When doing a home equity loan calculation, you’ll need to use a basic formula to compute your payments.

M = P[i(1+i)^n] / [(1+i)^n – 1]

• M is your monthly payment
• P is the principal amount of the loan
• i is the monthly interest rate
• n is the total number of months of loan payments

Don’t have the time or energy for manually calculating home equity loan payments?

My free online calculator can simplify the process. Just input the information into the calculator, and you’ll have your payment amount.

It also offers a simple way to compare equity loan products and, when you have an adjustable-rate home equity loan, to quickly recalculate your monthly payments when interest rates change.

You can calculate your home equity loan estimate by using my free online calculator. 

If you want to calculate this yourself, you’ll need this information:

• Current home market value
• Mortgage balance

Use this information in the following formula:

home value – mortgage balance = home equity

The home equity figure is then used to determine the potential loan amount

home equity x loan-to-value = potential loan amount

You can experiment with different loan-to-value amounts (from 80% to 90%) to determine the cash available.

Home equity loan interest rates change frequently, sometimes on the same day. You can keep tabs on the rates by referring to a dedicated web page for the current mortgage interest rates.

Closing costs for home equity mortgages typically run between 2% to 5% of the loan amount.

Some lenders offer no-closing-cost home equity loans, but borrowers need to compare rates. These loans may offset the free closing costs by charging a higher interest rate.

Equity loan closing costs include the property appraisal, notary fees, title searches, recording fees, and an additional title insurance policy for the loan.

Your lender may offer savings or waive fees for borrowers using automatic loan payments or when you have other accounts at the financial institution.

The interest on a home equity loan might be tax deductible when you meet the following conditions:

• To be federally deductible, funds must be used for “qualified home improvements.” The IRS defines this term as major construction to your primary or secondary home. This could include, for example, an addition, remodeling a bath or kitchen or replacing a roof. 
• The collateral home must be your primary or secondary residence.
• Total debt on the property used to secure the loan can’t exceed $750,000 for joint tax filers.
• You must itemize your federal tax filing by using Schedule A (1090) to receive any tax credits.
• You’ll need to keep detailed records and expense receipts to document your use of the loan funds.

Your accountant can advise you on deducting home equity interest payments.

Some lenders may write loans for 90% of the home’s equity, but typically they’re capped at 80-85%. There are other considerations that determine the amount, including:

• the home’s value
• your credit score
• loan-to-value ratio
• borrower’s annual income
• your equity in the property
• borrower’s employment history
• amount of closing costs

Your home equity loan may have a prepayment penalty if you pay it off before the loan term is reached. When a penalty is part of the lending agreement, the required term for you to keep the loan is typically two-to-five years.

House equity loans may be a good idea for some buyers. Let’s consider the advantages for borrowers first:

• The interest on a home equity loan may be tax deductible. 
• You have instant access to cash if you have an emergency.
• Equity loan rates are typically less than credit cards or other personal loans.

There are downsides to a home equity loan, including:

• The loans may have variable interest rates that increase dramatically over time.
• Your home is the collateral for the loan. That lien must be removed before you can sell your house.
• The equity loan is a lien on your property, and failure to pay means the lender can foreclose on your home.
• Holding an equity loan may reduce your ability to obtain other types of credit.

You can get a home equity loan just on my website. To check your eligibility and get a loan estimate, apply for a loan online.