Home Equity Loan Calculators – Work Out How Much

Are you keen to know more about home equity loans? You’ve come to the right place. Every month, over 6,900 people visit our website looking for guidance on secured loans.

This article will shed light on:

•  The basics of a home equity loan and its operation
•  The potential costs of a poorly chosen home equity loan
•  The varied purposes for home equity loans
•  The advantages and drawbacks of a home equity loan
•  The typical repayment duration for a fixed rate home equity loan

Did you know that according to PwC’s research, about 80% of all household debt in the UK is secured against property?¹ This highlights the importance of making informed decisions about home equity.

Don’t worry! We understand that these financial matters may seem complex, but we are here to make them simple for you.

Home equity – quick recap! 

Before we dive into the details about a home equity loan calculator, let’s recap on what home equity really is. 

Equity is the amount of an asset you own, less any outstanding debt owed on the asset.

So home equity is the amount of your property you own outright, calculated by subtracting any debts you owe on the property. For most people, this will just be a single mortgage. 

It is best understood with an example.

First, you need to find out the property’s value in today’s market. Don’t make the mistake of just using the amount of money you paid to buy the house. This can result in calculating your home equity incorrectly.

Let’s imagine the house is worth £200,000. You then subtract the remaining balance on your mortgage £50,000 for example. You would therefore have home equity of £150,000 (£200,000 – £50,000). 

Home equity therefore increases by continuing to make monthly payments on your mortgage, or by factors that increase the property value. External factors may also decrease property value and therefore your equity. 

How to calculate interest on a home equity loan

To work out the amount of interest you will pay within your monthly payment, you would need to grab a calculator.

It can be a little tricky. But to save you the trouble of working it out for yourself, you can use an equity loan calculator instead…

What is a home equity loan calculator?

A home equity loan calculator is a type of financial calculator, just like mortgage calculators or stamp duty calculators.

It is used to help potential loan applicants obtain an insight into what their monthly payment may be, based on how much they want to borrow and how long they want to repay. 

These calculators often have two stages.

The first is used to determine the amount of home equity you have, and the second is to reveal what loan terms you can get with that particular lender. 

By using a home equity loan calculator, it allows potential applicants to compare what might be available against other loan and HELOC providers. 

Where can I find a home equity loan calculator?

Home equity loan calculators are available on the websites of lenders that offer these products.

For example, you could find them on a UK bank website or another online lender. 

The representative APR rate used must reflect 51% of loan applications. Leaders that are authorised and regulated by the Financial Conduct Authority will do this. Don’t use illegal lenders. 

Is a home equity loan calculator accurate?

An equity loan calculator is not 100% accurate and you should take any figures presented with a pinch of salt.

The calculator uses generic information without taking into account your credit score or other personal finances. Without considering this information, the calculator cannot provide a personalised estimate.

The projected monthly payment may include a higher or lower interest rate than is realistic but is based on 51% of applications only.

Some lenders may provide a more personalised estimate by collecting further details. This is done without actually checking and marking your credit score.

If you are applying for a HELOC, the calculator cannot be accurate because it uses a variable interest rate that changes over time.

There is no way of being certain how the interest will change and is one of the risks of utilising the equity in this way. 

Home equity loans for all purposes

• Stuck paying high interest on credit card debts & loans?
• Looking to fund a home improvement project?
• Dreaming of finally taking the once-in-a-lifetime trip?

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How much can I borrow with a home equity loan?

A home equity loan or HELOC will usually allow you to borrow a loan amount up to a maximum of an 85% loan to value ratio.

If you had home equity of £100,000, you might be able to access credit up to £85,000, which is much more than an unsecured personal loan could offer – and usually with lower interest. 

In this case, the “value” in the “loan to value ratio” is the amount of equity in your home and not the value of the asset overall. 

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What is the current home equity loan rate?

The interest rate you are offered will be heavily determined by the loan amount, repayment period, your income, credit score and other factors – not least the lender you apply to.

Most home equity loans and HELOCs on the market at the time of writing have interest rates between 2% and 10%.

This means the best home equity loans are comparable to the best unsecured personal loans.

Yet, the higher interest rates on unsecured credit are higher than the higher end of a home equity loan. 

References

1. PWC – Household debt tops £2 trillion for the first time