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.

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

Borrowing against a home creates a significant commitment. Check the full costs, affordability and risk of losing the property if required payments are not maintained.

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.

Some calculators estimate equity and possible borrowing separately from monthly repayments. Their outputs depend on stated assumptions and do not reveal guaranteed lender terms.

A US-style home equity line of credit (HELOC) should not be assumed to be a standard UK product. Any UK revolving or drawdown secured facility has its own availability, fees and payment terms. Check whether interest or capital payments are required during the drawdown period and how the balance must be repaid.

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. 

For a regulated consumer-credit promotion using a representative APR, that rate or lower must be expected to apply to at least 51% of credit agreements entered into as a result of the promotion. It is not a promise to 51% of everyone who applies, and the rule should not be applied indiscriminately to mortgage APRC illustrations.

Is a home equity loan calculator accurate?

A calculator can accurately calculate its stated assumptions while still being only an illustration. It is not necessarily the rate or payment you will receive.

A calculator estimates payments using its stated amount, rate and term. It is not a lending offer, eligibility confirmation or suitability assessment. Compare the personalised terms and total cost before applying.

Check the rate, compounding, term and fees used. A representative APR rule does not mean a calculation is accurate for only 51% of applicants.

A personalised eligibility or quote service may request further information. Confirm whether it uses a soft or hard credit search before proceeding.

A variable-rate illustration can show payments at an assumed rate, but cannot predict every future rate change.

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. 

A Loans Warehouse customer’s experience

Individual experiences vary. Compare the total cost, fees, repayment term and risks before applying. A lower monthly payment may mean paying more overall, and secured borrowing puts your home at risk if repayments are not maintained.

Polly

“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”

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How much can I borrow with a home equity loan?

Loan-to-value compares secured borrowing with the property’s value, not with the equity alone. A second-charge lender normally considers the existing mortgage and proposed loan together, alongside affordability and credit criteria. There is no universal percentage of equity you can borrow.

Illustration only: at an 85% combined loan-to-value limit, a £200,000 property with a £100,000 mortgage could support at most £70,000 of extra secured borrowing before fees and other restrictions: £170,000 less £100,000. This is not an offer.

The “value” in loan-to-value is the property value. Equity is the value less existing secured debts.

Enquire about a secured loan through Loans Warehouse, a credit broker, not a lender. Approval and terms depend on checks. Compare the full cost before applying. MoneyNerd may receive a referral fee. Your home may be repossessed if you do not keep up repayments on a loan secured against it.

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.

Rates and eligibility change and depend on the product and your circumstances. Obtain a current personalised quotation or mortgage illustration and compare the total cost, fees, rate type and repayment terms; figures in this article are not live offers.

Compare secured and unsecured personalised offers on total cost and risk. See related guidance.

A secured loan is not automatically cheaper, and your home may be at risk if repayments are not maintained.

References

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