Your first home starts with a plan
A practical guide to the numbers, the process, and your next big step.
Read the guideWhat is a home equity loan?
A home equity loan lets you borrow a lump sum using your home as collateral. You repay the borrowed amount with interest over an agreed term. Rates are usually fixed, although adjustable-rate products also exist. If you already have a mortgage, the equity loan is generally a second mortgage with a separate payment. The CFPB’s home equity loan overview explains the basic structure and the risk of losing your home if you cannot repay it.
Home equity and available borrowing are different amounts
Equity is your property’s estimated current value minus the balances of loans secured by it. It can grow as you repay principal or the property gains value, and fall when you borrow more or the property loses value. Equity is not cash in a bank account, and the full amount is not necessarily available to borrow.
This calculator applies your chosen combined loan-to-value (CLTV) percentage to the home value, then subtracts existing secured balances. CLTV measures all loans secured by the property relative to its value. The resulting borrowing estimate is a planning figure, not a lender’s approval or an appraisal.
A simple home equity example
A $500,000 home with $300,000 in secured balances has $200,000 in equity. With an illustrative 80% combined borrowing limit, total secured debt would be limited to $400,000 in this model. Subtracting the existing $300,000 leaves $100,000 of potential additional borrowing before fees. The 80% setting is adjustable and is not a universal lending requirement.
Home equity loan, HELOC, or cash-out refinance?
A home equity loan provides a set amount upfront. A HELOC is a revolving credit line that allows repeated borrowing within the agreement’s limits; its rate is usually variable. Both can sit alongside an existing first mortgage. Read the CFPB’s home equity loan and HELOC comparison and use the HELOC calculator to explore that payment structure.
A cash-out refinance replaces the existing mortgage with a larger one, allowing you to receive cash after the old loan and applicable costs are paid. It changes the terms of your first mortgage, so compare the cost of refinancing the whole balance with adding a separate equity loan. The CFPB outlines these alternatives to a HELOC. You can model a proposed cash-out loan in the refinance calculator.
What affects the amount and cost of a loan?
Lenders consider property value, income, credit history, and their own requirements when setting an offer. Ask for the interest rate, APR, repayment schedule, and itemized fees. Compare the total repayment cost as well as the monthly payment. The FTC’s guide to home equity borrowing explains why the product’s terms and your ability to repay matter.
Plan for the additional payment
Include both mortgage payments and your ongoing taxes, insurance, maintenance, and other expenses in your budget. This calculator estimates equity and borrowing capacity only; it does not calculate a new equity loan’s monthly payment or deduct closing costs. Replace the estimated property value and balances with current information before comparing written offers.
Borrowing against equity creates debt secured by your home. Using the proceeds to repay credit cards does not erase the debt and can put your home at risk if you cannot make payments. Consider the purpose of the borrowing, the full cost, and how you would manage a change in income before committing.
