Home Equity Loan Calculator
How much can you borrow against your home? See your available equity, monthly payment, and total interest — at the 80% combined loan-to-value limit most lenders use.
- Home value$400,000.00
- Mortgage owed−$250,000.00
- Equity$150,000.00
- 80% LTV cap$320,000.00
- Available to borrow$70,000.00
A home equity loan is a second mortgage: fixed rate, fixed payment, and your house is the collateral — fall behind and the lender can foreclose. Interest may be tax-deductible if you use the money to buy, build, or substantially improve the home. A HELOC (credit line) is the flexible-rate alternative for ongoing projects.
How the math works
Your equity is the part of the home you actually own: appraised value minus what you still owe on the mortgage. A $400,000 home with a $250,000 balance means $150,000 of equity — but you can't borrow all of it.
Lenders protect themselves with a combined loan-to-value (CLTV) cap, usually 80%. They add your existing mortgage to the new loan and require the total to stay at or under 80% of the appraised value. So your maximum new loan is 80% of the home's value minus your current mortgage balance. On that $400,000 home: 80% is $320,000, minus the $250,000 mortgage, leaves $70,000 of borrowable equity. Note the lender uses their own appraisal, not an online estimate — if the appraisal comes in low, your borrowing room shrinks.
The monthly payment works like any amortizing loan. Each month the lender charges interest on your remaining balance, and the rest of your fixed payment reduces the balance. Three inputs set your payment: the amount borrowed, the interest rate, and the term. Home equity loans usually carry fixed rates slightly higher than first mortgages — you're borrowing in second position, which is riskier for the lender — with terms of 10, 15, or 20 years. A shorter term means a bigger payment but much less total interest.
Worked example
Take a home appraised at $400,000 with a $250,000 mortgage balance, and borrow $50,000 as a home equity loan at 8.25% fixed for 15 years.
First the limit: 80% of $400,000 is $320,000; minus the $250,000 mortgage, the lender allows up to $70,000 — so the $50,000 request fits comfortably. The $50,000 loan over 180 months works out to $485.07 per month. Over the full term you'd pay $87,313 total, of which $37,313 is interest — the loan costs about 75% more than the amount borrowed. That's the price of stretching repayment over 15 years at 8.25%: a 10-year term would raise the payment to about $613/month but save roughly $13,720 in interest.
What to watch for
- Borrow for the house, not the lifestyle. Your home is the collateral — fund renovations that add value or consolidate truly higher-cost debt, not vacations or cars.
- Don't max out the 80%. Borrowing the full limit leaves no cushion if home values dip. Keeping 10–15% equity untouched protects you from going underwater.
- Consider the HELOC alternative. If you need money in stages — a multi-month renovation — a HELOC's draw-as-you-go structure can cost less than paying interest on a lump sum from day one.
- Watch for closing costs. Many lenders advertise "no closing costs" but bake them into the rate. Ask for the rate with and without lender credits so you can compare honestly.
- Keep the term short if you can afford it. Every extra five years at 8%+ adds tens of thousands in interest, as the example above shows.
Frequently asked questions
How much can I borrow with a home equity loan?
Most lenders let your combined loans (mortgage + equity loan) reach 80% of your home's appraised value. On a $400,000 home with a $250,000 mortgage, that's up to $70,000. Some lenders allow 85–90% with stricter terms.
What's the difference between a home equity loan and a HELOC?
A home equity loan is a lump sum with a fixed rate and fixed monthly payment — predictable. A HELOC is a revolving credit line with a variable rate you draw from as needed — flexible but the payment can rise.
Is home equity loan interest tax-deductible?
It can be, but only if you use the loan to buy, build, or substantially improve the home securing the loan — not for paying off credit cards or vacations. Consult a tax professional for your situation.
What are the risks of borrowing against my home?
Your home is the collateral: if you can't make the payments, the lender can foreclose. It also reduces your equity cushion if home prices fall. Borrow for needs with a clear payoff — renovations that add value, or consolidating truly higher-cost debt — not lifestyle spending.
How is the 80% combined loan-to-value limit calculated?
Add your current mortgage balance to the new loan, then divide by the home's appraised value — lenders want that number at or under 80%. On a $400,000 appraisal with a $250,000 mortgage, 80% is $320,000, so the most you could add is $70,000. The appraisal the lender orders (not an online estimate) is the number that counts.
Should I get a home equity loan or a cash-out refinance?
It depends on your first mortgage's rate. If your current rate is well below today's rates, a home equity loan lets you borrow without touching it. If today's rates are lower than your current rate, a cash-out refinance can lower your main rate and pull cash out in one loan. Compare the blended cost of both options — a licensed mortgage professional can run the numbers for your situation.
How long does it take to get a home equity loan?
Typically 2–6 weeks: application, appraisal, underwriting, then a mandatory 3-day right-of-rescission waiting period after closing before funds disburse. Federal rules and the appraisal set the timeline — not something a lender can waive to move faster.