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

A home equity loan is a lump sum at a fixed rate — one disbursement, fixed monthly payments for the full term. A HELOC is a revolving line of credit with a variable rate — draw as needed during the draw period, pay interest-only on what's borrowed. Home equity loans suit one-time, defined expenses. HELOCs suit phased projects or ongoing needs where you want flexibility.

What rate should I expect on a home equity loan?

Home equity loan rates typically run 0.5–1% above 30-year mortgage rates. In a 7% mortgage rate environment, home equity loans are often 8–9.5% for well-qualified borrowers. Rates depend heavily on CLTV (lower is better), credit score, and loan term. Credit unions often offer the most competitive home equity loan rates.

How does a home equity loan affect my taxes?

Interest is only deductible if the funds are used to 'buy, build, or substantially improve' the home securing the loan (post-2017 tax law). Home improvement projects qualify; debt consolidation, education, or other uses typically don't. Consult a tax professional — the deductibility question is fact-specific and the rules have nuance.

Is a home equity loan better than a cash-out refinance?

It depends on your existing mortgage rate. If you have a mortgage at 3–4% and refinancing would raise your primary rate to 7%+, a home equity loan keeps the low first mortgage intact while borrowing at a higher rate only on the equity amount. If your mortgage rate is already high and you're refinancing anyway, cash-out refinancing may be simpler and cheaper.

🏦Borrowing

Home Equity Loan Calculator: How Much Can You Borrow — and What Does It Cost?

How much could you borrow against your home?

What This Does

A home equity loan gives you a lump sum at a fixed interest rate, repaid in equal monthly installments — the predictable, lower-rate sibling of a personal loan, secured by your home. Unlike a HELOC, there's no draw period or variable rate: you borrow once, pay the same fixed amount every month, and the loan is done. Eligibility depends on your combined loan-to-value ratio (CLTV). Most lenders allow up to 80–85% of your home's appraised value minus your remaining mortgage balance. This calculator determines your maximum available equity, monthly payment at your rate and term, total interest over the life of the loan, and the resulting CLTV. Because your home is collateral, home equity loans carry real risk: default can result in foreclosure. This makes them appropriate for purposes with clear ROI — home improvements that increase property value, replacing high-rate credit card debt at a significantly lower rate, or education expenses. They're less appropriate for financing vacations, discretionary spending, or purchases that won't outlast the loan term. The calculator also compares your home equity loan against a HELOC alternative, so you can see the tradeoff between payment certainty (loan) and flexibility (HELOC) for your specific amount.

When Should You Use This?

→Planning a major home renovation and need a lump sum with predictable payments
→Consolidating high-interest debt at a lower rate using home equity
→Comparing home equity loan vs. HELOC for a specific project amount
→Calculating whether your home has enough equity for a meaningful loan
→Understanding your combined LTV after taking a home equity loan

Example Scenario

Thomas and Karen own a home appraised at $550,000 with $310,000 remaining on their mortgage. Current LTV: 56%. At 85% max CLTV, maximum additional borrowing: $157,500. They want $90,000 for a primary suite addition. Home equity loan at 8.25% for 15 years: $876/month, $67,680 total interest. vs. personal loan at 12% for 7 years: $1,583/month, $32,972 total interest. The home equity loan saves $707/month but costs more total interest over the longer term. Their priority is cash flow — they choose the home equity loan.

🏠Home Equity Loan Calculator

Home Equity Loan Analyzer

Enter your home value, mortgage balance, and loan details to calculate your monthly payment, CLTV, equity position, term trade-offs, and rate sensitivity. Results update live.