Calculate your home equity loan monthly payment. Compare home equity loan vs HELOC, understand LTV limits, tax deductibility, and smart uses for your home's equity.
General market averages — rates and limits vary by lender and credit profile
Enter your loan amount, rate, and term to see your exact monthly payment and full amortization schedule.
Open Loan Calculator →A home equity loan — sometimes called a second mortgage — allows homeowners to borrow against the equity they've built in their property. Equity is the difference between your home's current market value and the amount you still owe on your mortgage. If your home is worth $400,000 and your mortgage balance is $250,000, you have $150,000 in equity. Lenders typically allow you to borrow up to 85% of combined loan-to-value (CLTV), meaning your first and second mortgage together cannot exceed 85% of your home's value.
Home equity loans are disbursed as a single lump sum, carry a fixed interest rate, and are repaid over a fixed term — typically 5 to 30 years. Monthly payments are predictable, making budgeting straightforward. Use our loan calculator to compute your exact payment for any loan amount, rate, and term combination.
Home Equity Loan — best for large, defined, one-time expenses where you know the total cost upfront. Examples: full kitchen renovation, adding a room, debt consolidation, medical bills. Fixed rate means no interest rate risk. Lump sum disbursement is immediate.
HELOC (Home Equity Line of Credit) — best for ongoing expenses or projects where total cost is uncertain. Works like a credit card secured by your home. Draw funds as needed during the draw period (typically 10 years), then repay over the repayment period (10–20 years). Variable interest rate can be lower initially but creates risk if rates rise. Most appropriate when flexibility is the priority.
Step 1: Determine your home's current market value (use a recent appraisal, Zillow/Redfin estimate, or recent comparable sales).
Step 2: Subtract your current mortgage balance.
Step 3: Apply the lender's maximum CLTV (typically 80–85%).
Formula: Max loan = (Home value × 0.85) − existing mortgage balance
Example: Home value $400,000 × 85% = $340,000 − $250,000 mortgage = $90,000 maximum home equity loan amount.
Not all uses of home equity are equally wise. The best uses generally add value to your property, generate returns, or pay off higher-cost debt:
• Home improvements: Kitchen, bathroom, or addition renovations can return 50–80 cents per dollar spent in home value, and interest is tax deductible
• Debt consolidation: Replacing high-interest credit card debt (18–24%) with a home equity loan at 8–9% saves significant interest — but converts unsecured debt to secured
• Education: Funding education can have strong long-term ROI, though student loan alternatives may offer more flexibility
• Emergency fund: Establishing a HELOC as a financial safety net (paying no interest until drawn)
The most important distinction between home equity loans and unsecured personal loans is collateralization. If you default on a home equity loan, the lender can foreclose on your property — even if you are current on your primary mortgage. This risk is real and has led many homeowners to lose their homes during economic downturns. Only borrow against your home's equity for purposes that improve your financial position, and ensure the monthly payment fits comfortably within your budget using our loan calculator.
The home equity loan process typically takes 2–6 weeks, including application review, home appraisal, title search, underwriting, and closing. It's faster than a primary mortgage refinance but involves similar steps. Some lenders offer expedited processing for existing customers.
Applying for a home equity loan triggers a hard credit inquiry, which may temporarily reduce your score by a few points. Taking on a new loan increases your total debt load. However, making consistent on-time payments rebuilds your score over time. Missing payments or defaulting has severe negative consequences.
It's more difficult but possible. Most lenders require a minimum credit score of 620–660 for home equity loans, with the best rates reserved for scores above 740. If your credit score is below 620, consider improving it before applying, as the rate premium for poor credit can be significant — 2–4% higher than prime rates.
If you sell your home, the home equity loan must be repaid at closing from the sale proceeds, along with your primary mortgage. Both liens are paid before you receive your equity as cash. Ensure your expected sale price will cover both balances plus selling costs (typically 6–9% of sale price in agent commissions and closing costs).