- Home equity loan
- A fixed-rate loan secured by your home, paid out as a lump sum and repaid in equal monthly payments over a set term. It sits behind your first mortgage as a second lien. Unlike a HELOC, the amount, rate and payment are fixed from the start, which is how this calculator treats it.
- Home equity
- The market value of your home minus what you still owe on it. With the defaults, a $450,000 home and a $240,000 mortgage balance leave $210,000 of equity. Lenders let you borrow against only part of it, since they keep a cushion in case the home’s value falls.
- Combined loan-to-value (CLTV)
- All loans secured by the home, the first mortgage plus the new equity loan, divided by the home’s value, as a percentage. Many lenders cap it, commonly at 85%, which is the cap this calculator uses. A higher CLTV means less equity cushion and usually a higher rate or a smaller approval.
- Max available
- The largest equity loan that keeps combined borrowing within 85% of the home’s value: 85% of the value minus the current mortgage balance. With the defaults, that is $382,500 minus $240,000, or $142,500. A lender’s actual limit depends on its own cap, the appraisal, and your credit and income.
- Second mortgage
- A loan secured by a home that already has a first mortgage. If the home is sold or foreclosed, the first mortgage is paid before the second, so second liens carry more risk for the lender and usually a higher rate. A home equity loan is one kind of second mortgage.
- Interest rate
- The annual percentage the lender charges on the unpaid balance, not including fees. A home equity loan’s rate is fixed, so the payment never changes. This calculator divides it by 12 to get the monthly rate used in the payment formula.
- Loan term
- The number of years over which the equity loan is repaid in equal monthly payments. A shorter term raises the payment but cuts total interest; a longer term does the opposite. The term of the equity loan is independent of the years left on your first mortgage.
- Total interest
- The interest paid over the full term if the loan runs to maturity with regular payments: total repaid minus the loan amount. It does not include closing costs or fees, which some lenders charge on equity loans and which raise the true cost of borrowing.
- Closing costs
- Fees charged to set up the loan, such as appraisal, origination, title and recording fees. Some lenders cover them or roll them into the loan; others charge them in cash. This calculator does not include them, so compare lender offers on both rate and fees.
