Home Equity Loan Calculator

A lender appraises your home and approves an amount based on your equity, credit and income. At closing, you get a lump sum, usually at a fixed rate, and begin monthly payments on a set schedule, in addition to your first mortgage. The lender takes a lien on your home, so failing to pay can lead to foreclosure.

Multiply your home's value by the lender's limit, often 80% to 85%, then subtract your mortgage balance. On a $400,000 home at 85% with $220,000 owed, the most you could borrow is $120,000. Your income, debts and credit can reduce that amount. Borrowing the maximum also leaves you little cushion if home prices fall.

It depends on the rate and term. At 8%, it's $1,213 a month over 10 years, with $45,593 in total interest, or $836 over 20 years, with $100,746 in interest. The table above covers other combinations. This is on top of your existing mortgage payment, so check that both fit your budget.

It's one at or below what similar borrowers are being offered today. Rates depend on your credit, your combined loan-to-value ratio, the term and market conditions. Check a bank, a credit union and an online lender on the same day, and compare APRs, as fees vary. These loans usually cost more than first mortgages, but less than personal loans.

A home equity loan gives you a lump sum with a fixed rate and fixed payments. A HELOC is a revolving line of credit with a draw period, often 10 years, when many let you pay interest only, followed by a repayment period. The rate is usually variable. On $100,000 at 8.5%, interest-only payments are $708 a month, then $985 once 15 years of repayment start. Choose "Compare a HELOC" above to see yours.

It doesn't change your first mortgage's terms or balance. You'll have two separate loans and two payments. Your home's equity falls, though, which could make it harder to refinance or sell if prices drop. When you sell, both loans are paid from the proceeds. If the proceeds fall short, you'd have to make up the gap.

Many lenders look for a score of around 680 or higher, and the best rates often go to those at 720 or above. Some will consider lower scores with more equity or a lower debt load. Lenders also check your debt-to-income ratio, often preferring it below about 43%. Ask for prequalification to see your options before a full credit check.

You can use it for almost anything, though home improvements and debt consolidation are the most common uses. Using it for improvements could add value to the home and may make the interest deductible. Be careful with spending on things that lose value or with paying for vacations, since you're putting your house on the line. Lenders may ask for your intended use.

It may be, if you use the funds to buy, build or substantially improve the home securing the loan, and you itemize deductions. It's subject to the overall limit on mortgage debt. Interest isn't deductible if you use the money for other things, such as paying off credit cards. See IRS Publication 936, and check with a tax professional.

It can be if the rate is well below your other options and you have a clear plan to repay it. The danger is that a low payment over a long term tempts you to borrow more than you need. You're also exchanging unsecured debt for debt backed by your home. Before signing, run the numbers and make sure you could cover the payment if your income fell.

Banks, credit unions, online lenders and mortgage companies all offer them. Compare the rate, fees, closing costs and any prepayment penalty. You could also check a lender's license through NMLS Consumer Access. Be wary of anyone pushing you to borrow more than you asked for, or to sign quickly. Equity scams target older homeowners in particular.