Fixed home equity loan calculator

How does a home equity loan work?

Homeowers looking at billsAs the name implies, a home equity loan is a loan against the equity in the home. The word equity just means ownership.

For example, let's say your home is valued at $100,000 and there is no mortgage loan on the home. You have 100% equity (ownership) in the house. For whatever reason, you need to borrow money from the bank, and the bank tells you that they will give you $80,000 if you agree to repay the bank every month and give the bank a lien on the home. A lien means that if you fail to repay the bank for the home equity loan, the bank has the legal right to foreclose and take the house as repayment for the loan.

Home equity loans are usually a fixed amount of money that is calculated as a percentage of the appraised value of the home. Here's another example. The home has a value of $100,000 and there is no mortgage or loan against the property. The bank policy may be to loan only 80% of the value of the home:

Appraised Value = $100,000
X 80% = $80,000

The bank will lend $80,000 to qualified borrowers.

Home equity loans can also be 2nd mortgages. Using the same example above, the home is valued at $100,000 and the 1st mortgage is $50,000 which leaves $50,000 equity. This means that the bank owns $50,000 or 50% of your home and you own 50% of the home. The bank could give you $30,000 as a second mortgage (home equity). Unfortunately, the bank(s) would then own 80% (1st = $50,000 + 2nd = $30,000) of the home and you would own only 20%.

Home equity loan with existing loan

Appraised Value = $100,000
X 80% = $80,000
less existing loan of $50,000
equals $30,000 for a home equity loan

Home equity loan requirements vary from bank to bank. The interest rates on home equity loans also vary from bank to bank. It pays to shop around for the best home equity deal.

Home equity loans can be a great way to pay for a child’s education, home improvements or bill consolidation. Use the home equity payment calculator to estimate and compare monthly equity payments with different loan terms, interest rates and loan amounts.

Fixed rate home equity loan calculator
Monthly Loan Payment - 1 Monthly Loan Payment - 2
Interest Rate Interest Rate
Loan Term Loan Term
Mortgage Amount Mortgage Amount
Monthly Payment Monthly Payment
Compare Payments
1. Principal & Interest - Fully amortizing payment ( i.e. principal & interest)
2. Bi-Weekly - 1/2 of the fully amortizing monthly payment paid every two weeks
3. Interest Only - Interest only payment - no principal reduction