Home Equity Loan Calculator [LTV and Loan Amount]

This home equity loan calculator makes it simple to understand your options. Simply plug in your home’s current value, remaining mortgage balance, and estimated credit score. 

We’ll instantly show you your loan-to-value ratio and potential borrowing power. 

Whether you want to renovate, cover education expenses, or consolidate high-interest credit card debt, this home equity loan calculator gives you a clear picture of what’s possible. Give it a try and start planning your next financial move today.

How do you calculate the equity in your home? 

You can calculate your home equity in three simple steps: 

1. Find out your home’s current value. You can check sites like Zillow or Redfin for an estimate, but you may need a professional appraisal for the most accurate value.
2. Add up the total debts backed by your home. For most people, this is just your outstanding mortgage balance. But you may need to include any second mortgages or home equity loans if you have those too.
3. Subtract the total debt (from step 2) from your home’s value (from step 1). 

The amount left over is your home equity. 🎉

For example: 

• Home’s current value: $300,000
• Total debts backed by your home: $200,000
• Home equity: $300,000 – $200,000 = $100,000

Your equity increases as you pay down your mortgage and if your home value rises. But it can decrease if home values drop. 

What is LTV and how is it calculated?

LTV stands for loan-to-value ratio. Lenders use this number to assess the risk of lending money against your home. To calculate your LTV:

1. Divide your outstanding mortgage balance by your home’s current appraised value
2. Multiply the result by 100 to get a percentage

For example:

• Outstanding mortgage balance: $200,000
• Home’s appraised value: $300,000

LTV = ($200,000 / $300,000) x 100 = 66.67%

Tip

Most lenders prefer a combined LTV of 85% or less. This means that your current LTV plus the new loan amount shouldn’t exceed 85% of your home’s value. A lower LTV indicates more equity in your home, which is less risky for lenders and could qualify you for better loan terms. So, you could potentially borrow up to $55,000 and still stay under the 85% combined LTV threshold: 85% = ($200,000 + $55,000) / $300,000 x 100

How is the interest on a home equity loan calculated?

Most home equity loans have fixed interest rates. The interest rate you’re given is calculated based on factors like: 

• Your credit score—higher credit scores get lower rates. 
• LTV—lower LTVs get lower rates
• Loan amount and term—larger loans or shorter terms may qualify for lower rates. 

Your rate is expressed as an annual percentage rate (APR). This includes both the interest rate and any loan fees charged by the lender. As a result, the loan’s APR is almost always higher than the interest rate. 

How can I get the lowest interest rate on my home equity loan?

Using these tips can help you qualify for the best home equity loan rates:

• Raise your credit score. The best rates are usually reserved for those with a credit score of 700 and higher, but every little increase counts. Paying down your credit card balances and making on-time payments are two ways to increase your score.
• Lower your LTV. Try to keep your LTV under 80%. If it’s currently higher than this, pay extra on your mortgage or wait for your home’s value to increase.
• Compare at least three lenders. Get quotes from a mix of banks, credit unions, and online lenders to see which offers the best loan terms based on your finances.
• Set up automatic payments. Many lenders have autopay discounts that can lower your rate by 0.25%.

Let’s look at examples of how different factors can affect your rate. Say this is your current financial situation: 

• Your home’s value: $300,000
• Your mortgage balance: $210,000
• Current LTV: 70%
• Your credit score: 650 (average range)

You start shopping for a home equity loan and pre-qualify for a rate of Prime + 3%. The current Prime rate is 8%, so your potential rate is 11%. 

• Current potential rate: Prime (8%) + 3% = 11%

Now, let’s see how improvements could lower your rate:

Improvement	New rate	Savings
Lower LTV by paying down mortgage to $195,000	Prime + 2% = 10%	1%
Improve credit score to 720	Prime + 1% = 9%	2%
Set up autopay	New rate – 0.25% = 8.75%	2.25%

If you lowered your LTV, raised your credit score, and set up autopay, it could lower your potential rate from 11% to 8.75%. 

How are home equity loan payments calculated? 

Lenders calculate home equity loan payments using a fixed amortization schedule. The process looks like this: 

1. Determine the loan amount, interest rate, and loan term (in months).
2. Calculate the monthly interest rate (annual rate divided by 12).
3. Use this formula to find your monthly payment: 

Monthly Payment = P * (r * (1 + r)^n) / ((1 + r)^n – 1) 

Where: 

• P = Principal loan amount 
• r = Monthly interest rate 
• n = Total number of months

For example, on a $55,000 loan at 10% APR for 10 years:

Monthly Payment = $55,000 * (0.00833 * (1.00833)^120) / ((1.00833)^120 – 1) = $727

This payment stays the same each month, but the proportion of principal to interest changes over time. Early on, most of your payment will go toward interest. But towards the end of your loan, payments will go mostly to the principal.

Are home equity loans and lines of credit calculated differently?

Home equity loans and lines of credit (HELOCs) are calculated quite differently:

Home equity loans work like a traditional mortgage:

• You borrow a lump sum of cash upfront.
• You have a fixed interest rate.
• Your monthly payments stay the same for the entire loan.
• Each payment is made up of both principal and interest.

HELOCs work more like a credit card:

• You have a credit limit you can borrow from as needed.
• The interest rate is usually variable.
• During the “draw period” (typically 10 years), you can borrow and repay repeatedly.
• You only pay interest on what you’ve borrowed.
• After the draw period, you enter the “repayment period” where you pay back the principal and interest.

Calculating HELOC payments can be much harder because it’s based on how much you’ve borrowed, current interest rates, and whether you’re in the draw or repayment period. For a simpler way to calculate HELOC payments, check out our calculator.