Home equity loan calculator

Equity and what a lender will actually lend

Equity is the plain difference between what a home is worth and what is still owed on it. It is a useful number to know and it is not the number a lender works from, because no lender will advance the last slice of a house. What they will go to is a ceiling on the combined loans against the property, and what is available to borrow is that ceiling less the existing mortgage.

The gap between the two figures is the point. A home with substantial equity can still have very little available to draw on, and knowing which number a lender means is the difference between an application that works and one that does not.

That ceiling is a lender convention rather than a rule anybody publishes. It moves with the lender, with the credit assessment and with the market, and it moves downwards fast when house prices fall. The figure on this page is yours to set for exactly that reason.

A second charge, and what that means

A home equity loan sits behind the existing mortgage. The first lender is paid first if the house is ever sold under pressure, and the second lender takes what is left. That is why the rate is higher than a first mortgage and lower than an unsecured loan: there is security, but it is second in line.

It also means the house is at stake in a way it is not with a credit card. Borrowing at a lower rate to clear a higher one is real arithmetic and a genuine saving, and it converts an unsecured debt into one attached to where you live. That is a trade worth making deliberately rather than by accident.

What this page does not model

It works out a fixed-rate loan, fully amortising, taken all at once. Closing costs, valuation fees and any early repayment charge are not in it. Nor is tax: interest on borrowing against a home is deductible in some places under some conditions, and the conditions are specific enough that a calculator guessing at them would do more harm than good.

It also does not judge whether the borrowing is a good idea, which depends on what the money is for and on what else is owed at what rate.

Common questions

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

In ordinary use, yes. A second mortgage is any loan secured on a property that already carries one, and a home equity loan is the common form of it. A line of credit is a second charge too, arranged differently.

How is this different from a HELOC?

This page is the lump sum: you take the whole amount now, at a fixed rate, and repay it on a set schedule from the first month. A line of credit lets you draw what you need over a period and charges only the interest while you do, which costs less at first and considerably more later. The HELOC page works that one out.

Why is the amount available lower than my equity?

Because the ceiling applies to everything secured on the home, not just to the new loan. At a ceiling of eighty-five per cent, the first mortgage and the new loan together have to fit inside eighty-five per cent of the value, so the existing balance uses the allowance up first.

What if house prices fall?

Then the available amount falls with them, and faster than the value does, because the existing mortgage does not shrink to match. This is the mechanism that closes equity borrowing off in a downturn, which is also when people most want it.

Is anything I type stored?

No. The calculation happens on the server as part of rendering the page, nothing is written down, and the access log for this site drops the query string precisely so that the numbers you enter are never recorded.