Calculator Equity Home Loan

Tapping into the equity in your home can be a convenient and cost-effective way to access money for large expenses like home improvements or college tuition. Many homeowners have plenty of equity available, the interest rates and monthly payments on home equity loans are relatively low and the interest on the loans is usually tax deductible.

Home equity is the difference between your home’s current market value and the total of all loans you have against the home. If your home is worth $200,000 and you have a mortgage with a remaining balance of $100,000, then you have $100,000 of equity in your home. A home equity loan calculator can help you determine how much equity you have in your home. You enter basic information such as the estimated value of your home and the total of all loans against your home, and the calculator determines the equity in your home. Some will show this result as total equity in your home while others, often run by sites of lenders, will show your result in the amount available to borrow. Other calculators will ask for additional information about your current loans to show you how the equity in your home will increase as the debt on your home decreases over time.

Lending limits and policies vary from lender to lender. Recently, due to decreasing home values and the problems associated with this, lending practices and policies have become somewhat tighter than before. Generally, though, lenders will allow homeowners to borrow between 75-85% of the value of their home. This means, using the previous example of a $200,000 home, that you could have loans totaling between $150,000-$170,000 against your home. So, if your first mortgage has a balance of $100,000, then you could take out a home equity loan of $50,000-$70,000. Again, home equity loan calculators sponsored by lenders will often calculate this available equity for you.

What are the risks of taking out a home equity loan? Keep in mind that when you take out a home equity loan, you are putting your home up as collateral. If you can’t make the payments, the lender has a claim against your home. For years, this was typically a non-issue as home values were increasing quite rapidly. Recently, however, home values in many parts of our country have dropped significantly resulting in homeowners being “under water” or owing more on their home than the home is worth.

If you are considering a home equity loan, calculators can be extremely helpful in determining how much equity you have, how much is available to borrow, and what the future value of your home may be.