Home Equity Loan Calculator

A home equity loan is a second mortgage. You borrow a lump sum at a fixed interest rate, with monthly payments of principal and interest over a fixed term (typically 5–30 years). Lenders generally allow combined loan-to-value (CLTV) — first mortgage plus home equity loan — up to 80–90% of the home's appraised value.

Because the home is collateral, rates are substantially lower than unsecured personal loans — typically 1–3 points above conventional mortgage rates. The trade-off is severe: default puts the home at risk through foreclosure (after first-mortgage holder is satisfied), making this a much higher-stakes form of debt than credit cards or personal loans.

A home equity loan is a fixed-rate, fixed-term, lump-sum loan. A HELOC (home equity line of credit) is a revolving line, typically variable-rate, that you draw from as needed. The right choice depends on the use case: a home equity loan fits a known, one-time expense (a $50,000 kitchen renovation); a HELOC fits ongoing or uncertain spending (a long-term home renovation completed in stages, or a flexible emergency reserve).

Home equity loan payments are fully predictable; HELOC payments rise with rates and with how much you've drawn. For risk-averse borrowers, the home equity loan's predictability is worth the lower flexibility.

Under current tax law (TCJA, 2018–2025), interest on home equity loans is deductible only if the funds are used to buy, build, or substantially improve the primary residence securing the loan. Using a home equity loan to consolidate credit-card debt or pay for a vacation is not deductible.

Even when deductible, the practical benefit is limited because the standard deduction is high enough that most filers don't itemize post-TCJA. For higher-income itemizers using a home equity loan for genuine home improvements, deductibility can recover meaningful tax savings — but the calculation should never be the sole reason to take out the loan.

Major home improvements that genuinely add value — kitchens, bathrooms, additions — particularly when you have meaningful equity to draw from and a clear renovation budget. The interest rate is often the lowest available outside of the first mortgage itself.

Debt consolidation when the math is dramatically favorable and the borrower is disciplined. Rolling $50,000 of 22% credit-card debt into an 8% home equity loan saves vast amounts in interest — but converts unsecured debt to secured. If the consolidated cards get re-run-up, you're worse off.

Large one-time costs (education, family medical) where lower-rate alternatives don't exist or aren't feasible. Borrowing against home equity should be reserved for high-stakes uses; consumer purchases that you could otherwise save for don't justify the foreclosure risk.