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

A home equity loan is a fixed amount with fixed payments over a set term (like a second mortgage). A HELOC (home equity line of credit) is a credit line — borrow what you need when you need it, pay interest only on the drawn amount, with variable rates. HELOCs are more flexible; home equity loans are more predictable. Both put your home up as collateral.

What credit score do I need?

Generally 620+ for any home equity product, 700+ for the best rates, 740+ for premium offers. Below 620 is harder — some lenders work with you at higher rates and lower LTV caps. Subprime home equity products exist but the rates are punishing; consider whether borrowing makes sense at those rates.

What's a typical LTV cap?

80% is the standard for HELOCs and most home equity loans. Some lenders offer 85%, fewer 90%, very few 95%+. CLTV (combined loan-to-value, including your existing mortgage + the new loan) is the key cap. So an 80% CLTV with a $500K home means total mortgages can't exceed $400K — your existing mortgage + any new home equity loan combined.

What about closing costs?

Home equity loans typically have 2-5% in closing costs (appraisal, title, origination fees, recording). HELOCs sometimes waive these but charge an annual fee or higher rate to compensate. Add closing costs to the total cost when comparing options.

Is the interest tax-deductible?

Only if the loan was used to buy, build, or substantially improve the home that secures it (per the 2017 Tax Cuts and Jobs Act). Cash-out for debt consolidation, college, or general expenses is NOT deductible at the federal level. State rules vary. Consult a tax professional — this is not tax advice.

Should I do a cash-out refi instead?

Maybe, depending on your existing mortgage rate. If your current mortgage is at 3% and current rates are 7%, a cash-out refi means refinancing your whole balance at 7% — usually a bad trade for the equity access. A separate home equity loan keeps your good rate intact. If your existing rate is already at market, cash-out refi can be cleaner (one payment instead of two).

Money & Finance · Free tool

Home Equity Loan Calculator

Calculate max borrowable against your home equity, monthly HELOC payment, total interest, and LTV check in one place. Free, instant, online.

Updated June 2026

Home value ($)Mortgage balance ($)LTV cap (%)APR (%)Term (years)

Max you can borrow

$125,000

Monthly payment

$1,231

Current equity	$200,000
Current LTV	60.0%
Total interest paid	$96,566
Total paid over term	$221,566

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What it does

Calculate how much you could borrow against your home’s equity and what the monthly payment would be. Three inputs: current home value (best estimate; check recent comparable sales or Zillow Zestimate as a starting point), current mortgage balance (from your latest statement), and LTV cap (the maximum loan-to-value ratio your lender allows — typically 80% for HELOCs, 85% for home equity loans, occasionally 90%+ for premium customers). The tool returns: maximum borrowable amount, monthly payment at the rate you enter, and total interest over the loan term.

The basic math: max borrowable = (home value × LTV cap) − current mortgage balance. So a $500K home with $200K mortgage and 80% LTV cap allows: ($500K × 0.80) − $200K = $200K maximum new loan. Monthly payment uses standard amortization formula: P = L × (r(1+r)ⁿ) / ((1+r)ⁿ − 1), where L is loan amount, r is monthly rate, n is total payments.

Important: this is for planning, not a loan quote. Actual lender terms depend on credit score, debt-to-income, employment, property type, appraisal results, and current rate environment. Use the calculator to estimate whether tapping equity makes sense for your situation; get specific quotes from 3+ lenders before committing. Home equity loans put your home at risk if you default — borrow only what you can comfortably repay.

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Example input & output

Input

Home value: $500,000
Mortgage balance: $300,000
LTV cap: 85%
APR: 8.5% · Term: 15 years

Output

Max borrowable: $125,000 ($500K × 85% − $300K)
Current equity: $200,000 · Current LTV: 60%
Monthly payment on full draw: ≈ $1,231
Total interest over 15 years: ≈ $96,565

You can't borrow all $200K of equity — the 85% combined-LTV cap protects the lender's cushion. Borrowing less than the max scales the payment proportionally (e.g. $60K → ≈ $591/month).

How to use it

Enter your home's current market value. Check Zillow / Redfin / your most recent appraisal — they don't agree perfectly, so use a midpoint estimate.
Enter your current mortgage balance from your latest statement (not the original loan amount).
Set the LTV cap your lender allows. 80% is standard for HELOCs; 85% common for home equity loans; some go higher with extra fees.
Enter the interest rate. Get current rates from Bankrate.com or directly from 2-3 lenders. HELOC rates are typically variable (Prime + margin); fixed home equity loans have higher rates.
Set the loan term — 5, 10, 15, or 30 years. Shorter = higher payment, less total interest.
Read the output: max borrowable, monthly payment, total interest. Compare against your current monthly cash flow before committing.

How it works

Two steps. Borrowing capacity: max = home value × LTV cap − mortgage balance — the lender caps the combined debt against the house, not just the new loan. Payment: the standard amortization formula PMT = L × r ÷ (1 − (1 + r)⁻ⁿ) applied to the max draw at the APR and term you set. The tool also reports current equity (value − balance) and current LTV (balance ÷ value), the two numbers a loan officer checks first.

Common mistakes when using this tool

Confusing equity with borrowable equity. $200K of equity at an 85% CLTV cap yields only $125K of borrowing room. The cap, not your equity, is the binding constraint.
Modeling a HELOC with this fixed-rate math. HELOCs are variable (Prime + margin) with interest-only draw periods — this calculator models the fixed home equity loan case.
Using a hopeful home value. The lender’s appraisal decides, and it often lands below the listing-site estimate. Run the numbers at 95% of your estimate to see how sensitive the max is.

When to use this tool

Considering tapping home equity for a major expense (renovation, debt consolidation, college tuition).
Comparing HELOC vs home equity loan vs cash-out refinance scenarios.
Sanity-checking a lender's quoted payment against your own math.
Planning year-over-year as your home value and mortgage balance change.

When not to use it

Final loan decisions — get actual quotes from lenders. Calculator output is approximate; lenders vary on LTV, rate, fees, and approval criteria.
Unusual property types (manufactured homes, condos, multi-units, investment property) — those have different LTV caps and rate structures.
Variable-rate (HELOC) projections — calculator assumes fixed rate. HELOCs adjust with Prime; your future payment could be higher or lower than today's.
Hard times — borrowing against equity to cover urgent debt is a sign to talk to a financial counselor, not a calculator. Defaulting on a home loan means foreclosure.

Common use cases

Homeowner pricing a $60K kitchen renovation against the equity actually available.
Comparing the payment on a home equity loan vs continuing to pay 22% APR on consolidated card debt.
Checking how much borrowing headroom a year of appreciation and principal paydown added.
Stress-testing a lender's offer: does their quoted payment match the math at the stated APR and term?

Frequently asked questions

What's the difference between a home equity loan and a HELOC?: A home equity loan is a fixed amount with fixed payments over a set term (like a second mortgage). A HELOC (home equity line of credit) is a credit line — borrow what you need when you need it, pay interest only on the drawn amount, with variable rates. HELOCs are more flexible; home equity loans are more predictable. Both put your home up as collateral.
What credit score do I need?: Generally 620+ for any home equity product, 700+ for the best rates, 740+ for premium offers. Below 620 is harder — some lenders work with you at higher rates and lower LTV caps. Subprime home equity products exist but the rates are punishing; consider whether borrowing makes sense at those rates.
What's a typical LTV cap?: 80% is the standard for HELOCs and most home equity loans. Some lenders offer 85%, fewer 90%, very few 95%+. CLTV (combined loan-to-value, including your existing mortgage + the new loan) is the key cap. So an 80% CLTV with a $500K home means total mortgages can't exceed $400K — your existing mortgage + any new home equity loan combined.
What about closing costs?: Home equity loans typically have 2-5% in closing costs (appraisal, title, origination fees, recording). HELOCs sometimes waive these but charge an annual fee or higher rate to compensate. Add closing costs to the total cost when comparing options.
Is the interest tax-deductible?: Only if the loan was used to buy, build, or substantially improve the home that secures it (per the 2017 Tax Cuts and Jobs Act). Cash-out for debt consolidation, college, or general expenses is NOT deductible at the federal level. State rules vary. Consult a tax professional — this is not tax advice.
Should I do a cash-out refi instead?: Maybe, depending on your existing mortgage rate. If your current mortgage is at 3% and current rates are 7%, a cash-out refi means refinancing your whole balance at 7% — usually a bad trade for the equity access. A separate home equity loan keeps your good rate intact. If your existing rate is already at market, cash-out refi can be cleaner (one payment instead of two).

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