1. What is a Home Equity Loan?

A home equity loan allows homeowners to borrow against the equity in their property, typically at fixed interest rates. This calculator computes payments for a standard $100,000 home equity loan.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment (USD)
• \( 100000 \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (years × 12)

Explanation: The formula accounts for both principal repayment and interest charges over the loan term.

3. Importance of Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan fits within your financial capabilities before committing.

4. Using the Calculator

Tips: Enter the annual interest rate (typically 7-9% for home equity loans) and loan term in years. All values must be valid (rate > 0, term between 1-30 years).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between home equity loan and HELOC?
A: A home equity loan provides a lump sum at fixed rate, while a HELOC is a revolving credit line with variable rates.

Q2: Are there closing costs on home equity loans?
A: Yes, typically 2-5% of loan amount, though this calculator doesn't include them in the payment.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the loan life.

Q4: Can I pay off the loan early?
A: Most allow early repayment, but some have prepayment penalties - check your loan terms.

Q5: Is the interest tax deductible?
A: Under current US tax law, interest is deductible only if used for home improvements (consult a tax advisor).