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Home Equity Loan Payment Formula:
A home equity loan allows homeowners to borrow against the equity in their home. It provides a lump sum payment with a fixed interest rate and fixed monthly payments over a set term.
The calculator uses the standard loan payment formula:
Where:
Explanation: This formula accounts for both principal and interest payments, with more interest paid early in the loan term.
Monthly Payment: The fixed amount you'll pay each month.
Total Payment: The sum of all payments over the loan term.
Total Interest: The total amount of interest paid over the life of the loan.
Tips: Enter the loan amount, annual interest rate (not APR), and loan term in either years or months. All values must be positive numbers.
Q1: What's the difference between home equity loan and HELOC?
A: A home equity loan provides a lump sum with fixed payments, while a HELOC is a revolving credit line with variable rates.
Q2: Are there closing costs on home equity loans?
A: Yes, typically 2-5% of the loan amount, though this calculator doesn't include them.
Q3: How does this compare to a cash-out refinance?
A: Refinancing replaces your first mortgage, while a home equity loan is a second mortgage.
Q4: What loan terms are typical?
A: Most home equity loans have 5-30 year terms, with 10-15 years being most common.
Q5: Are home equity loan payments tax deductible?
A: Interest may be deductible if used for home improvements (consult a tax advisor).