How to Use the Calculator
This calculator helps estimate your potential borrowing power using home equity:
- Estimated Home Value: Current market value of your property.
- Current Mortgage Balance: The Remaining balance on your primary mortgage.
- Desired Loan Type: Choose between a fixed-rate Home Equity Loan or a variable-rate HELOC.
Loan Parameters
- Loan-to-Value (LTV) Ratio Limit: Typically up to 80–85% of your home’s value.
- Term of the Loan: Duration in years (for Home Equity Loans).
- Interest Rate: Enter estimated APR (Annual Percentage Rate).
After entering your data, you’ll see:
- Maximum Borrowable Equity: Based on your home's value and existing mortgage.
- Estimated Monthly Payment: For Home Equity Loans.
- Interest Cost Overview: Based on the loan amount and term.
Understanding the Results
Using U.S. average figures:
- Home Value: $400,000
- Mortgage Balance: $250,000
- LTV Limit: 80%
You could borrow up to $70,000:
- 80% of $400,000 = $320,000
- $320,000 - $250,000 = $70,000 available equity
For a Home Equity Loan
At 8% interest over 15 years:
- Monthly Payment: $668.96
- Total Interest Paid: $50,412.16
- Total Repayment: $120,412.16
For a HELOC
Assuming $35,000 is drawn at 8%:
- Interest-Only Draw Period (10 years): $233.33/month
- Repayment Period (20 years): Varies based on the full balance drawn and the final interest rates
When to Use a Home Equity Loan or HELOC
- Home Renovations: Fund improvements that may boost property value.
- Debt Consolidation: Pay off high-interest debts at a lower rate.
- Major Expenses: Cover tuition, medical bills, or emergency costs.
- Flexible Access (HELOC only): Borrow as needed during the draw period.
Try the calculator now to estimate your home equity borrowing power and monthly payment options.
FAQ:
Q: What's the difference between a Home Equity Loan and HELOC?
A: A Home Equity Loan gives a lump sum with fixed payments, while a HELOC is a revolving credit line with variable rates.
Q: How much equity do I need to borrow?
A: Most lenders require at least 15–20% equity remaining after borrowing.
Q: Will this affect my first mortgage?
A: No, these are secondary loans secured by your home equity.
Q: Are interest payments tax-deductible?
A: Possibly, if funds are used for home improvements, consult a tax advisor.
