Home Equity Loan Calculator

The short answer

• Lenders usually cap all loans on the home at 80% to 85% of its value. A $500,000 home with $300,000 owed supports up to $125,000 at 85%.
• $50,000 at 8.66% over 15 years costs $497.07 a month and $39,473 in interest.
• If your first mortgage has a low rate, a second loan is far cheaper than a cash-out refinance.
• The interest is deductible only if you itemize and the money buys, builds or substantially improves the home.

What a home equity loan is

A home equity loan, sometimes called a second mortgage, is a lump sum borrowed against the equity in your home: its value minus what you owe. You get all the money at closing and repay it in equal monthly payments at a fixed rate, usually over 5 to 30 years. Your first mortgage stays as it is. Because the home secures the loan, rates are lower than on credit cards or personal loans, but missing payments puts the home at risk.

How much you can borrow

At an 80% limit the same home supports $100,000. The lender also checks your credit and income: a debt-to-income ratio under about 43% is a common requirement, and the debt-to-income calculator shows yours with the new payment added.

A worked example

Closing costs taken from the loan mean you repay $50,000 but receive $49,000, so the true cost, the APR, is 9.00% rather than 8.66%. With $2,500 of costs it would be 9.54%.

Choosing the term

Stretching the term lowers the payment but multiplies the interest. Match the term to what you are paying for: a roof that lasts 25 years can justify a longer loan than a car that lasts eight. Rates are often a little lower for shorter terms.

Rates in 2026

Bankrate’s survey put the average 10-year home equity loan at about 8.66% and the average HELOC at about 7.33% on October 7, 2026. Freddie Mac’s 30-year first-mortgage average was about 7.3% on October 1, 2026. Home equity loans cost more than first mortgages because the lender is paid second if the home is sold in foreclosure. Your rate depends on your credit score, the CLTV and the loan size.

Closing costs and the APR

Expect closing costs of about 2% to 5% of the loan: an appraisal, origination and title fees, and recording charges. Some lenders waive them, sometimes in exchange for a slightly higher rate or a fee if you repay within a few years. Compare offers on the APR, which spreads the costs over the loan, and on the total cash you will repay.

Three ways to tap equity

The calculator raises the same cash all three ways and shows your total mortgage payments now and later, and the extra interest and costs over each loan’s life compared with keeping only your mortgage.

When you have a low first mortgage

Millions of homeowners hold mortgages from 2020 and 2021 at 3% to 4%. A cash-out refinance would reprice the whole $300,000 at 7.3% and restart a 30-year term, adding about $349,000 of interest and costs to raise $50,000. A second loan leaves the cheap mortgage alone. The HELOC has the lowest payment at first but, over its 30-year life, costs about twice the home equity loan, because you pay interest only for ten years.

When your mortgage rate is high

The picture changes if your first mortgage already costs more than today’s rates. With the same $300,000 at 7.5%, a cash-out refinance at 7.3% has the lowest monthly payment, $2,399.50 against $2,714.04 with a home equity loan on top, because it also cuts the rate and spreads the debt over 30 years. Over the long run it still costs $159,227 more than keeping the mortgage, against $40,473 for the home equity loan, mostly from the five extra years of payments. The refinance calculator shows the break-even month for a rate-cutting refinance.

Home equity loan or HELOC

Choose a home equity loan for one known cost, such as a roof or a kitchen with a fixed quote, and when you want a payment that never changes. Choose a HELOC for costs that come in stages or are uncertain, and when you can repay quickly; you pay interest only on what you draw. A HELOC’s rate moves with the prime rate, about 7.00% in October 2026. The HELOC calculator shows its draw and repayment payments in detail.

Is the interest deductible?

Interest on a home equity loan is deductible only if you itemize and you use the money to buy, build or substantially improve the home that secures the loan. Interest on money used for anything else, such as paying off credit cards, buying a car or paying tuition, is not deductible. The One Big Beautiful Bill Act (P.L. 119-21) made this rule permanent, along with the $750,000 limit ($375,000 if married filing separately) on total mortgage debt, first mortgage and home equity loan together, whose interest can be deducted (IRS Publication 936). Loans taken out before December 16, 2017 keep the older $1,000,000 limit.

Working out the tax saving

On $50,000 at 8.66% over 15 years, first-year interest is $4,264. If the loan pays for a renovation and you itemize in the 24% bracket, that saves about $1,023 of federal tax in the first year, making the rate about 6.58% after tax. Most households take the standard deduction ($32,200 for married couples filing jointly in 2026) and get no saving. Above the cap only part of the interest counts: with $700,000 on the first mortgage and a $100,000 improvement loan, 93.75% of the interest is deductible.

Sensible uses

• Renovations and repairs that keep or add value, where the interest may be deductible.
• A large one-off cost with a fixed price, such as a new roof, heating system or accessibility work.
• Replacing much higher-rate debt, with a firm plan not to run it up again.

Avoid using home equity for holidays, cars or day-to-day spending: you could still be paying for them long after they are gone.

Consolidating debt

Swapping credit card debt at over 20% for a home equity loan near 9% can save a lot of interest, but it moves unsecured debt onto your home and often over a longer term. Pay it off over a short term, close or freeze the cards you cleared, and compare with a balance transfer or a debt plan first. The debt payoff calculator shows how fast you could clear the debts without borrowing against your home.

Qualifying

Lenders look at four things: equity (the CLTV after the loan), your credit score (many want 620 to 680 or more, with the best rates above 740), your debt-to-income ratio, and stable income. Expect an appraisal or an automated valuation of the home. A lower CLTV and a higher score usually win a lower rate.

The risks

• Your home secures the loan: if you cannot pay, the lender can foreclose.
• If prices fall, you could owe more than the home is worth, which makes selling or refinancing hard.
• A second monthly payment for years cuts your room in the budget if income drops.
• Closing costs make borrowing small amounts expensive.

If you sell the home

Both the first mortgage and the home equity loan are paid off from the sale proceeds at closing. Check the loan for an early payoff fee before you borrow if you might move within a few years. Money spent on improvements also adds to your cost basis, which can reduce any capital gain above the home sale exclusion.

From application to cash

1. Check your credit report and your home’s likely value.
2. Get Loan Estimates from your bank, a credit union and an online lender on the same day.
3. Compare the rate, APR, closing costs and any early payoff fee.
4. Close. For a loan on your main home, you have three business days to cancel, so the money arrives after that.

Using the calculator well

Enter your home’s value, what you owe and the lender’s CLTV limit to see the most you can borrow. Then add the amount, rate and term from a quote. Under More options, add closing costs, say what the money is for and whether you itemize, and enter your current mortgage rate and the HELOC and refinance rates you have been offered to compare all three ways. For the total monthly housing cost with tax and insurance, use the mortgage calculator.

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