1. What is a Home Equity Loan?

A home equity loan allows homeowners to borrow against the equity in their home. It's a type of second mortgage that provides a lump sum payment with a fixed interest rate and repayment term.

2. How the Calculator Works

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment
• \( P \) — Loan principal 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 the Results

Details: The calculator shows your estimated monthly payment, total repayment amount over the loan term, and total interest paid. These figures help you evaluate the true cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (without the % sign), and loan term in years. For accurate results, use the interest rate quoted by your lender.

5. Frequently Asked Questions (FAQ)

Q1: How is home equity calculated?
A: Home equity is your property's current market value minus any outstanding mortgage balances.

Q2: What's the difference between a 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.

Q3: Are there tax benefits to home equity loans?
A: Interest may be tax-deductible if used for home improvements (consult a tax professional).

Q4: What loan terms are typical?
A: Most home equity loans have 5-30 year terms, with 10-15 years being most common.

Q5: How does credit score affect rates?
A: Higher credit scores typically qualify for lower interest rates, potentially saving thousands over the loan term.