Do you have significant outstanding consumer debt? This calculator makes it easy for homeowners to estimate how much interest they will save by consolidating many unsecured debts & other high-interest debts into a low-interest home equity loan.
Enter each one of the debts that you would like to pay off, along with their corresponding principal balances, interest rates, and monthly payment amounts. Once you have all your debts entered, make any desired changes to the "New Loan Information" default entries (including if you want any additional cash back) and then click on the "Calculate New Loan" button.
If you want to obtain a home equity loan but do not have any debts you are paying off with the money you can leave the top section of the calculator blank and enter your loan information in the row above the calculation button to figure the payments on your home equity loan.
Calculate Home Equity Loan Payments
Enter Any Debts You Would Like to Pay Off With Your New Loan
Current 30 YR Fixed Mortgage Rates
The following table highlights locally available current mortgage rates. By default 30-year purchase loans are displayed. Clicking on the refinance button switches loans to refinance. Other loan adjustment options including price, down payment, home location, credit score, term & ARM options are available for selection in the filters area at the top of the table.
How Much do Home Equity Loans Cost?
Closing costs on home equity loans are typically anywhere between 2 to 5 percent of the loan amount. This fee covers home appraisal, document preparation, title search & an application fee.
If you borrowed $100,000 this would mean the cost of the loan (outside of interest) would be between $2,000 and $5,000.
Borrowers can also pay for a lower loan rate by buying points. 1 point costs 1% of the loan amount. Instead of borrowing at 6% a borrower on a $100,000 loan could pay $1,000 upfront to obtain a 5.75% rate.
Since first mortgages have senior priority in case of default, second mortgages typically charge a slightly higher rate of interest to compensate for the greater risk.
If fees or rates seem high at a particular lender it can pay to shop around & take competitive quotes from one bank to another.
How Much Equity Can I Borrow Against?
Lenders typically allow homeowners to cash out up to 85% of the equity in their home between their first & second mortgages. People with excellent credit may be able to cash out 90% or more of their home's value.
If a home is valued at $250,000 and has $150,000 of first mortgage debt this means a person would be able to borrow up to an additional $62,500 (at 85%) or $75,000 (at 90%).
Is This Tax Deductible?
If the debt is obtained to pay off other debts then the answer is no.
Prior to 2018 homeowners could deduct interest on up to $100,000 of second mortgage debt. Interest on first mortgage debt is still tax deductible, but second mortgage interest no longer is UNLESS the debt is used to build or substantially improve the property. Due to the Tax Cuts and Jobs Act of 2017 (also known as the TCJA, or the Trump tax cuts) the cap on interest deductibility was lowered from interest on up to $1,000,000 to the interest on up to $750,000 of mortgage debt for married couples filing jointly. For married couples filing separately the cap on interest deductibilyt is set at the interest on $375,000 of mortgage debt.
If you obtain a loan to do major home improvements which increase the value of the house then the cost of those improvements can also figure into your purchase basis for the home, but most homeowners do not exceed the primary residence sale capital gain exclusion of $250,000 for individuals or $500,000 on joint-filed returns.
If the debt is used for dual purposes (say paying off a credit card or funding college expenses AND adding an extra room onto a home) then the portion of the debt that is considered origination debt may have tax deductible interest expenses. Be sure to keep receipts for any major renovations or home improvements, and discuss your situation with a trusted accountant to determine if a particular project will qualify.
One other tax consequence of note is the TCJA also lowered the state & local income tax deduction from unlimited to a max of $10,000. Residents of many coastal states with high property values & high property tax rates will get hit by the new SALT deduction limit.
What is the Difference Between a HELOC and a Home Equity Loan?
Home equity loans give the borrower a lump sum of cash & typically charge a fixed-rate of interest for a 5, 10 or 15 year period. These loans come with closing costs & a known repayment cycle.
Home equity lines of credit enable a borrower to tap equity on an "as needed" basis for a set period of time. They operate similarly to credit cards, though with lower rates since the debt is secured by the home. They allow greater flexibility in terms of repayment and use floating interest rates tied to a set margin above a reference benchmark rate. HELOCs may charge a fee for being open for a set number of years, however you are not charged interest until you withdraw funds. HELOCs can be repeatedly paid off & drawn upon as needed.
Some banks also offer hybrid products which combine features of both loan options. They'll start as a line & then can be converted to a regular amortizing loan.
Should You Leverage Equity?
If your family has a history of responsible credit use & you recently had an emergency that racked up temporary debt then leveraging equity may make sense.
However if a member of the family perpetually lives beyond their means & uses credit irresponsibly then you would not want to cover their personal debts with your house, as they'll likely quickly rack up new debts & could end up costing you your home.
It is easier to discharge credit card debt in bankruptcy than to involve your primary residence in the process.
A few options to consider which will not put your home at risk:
- personal loans: these charge a higher rate of interest, but can be quickly obtained on many online peer-to-peer lending platforms like Prosper and Lending Club
- 0% APR introductory credit card offers: transfer balances from higher interest debt to a card with an interest-free grace period
- credit counseling: credit counselors may be able to help offer debt relief services for people who have too much debt
Cash Out Refinance Limits
Borrowers who intend to leverage their home equity through a cash out refinance typically can borrow anywhere between 80% to 85% of the home's value if their credit is in good condition. Few banks will lend above this level & those that do typically require the borrower to pay higher interest rates or other fees to help compensate for the risks the lender is exposed to.
Government-sponsored programs each have their own limits. For VA loans the loan-to-value limit is 90%. USDA & FHA loans have an LTV limit of 80%.