Home Equity Loan Calculator

Monthly payment, CLTV, available equity, and use case analysis

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MONTHLY PAYMENT $607
CLTV
0%85%100%+
CLTV72.5%
Max Available Equity$100,000
Home Equity$160,000
Total Interest$22,893
Total Repaid$72,893
Est. Monthly Savings*—
CLTV = (Mortgage + HE Loan) ÷ Home Value
Max Loan = Home Value × 0.85 − Mortgage

Borrowing Option Comparison

OptionTypical RateRate TypeTax Deductible?Collateral
Home Equity Loan7.5–9.5%FixedYes (if home improvement)Your home
HELOC7–10% (variable)VariableYes (if home improvement)Your home
Personal Loan10–20%FixedNoNone (unsecured)
Cash-Out Refi6.5–8%FixedYesYour home
Credit Card20–28%VariableNoNone

Debt Consolidation Savings

Enter your current debts to see if consolidating with a home equity loan saves money

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Consolidation Analysis

Current Monthly Min. Pay$370
HE Loan Payment$607
Monthly Interest Saved$246
5-Year Interest Savings$14,760

Home Improvement ROI

See which projects return more than your equity loan cost

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Project ROI Analysis

Project Cost$30,000
Value Added to Home$23,100
Loan Interest Cost$13,736
Net Equity Gain$9,364
Return vs Cost+31.2%
Verdict✅ Adds value

Tax Deduction Estimator

Annual Interest$4,000
Potential Tax Savings$880
After-Tax Effective Rate6.24%
10-yr Tax Savings$5,016

How to Use This Calculator

1
Enter Home Value & Mortgage Balance

The calculator computes your CLTV (Combined Loan-to-Value) to determine how much you can borrow. Most lenders cap CLTV at 85%.

2
Set Loan Parameters

Enter your desired loan amount, interest rate, and term. Compare terms to see how monthly payment vs. total interest tradeoffs work.

3
Evaluate Your Use Case

Use Tab 3 to see if your project generates enough home value to justify the loan cost, or to calculate potential tax deductions on the interest.

Key Formulas

CLTV = (Mortgage Balance + HE Loan) ÷ Home Value × 100
Max Loan = (Home Value × 0.85) − Mortgage Balance
Payment = P × r(1+r)^n / ((1+r)^n − 1)
After-Tax Rate = APR × (1 − Tax Bracket)

Key Terms

CLTV — Combined Loan-to-Value: total mortgage + HE loan ÷ home value. Most lenders cap at 80–90%.
Home Equity Loan — Fixed-rate, lump-sum second mortgage. Predictable payments, best for one-time large expenses.
HELOC — Home Equity Line of Credit: revolving variable-rate credit line. More flexible but rate risk.
Equity — Home Value minus all outstanding loan balances secured by the property.
Second Mortgage — Any loan secured by your home that is subordinate to your primary mortgage.
Tax Deduction — Interest on HE loans used to "buy, build, or substantially improve" the home may be deductible if you itemize.

Home Equity Loan: Is It the Right Way to Tap Your Equity?

A home equity loan lets you borrow against the value you've built in your home. Unlike a HELOC (home equity line of credit), a home equity loan provides a lump sum at a fixed interest rate, making payments predictable for the life of the loan. In 2024, rates ranged from approximately 7.5–9.5% — significantly lower than personal loans or credit cards, but with your home as collateral.

How Much Can You Borrow?

The maximum you can borrow is determined by your Combined Loan-to-Value (CLTV) ratio. Most lenders cap CLTV at 85%, meaning if your home is worth $400,000 and you owe $240,000 on your primary mortgage, the maximum HE loan is $400,000 × 0.85 − $240,000 = $100,000. Lenders with CLTV caps of 80% would limit you to $80,000 in this example.

Home Equity Loan vs. HELOC: Key Differences

Both products use your home as collateral, but they differ in structure. A home equity loan gives you a lump sum at a fixed rate — best for one-time expenses where you know the total cost (home renovation, debt consolidation). A HELOC is a revolving credit line with a variable rate — best for ongoing expenses or projects where costs are uncertain. HELOCs often have lower initial rates but create payment risk if rates rise substantially.

Tax Deductibility (2024 Rules)

Under current IRS rules, interest on home equity loans is deductible ONLY if the loan is used to "buy, build, or substantially improve" the home securing the loan. Using equity for debt consolidation, education, or other personal expenses disqualifies the interest deduction. If you use the loan for home improvement and itemize deductions, the interest can provide meaningful savings — at a 22% bracket, $4,000 in annual interest generates $880 in tax savings, effectively reducing your rate from 8% to 6.24%.

Risks to Consider

The primary risk is foreclosure — your home is collateral. If you default on a home equity loan, the lender can foreclose. This makes discipline around use of funds essential. Avoid using home equity for depreciating assets or consumption expenses. Home improvement projects that add documented value are the most financially sound use of equity debt.

Frequently Asked Questions

What is the maximum CLTV for a home equity loan?

Most lenders set a maximum CLTV of 80–85%. Some specialty lenders go up to 90%. This means if your home is worth $400,000, the maximum total debt against it is $320,000–$360,000 with most lenders, including both your primary mortgage and the equity loan.

Is a home equity loan the same as a second mortgage?

Yes, a home equity loan is a type of second mortgage — any loan secured by your home that is subordinate to your primary mortgage. If you default, the first mortgage gets paid before the second. This subordinate position is why second mortgage rates are slightly higher than first mortgage rates.

Home equity loan vs. cash-out refinance — which is better?

Cash-out refinancing replaces your entire primary mortgage at current rates. If current rates are lower than your existing rate, refi wins. If your primary mortgage rate is already low (e.g., 3% from 2021) and you only need to borrow $50,000, a home equity loan is better — you keep your low primary rate and only pay higher rates on the new $50,000.

Can I deduct home equity loan interest in 2024?

Only if the funds are used to buy, build, or substantially improve the home securing the loan. Using equity for debt consolidation, medical bills, or a vacation disqualifies the deduction. You must also itemize deductions — the deduction provides no benefit if you take the standard deduction.

What credit score do I need for a home equity loan?

Most lenders require a minimum 620–640 FICO score, with the best rates reserved for 720+. Lenders also look at your debt-to-income ratio (typically must be under 43%) and the amount of equity you're retaining after the loan.

How long does it take to get a home equity loan?

The process typically takes 2–4 weeks. This includes the application, appraisal (often a drive-by or desktop appraisal), title search, underwriting, and closing. Home equity loans are subject to a 3-day right of rescission after closing for owner-occupied properties.

Are there closing costs on a home equity loan?

Yes, typically $500–$3,000, including appraisal, title search, recording fees, and origination fees. Some lenders offer "no closing cost" loans by folding costs into the rate. Factor these costs into your total cost comparison, especially for smaller loan amounts.

What happens to my home equity loan if I sell my home?

The home equity loan must be paid off at closing. Proceeds from the sale first pay the primary mortgage, then the equity loan, with any remainder going to you. If you owe more than the sale price, this is called an "underwater" situation and complicates the sale.

Can I use a home equity loan for investment property?

Yes, you can use home equity from your primary residence to invest in rental properties or other investments. The interest may be deductible as investment interest if the funds are used for investment purposes. Consult a tax professional for your specific situation.

What's the difference between home equity loan and HELOC?

Home equity loan: fixed rate, lump sum, fixed monthly payments — best for known one-time expenses. HELOC: variable rate, revolving credit line with draw and repayment phases — best for ongoing or uncertain expenses. HELOCs have more payment flexibility but rate risk if interest rates rise.

How does a home equity loan affect my credit?

The initial hard inquiry temporarily lowers your score by 5–10 points. Adding the loan increases your debt, which may affect your debt utilization ratio. Making on-time payments over time improves your credit history. Missing payments damages your credit significantly and risks foreclosure.

Can I pay off a home equity loan early?

Yes, most home equity loans can be prepaid without penalty, though some have prepayment penalties in the first 1–3 years. Check your loan documents. Early payoff saves all the interest that would have accrued on the remaining balance.

What is the home equity loan rate in 2024?

As of 2024, home equity loan rates range from approximately 7.5–9.5% for well-qualified borrowers, depending on CLTV, credit score, loan term, and lender. Credit unions typically offer lower rates than banks. Variable-rate HELOCs start lower but can rise with the prime rate.

Is a home equity loan worth it for debt consolidation?

It can be, if: (1) the rate is significantly lower than your existing debt (a 9% HE loan vs 24% credit cards saves substantially), (2) you have the discipline not to run up new debt after consolidating, and (3) you're comfortable with your home as collateral for what was previously unsecured debt.

What home improvements have the best ROI?

According to Remodeling Magazine's Cost vs. Value report, the highest ROI projects typically include garage door replacement (~95% ROI), steel entry door replacement (~91%), fiber cement siding (~88%), minor kitchen remodel (~77%), and deck additions (~69%). Major additions and luxury upgrades generally have lower ROI percentages.

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