Home Equity Loan Calculator – Forbes Advisor

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A home equity loan calculator is a good way to start exploring pricing options for tapping into the equity in your home. You can use this calculator to get an idea of ​​your eligibility for a home equity loan, how much you might qualify for, and what it might cost you.

How to Calculate Home Equity

Home equity is the difference between the current value of your home and the amount you owe on it. To find out how much equity you have, first get the most recent appraised value; then subtract your mortgage balance and any loans secured by your home, such as a home equity loan or home equity line of credit (HELOC), from this value. The remaining total is the amount of equity you have in your home.

How to Use the Home Equity Loan Calculator

To get started, you will need three main pieces of information:

  • The current value of your home
  • The outstanding balance of your mortgage and any other loans secured by your home
  • Your FICO credit score

The calculator will estimate your loan amount based on this information. If you don’t have enough equity in your home or your credit rating is low, you may not qualify for a home equity loan.

Although the calculator may give an estimate of how much you can borrow, talk to your lender for accurate results based on a wider range of information.

Related: Best home equity lenders

How a mortgage loan works

Home equity loans are a type of loan that uses your home as collateral and allows you to borrow against that equity. They are considered a second mortgage.

Borrowers will receive their loan in one installment. The repayment term can vary from 5 years to 30 years, depending on the terms of your loan. The longer you delay paying it back, the more interest you will pay. Interest rates on home equity loans are fixed and usually lower than credit card or personal loan rates.

How hard is it to get a home equity loan?

Qualifying for a home equity loan is similar to qualifying for a mortgage. You will need to prove your creditworthiness or prove that you can repay the loan. Lenders will check your credit score, income, debt-to-income ratio (DTI), and maximum loan-to-value (LTV) ratio. Lenders generally prefer your DTI to be below 43% (although some allow a bit higher) and an LTV no higher than 80%.

Lender requirements vary, but generally you will need to have at least 20% equity in your home to qualify for a loan.

Eleanor C. William