Home Equity Loan Calculator - NerdWallet (2024)

Use this calculator to find outhow much money you might be able to borrow with a home equity loan and how much it might cost.

Home equity refers to the amount of your house you’ve “paid off.” Every time you make a mortgage payment or the value of your home rises, your equity increases. As you build equity, you may be able to borrow against it. With a home equity loan, you receive the money in one lump sum.

How does a home equity loan work?

A home equity loan lets you borrow from the equity that you’ve built in your home through mortgage payments and appreciation. You receive the money all at once with a fixed interest rate, making it a solid choice if you know exactly how much you’ll need to borrow. For example, you might choose a home equity loan if you’re replacing your roof or putting in new carpet.

To determine how much you may be able to borrow with a home equity loan, divide your mortgage’s outstanding balance by your current home value. This is your loan-to-value ratio, or LTV. You can find the remaining balance on your loan on your most recent mortgage statement. Your most recent home appraisal can give you an idea of its current value.

Depending on your financial history, lenders generally want to see an LTV of 80% or less, which means you have at least 20% equity in your home. In most cases, you can borrow up to 80% of your home’s value in total.

An example: Let’s say your home is worth $200,000 and you still owe $100,000. If you divide 100,000 by 200,000, you get 0.50, which means you have a 50% loan-to-value ratio and 50% equity. Lenders that allow a combined loan-to-value ratio of 80% may let you borrow $60,000 more. That would bring the amount you owe to $160,000, which is 80% of the $200,000 home value.

Should I choose a home equity loan or a HELOC?

A home equity loan and home equity line of credit, or HELOC, are ways to cash in on your home’s equity, but they work differently.

HELOCs are similar to credit cards. You can borrow what you need as you need it, up to a certain limit. HELOCs often have adjustable or variable interest rates, meaning your monthly payment can change — but you pay interest only on the amount you draw.

Because you can draw on the line as necessary, HELOCs can be a better option if you don’t know exactly how much you need. For instance, you may be taking on a series of projects or renovations, and having a HELOC would allow you to finance the work in stages. By taking out only what you need as you need it, you can ensure that you aren’t borrowing — and paying interest on — more than you require.

If you like the fixed interest rate of a home equity loan but prefer a flexible balance, you can explore lenders that offer HELOCs with a fixed-rate option.

Choosing between a home equity loan or HELOC often comes down to your preferences: when you’d like to receive the money and whether you’re comfortable with a variable rate.

How to get a home equity loan

You’ll generally be eligible for a home equity loan or HELOC if:

If you meet these requirements and know how much you need to borrow, you’re ready to start reaching out to lenders. If the lender that financed your primary mortgage offers home equity loans, that can be a good place to start your search; however, we recommend that you compare offers from a few lenders to get the best available rate and terms. For our recommendations, check out NerdWallet’s roundup of the best home equity loan lenders.

Are home equity loans a good idea?

Just because you meet the requirements for a home equity loan or HELOC doesn’t mean it’s a wise choice. Borrowing against your home’s equity is always risky because the lender can foreclose on your home if you fail to make payments. Financial experts recommend tapping home equity only when it helps add value to your home, such as for repairs or remodeling or, in extreme cases, for help in a financial emergency.

Before choosing between a home equity loan or HELOC, be sure you understand the total cost versus benefit for you, including interest rates, fees, monthly payments and potential tax deductions.

How do I grow my home's equity?

If you’re sure all the information entered into the home equity loan calculator is correct and it shows you have less than 20% equity in your house, you may not be eligible for a loan or HELOC at this time. You may be able to speed up equity growth by: