Home Equity Loan Calculator
Calculate your monthly fixed payment, total interest paid, loan costs, and effective APR for fixed-rate home equity loans (second mortgages).
Calculate Fixed Home Equity Loan Payment
Enter loan amount, fixed interest rate, loan term, and upfront lender closing fees.
Home Equity Loan Output
Quick Summary
Our home equity loan payment calculator fixed rate calculates exact monthly payments for lump-sum second mortgages. Unlike variable-rate HELOCs, fixed-rate home equity loans deliver payment certainty with equal monthly principal and interest payments for terms ranging from 5 to 30 years.
How It Works: Fixed Home Equity Loans vs HELOCs
A Home Equity Loan (often called a **second mortgage**) is a closed-end loan disbursed as a single lump-sum payout at closing. It features a **fixed interest rate** and fixed monthly payments for the entire term (typically 5, 10, 15, or 20 years). Because your existing primary mortgage remains untouched, a home equity loan is ideal when you have a low interest rate on your first mortgage and need cash for major projects like home remodeling, debt consolidation, or college tuition.
Formula Explanation
Your fixed monthly payment ($Payment$) and total loan cost ($Cost_{total}$) are calculated using standard amortization math:
Step-by-Step Worked Example
Here is a detailed 5-step breakdown for a homeowner borrowing a $50,000 fixed home equity loan at 7.75% fixed APR over a 15-year term ($180$ months) with $800 closing fees:
- Step 1 (Calculate Monthly Interest Rate & Term): $r = 7.75\% \div 12 = \mathbf{0.00645833 \text{ per month}}$. $n = 15 \times 12 = \mathbf{180 \text{ months}}$.
- Step 2 (Calculate Monthly Principal & Interest Payment): Using the amortization formula, monthly payment $= \mathbf{\$470.62 / month}$.
- Step 3 (Calculate Total Amortized Payments): $\$470.62 \times 180 \text{ months} = \mathbf{\$84,711.60}$.
- Step 4 (Compute Total Interest Paid): $\$84,711.60 - \$50,000 \text{ loan} = \mathbf{\$34,711.60 \text{ Total Interest}}$.
- Step 5 (Compute Total Cost of Borrowing): $\$84,711.60 + \$800 \text{ closing fees} = \mathbf{\$85,511.60}$ (Effective APR $= \mathbf{7.99\%}$).
Calculation Examples: Real-World Scenario Comparison
Compare fixed monthly payments and interest costs across common loan amounts and term lengths at 7.75% APR:
| Loan Amount & Purpose | Loan Term | Fixed Monthly Payment | Total Interest Paid | Total Loan Cost |
|---|---|---|---|---|
| $25,000 Home Renovation | 5 Years (60 mos) | $503.74 / mo | $5,224.40 | $30,724.40 |
| $50,000 Kitchen Remodel | 10 Years (120 mos) | $600.28 / mo | $22,033.60 | $72,833.60 |
| $50,000 Standard Equity Loan | 15 Years (180 mos) | $470.62 / mo | $34,711.60 | $85,511.60 |
| $100,000 Major Addition | 20 Years (240 mos) | $820.95 / mo | $97,028.00 | $197,828.00 |
Benefits of Using the Home Equity Loan Calculator
Utilizing this calculator provides essential financial planning advantages:
- 100% Fixed Monthly Payment Certainty: Protects against variable interest rate fluctuations and payment shock.
- Compares 5, 10, 15, and 20-Year Terms: Evaluates lower monthly payments vs rapid debt payoff and interest savings.
- Includes Upfront Closing Costs in APR: Itemizes origination and title fees to show true effective annual percentage rate.
- Preserves Low Primary Mortgage Rates: Enables borrowing equity cash without refinancing an existing low-rate first mortgage.
Frequently Asked Questions (FAQ)
What is a home equity loan?
A home equity loan is a fixed-rate second mortgage that provides a single lump-sum cash payout repaid over a fixed term in equal monthly payments.
What is the difference between a home equity loan and a HELOC?
A home equity loan has a fixed interest rate, lump-sum payout, and fixed monthly payment. A HELOC has a variable interest rate, revolving credit line, and interest-only draw period.
What is a second mortgage?
A second mortgage is any loan secured against your home that sits secondary to your primary first mortgage in lien priority.
How much can I borrow with a home equity loan?
Most lenders allow borrowing up to 80% to 85% Combined Loan-to-Value (CLTV), calculated as 85% of home market value minus existing mortgage balance.
What credit score is required for a home equity loan?
Most home equity loan lenders require a minimum credit score of 620 to 680, with higher scores (740+) securing lower interest rates.
Is interest on a home equity loan tax-deductible?
Yes, but only if the loan proceeds are used to buy, build, or substantially improve the home securing the loan under IRS guidelines.
Are there closing costs on a home equity loan?
Yes. Home equity loan closing costs typically range between 2% and 5% of the loan amount, covering appraisal, title search, and origination fees.
Can I pay off a home equity loan early without penalty?
Most home equity loans do not have prepayment penalties, but verify with your lender if an early closure fee applies in the first 2-3 years.
What happens to my home equity loan if I sell my home?
When you sell your home, your first mortgage and home equity loan must both be paid off in full from the sale proceeds at settlement.
Is a home equity loan better than a cash-out refinance?
A home equity loan is better if your primary mortgage has a very low interest rate. Cash-out refinancing is better if current mortgage rates are lower than your existing rate.