1. What is a Home Equity Loan Calculator?

This calculator determines the maximum loan amount you can borrow against your home equity based on what you can afford to pay monthly, the interest rate, and the loan term.

2. How Does the Calculator Work?

The calculator uses the home equity loan formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( PMT \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12, in decimal)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the present value of an annuity (the loan amount) based on fixed monthly payments over a specified term.

3. Importance of Loan Amount Calculation

Details: Knowing your maximum affordable loan amount helps in financial planning, ensures you don't overextend yourself, and helps compare different loan options.

4. Using the Calculator

Tips: Enter your comfortable monthly payment amount, the current annual interest rate, and the desired loan term in years. All values must be positive numbers.

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 with fixed payments, while a HELOC is a revolving credit line with variable rates.

Q2: How does interest rate affect the loan amount?
A: Higher interest rates reduce the maximum loan amount you can afford for the same monthly payment.

Q3: What's a typical home equity loan term?
A: Terms usually range from 5-30 years, with 10-15 years being most common.

Q4: Are there fees not included in this calculation?
A: Yes, this doesn't account for closing costs, origination fees, or possible mortgage insurance.

Q5: How accurate is this calculator?
A: It provides a good estimate, but actual loan offers may vary based on credit score, property value, and lender policies.