1. What is a Home Equity Mortgage?

A home equity mortgage allows homeowners to borrow against the equity in their home. The loan is secured by the property and typically offers lower interest rates than unsecured loans because the lender has collateral.

2. How Does the Calculator Work?

The calculator uses the standard mortgage payment formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: This formula accounts for both principal and interest payments over the life of the loan.

3. Understanding Mortgage Payments

Details: Each payment consists of both principal (reducing your loan balance) and interest (cost of borrowing). Early in the loan, most of your payment goes toward interest.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (not APR), and loan term in years. The calculator will show your estimated monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR includes the interest rate plus other loan costs (fees, points, etc.).

Q2: How can I get the best home equity rates?
A: Shop multiple lenders, maintain good credit (700+), and keep your loan-to-value ratio below 80%.

Q3: Are there different types of home equity loans?
A: Yes, traditional home equity loans (lump sum) and HELOCs (credit line) are the two main types.

Q4: What costs aren't included in this calculation?
A: This doesn't include property taxes, homeowners insurance, or PMI if applicable.

Q5: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms have lower monthly payments but cost more overall.