Home Equity Loan Calculator

As you pay down your mortgage, you’ll build equity in your home. Home equity is the difference between how much you owe on your mortgage and your home’s value. 

Once you’ve built a substantial amount of equity, you may want to tap it to fulfill other financial goals. Use our home equity loan calculator to learn how much you could borrow. 

How does a home equity loan work?

A home equity loan is a type of second mortgage that allows you to borrow against the equity you’ve built in your home. It’s an installment loan that’s repaid on a monthly basis, similar to a mortgage. 

Home equity loans are disbursed in a lump sum and typically have a fixed interest rate and fixed monthly payments. Repayment terms range from five to 30 years. Your home is used as collateral for a home equity loan so if you fail to make payments, your lender can foreclose on it. 

How to use our home equity loan calculator 

Our home equity loan calculator can help you determine how much available equity you might qualify to borrow from with a home equity loan or home equity line of credit. 

Here is information you’ll need to use the calculator: 

  • Your home’s most recent appraised value (or estimated value) 
  • Your outstanding mortgage balance
  • Your credit score range 

If you need help determining your home’s value, reach out to your real estate agent to request a competitive market analysis. Another option is to use LendingTree’s
home value estimator

Find out how much you owe on your mortgage by taking a look at your most recent mortgage statement. If you don’t already know your credit score, you can get a free credit score online. 

Once you’ve inputted this information, the calculator provides the estimated home equity loan (or home equity line of credit) amount you might qualify for. With this number in mind, gather quotes from multiple home equity lenders to find the best deal. 

Home equity loan FAQs 

How do you calculate home equity? 

Home equity is simply the difference between your home’s market value and your outstanding mortgage balance. If you have a $300,000 home and owe $200,000 on your primary mortgage, you have $100,000 in equity. 

What’s the difference between a home equity loan and home equity line of credit? 

As mentioned above, a home equity loan is paid out in a lump sum and repaid in fixed monthly installments over a set term. On the other hand, a home equity line of credit (HELOC), works much like a credit card. You can use the credit line up to the established limit, but you pay only for what you use — plus interest. HELOCs have a set draw period, during which you can use the credit line. When the draw period ends, the HELOC goes into repayment and you can’t tap any more equity from the credit line. 

How do you apply for a home equity loan? 

You must meet several home equity loan requirements to apply and qualify for a loan, such as:

    • Have at least 15% equity. Your loan-to-value ratio should be 85% or lower, which means you have 15% equity or more in your home. In some cases, you may qualify for a home equity loan with a high LTV ratio
    • Have a minimum 620 credit score. Some lenders may have higher minimum credit scores, but you’ll need a score of 740 or higher to get the best interest rates. 
    • Have a maximum 43% debt-to-income ratio. The percentage of your gross monthly income used to repay debt, or your DTI ratio, should not exceed 43%. Some lenders may accept a ratio as high as 50%, though. 

It’s important to note that lenders typically limit the amount you can borrow to 85% of your available home equity, according to the Federal Trade Commission, so you likely won’t be able to tap the full amount. 

How much does a home equity loan cost? 

Just as with your first mortgage, there are closing costs to pay on a home equity loan, which can range from 2% to 5% of your loan amount. 

Costs typically include but may not be limited to: 

  • Loan origination fees 
  • Home appraisal fees 
  • Credit report fees 
  • Title search fees 
  • Lawyer fees 

Are there any home equity loan tax benefits?

You may qualify for a tax deduction on your home equity loan, depending on how the money is used. If you took out the loan to buy, build or substantially improve your home, then you can likely deduct the interest paid on your monthly home equity loan payments under the mortgage interest deduction. The interest isn’t tax-deductible for other purposes, such as debt consolidation or buying a second home.