Home equity loans and HELOCs (home equity lines of credit) are two versions of the same type of loan but with some major differences. Both are secured by the equity in your home, but the way you borrow money and calculate your loan payments are completely different.

This Home Equity Loan and HELOC payment calculator is versatile enough to calculate payments for both types of loans. It can also calculate your total payments over the life of the loan, the total amount of interest you'll pay, your loan balance at any point in time and provides an amortization schedule for paying off the loan.

To use as a Home Equity Loan Payment Calculator

(Need more information? See "About Home Equity Loans and HELOCs," below)

Doing the calculations for a home equity loan is fairly simple. Since these are usually fixed-rate loans repaid on a regular schedule, all you have to do is enter your loan amount, interest rate and length of the loan, and the calculator will provide your monthly payments.

On the calculator, click on the "Payment" button, then choose "fixed-rate loan" under "Payment option." Enter the loan amount, length of loan in months and interest rate, then hit "Calculate." The calculator will indicate what your monthly payments would be.

You can also run the process backward, indicating the monthly payment you can afford and letting the calculator determine how much you can borrow. To do that, click the "Loan amount" button, then enter your desired monthly payment, length of the loan and interest rate. The calculator will show you how much you can borrow with that payment.

Wondering how much you can borrow and at what rates on a home equity loan?  Use the "Get FREE Quote" tab at the top of the page to get personalized rate quotes from lenders.

 

To use as a HELOC Payment Calculator 

(Need more information? See "About Home Equity Loans and HELOCs," below)

Figuring out the payments for a HELOC is more complicated. For one thing, HELOCs are interest-only loans during the draw period – you don't have to repay any principle during that phase, but you must pay off any interest charges as they occur.  HELOCs are also adjustable-rate loans during the draw, so you can't pin them down to a single interest rate.

Because you're also borrowing – and possibly repaying, though that isn't required – various amounts of money during the draw, you may not have a set loan balance to calculate your payments against.

Once the draw ends, you don't borrow any more money and begin repaying principle, usually at a fixed rate. So from that point on it works like a regular home equity loan.

This calculator lets you do several different types of calculations to help you figure out what your payments will be.

To determine your payments during the draw phase:  

Choose "100 percent of interest owed" as your payment option and then proceed as above. The calculator will give you your interest-only payments for the loan.

To see how borrowing more money or a varying interest rate would affect your payments, use the sliding green triangles to adjust those values.

To determine payments for paying down the balance at a certain rate:

For you payment option, choose either 1%, 1.5% or 2% of the balance and the calculator will show you your balance for paying down your loan principle at that rate. Note that these may not fully pay off the principle by the end of the draw periods.

To determine payments during the repayment phase:

Follow the same steps as for a standard home equity loan.

Thinking about getting a HELOC?  Use the "Get FREE Quote" tab at the top of the page to get personalized rate quotes from lenders.

 

About Home Equity Loans and HELOCs

Both home equity loans and HELOCs are secured by your financial stake in your home – your home equity.  You use a portion of your home equity – the share of your home's value that is paid for – as collateral for the loan.  As such, home equity loans and home equity lines of credit generally have lower interest rates than other, unsecured loans.

The differences between a home equity loan and a HELOC are in 1) how you borrow the money and 2) how you pay it back. With a home equity loan, you borrow a single lump sum of money and immediately begin paying it back in installments.  Home equity loans can have either fixed or adjustable rates, though most have the former.

HELOCs are more complicated, but they're also more flexible.  They're like a credit card secured by your house, with a few key differences.

With a HELOC, you're given a line of credit that you can borrow against as you wish, up to a predetermined limit. There's a certain length of time, called the draw, during which you can borrow against the line, usually 5-10 years.

 The draw is usually interest-only, meaning you don't have to repay any loan principle, just the ongoing interest charges on whatever you've borrowed. Once the draw ends, you enter the repayment phase, often 10-20 years, where you must repay what you've borrowed. The draw is always an adjustable rate, but the repayment phase is often fixed-rate.

Though the draw is usually interest-only, you can still make additional payments toward the loan principle during that time if you wish.  This not only reduces what you'll eventually have to repay at the end of the draw period (and lowers the monthly payments you'll face), it also frees up more of your line of credit again.  This lets you use a HELOC as a cash-flow management tool, borrowing and repaying as needed or able.

Both home equity loans and HELOCs are what are known as second mortgages, or second liens. This means they are subordinate to the primary mortgage used to buy your home. In the event of a default and foreclosure, the primary mortgage gets paid off entirely before any second liens are paid.  This makes them slightly riskier than primary mortgages, so the rates run a bit higher than on a home purchase loan or refinance. But they're still considerably lower than the rates on most credit cards or other unsecured loans.

How much can you borrow?

What you can borrow depends largely on the amount of home equity you have.  Home equity lenders will generally allow you to borrow against 75-90 percent of the assessed value of your home for all loans combined, primary mortgage and a home equity loan/line of credit. This is called the loan-to-value ratio, or LTV.

So if you have a $400,000 home and the lender will allow an 80 percent LTV, that means you have up to $320,000 in primary mortgage debt and a home equity loan/HELOC.  So if you owe $250,000 on your mortgage, $320,000 - $250,000 = up to $70,000 available for a home equity loan/line of credit.

Home equity loans and lines of credit generally have certain minimums, often $5,000-$10,000, that you need to borrow or is the smallest line of credit they will set up.

Qualifying for a home equity loan or HELOC

The main qualification for a home equity loan or HELOC is having home equity, described above. Credit requirements are somewhat stricter than on a mortgage to buy or refinance a home; many lenders require a FICO score of 720 or higher, though some lenders will allow scores of 660 or below.  Expect to pay higher rates and face tighter LTV limits on lower scores.

As for income, your monthly debt payments, mortgage and home equity loan/HELOC included, should total no more than 45 percent of your pretax income.

With most home equity loans and HELOCs, there are no restrictions on how you use the money. You don't need to demonstrate a need for the money or justify it to the lender; you just have to qualify for the loan. Some special loan programs for things like medical expenses or home improvements may be an exception, though.

Ready to start looking at lenders? Click the "Get FREE Quote" box above for fast, personalized rate quotes tailored specifically for you.

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