan: you have swapped an interest-rate saving for the risk of losing the house. Converting unsecured debt into secured debt is the version of this trade people most often make without noticing.
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Ugo CharlesBuilt and fact-checked against our editorial standards · Last updated June 2026
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