Equity Loan Rates: Compare Costs and Payments

Compare home equity loan costs by entering a loan amount, APR and term to estimate the fixed monthly payment and total interest. This calculator does not look up current lender rates: use each lender’s quoted APR as an input to compare estimates on the same amount and term.

Formula

The calculator uses the standard fixed-payment amortization formula. First, convert the annual percentage rate into a monthly rate, then calculate the payment that pays down the balance over the chosen number of months.

• Monthly rate, r = APR ÷ 1,200, where APR is entered as a percentage per year.
• Number of payments, n = term in years × 12.
• Monthly payment = P × r ÷ [1 − (1 + r)⁻ⁿ], rounded to the nearest cent.
• Total interest = rounded monthly payment × n − P.

Here, P is the amount borrowed in dollars, r is the monthly interest rate as a decimal, and n is the number of monthly payments. The displayed APR is not divided by 100 twice: for example, an 8% APR gives a monthly rate of 8 ÷ 1,200, or about 0.006667.

Worked Example

Using the calculator’s defaults: loan amount P = $20,000, APR = 8%, and term = 5 years.

1. Monthly rate: r = 8 ÷ 1,200 = 0.0066667.
2. Number of payments: n = 5 × 12 = 60.
3. Monthly payment: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = $405.53, rounded to cents.
4. Total interest: $405.53 × 60 − $20,000 = $4,331.80.

These results represent the formula’s estimate for the stated inputs, not a lender quote.

Assumptions

• The rate is fixed for the full term.
• Payments are equal, made monthly, with the first payment one month after borrowing.
• Interest compounds monthly at APR ÷ 12.
• Fees, taxes, insurance, escrow and other charges are not included.

What Equity Loan Rates Mean

A home equity loan is generally a lump-sum loan secured by equity in a home, with repayment arranged over a specified term. Equity is the difference between a home’s value and the balances of loans secured against it; a lender’s valuation and rules determine what amount, if any, may be available. This page compares the arithmetic of quoted rates, not the amount a homeowner qualifies to borrow.

APR is useful for comparing borrowing costs because it is intended to express an annualized cost, but the precise items included in an APR can vary by product and disclosure. A rate quote by itself is not enough to compare two offers: the loan amount, term, payment schedule, fees and rate type also matter. Enter the APR supplied in the lender’s disclosure, and check which charges the quote includes.

How to Compare Quotes

For a clear comparison, keep the modeled amount and term constant, and enter each quoted APR separately. Then check the payment and total interest alongside the lender’s written fee and repayment disclosures. A lower payment can result from a longer term, rather than a lower overall borrowing cost.

• Compare the same principal amount and repayment period.
• Check whether the rate is fixed or can change; this calculator assumes fixed interest.
• Review origination, appraisal, closing or other listed charges separately if they are not reflected in the APR.
• Ask whether the quoted payment includes only principal and interest or other amounts as well.
• Compare any conditions, payment dates and consequences of early or late payment in the actual documents.

For example, a quote at one APR over five years and a quote at another APR over ten years do not isolate the rate difference. The longer term typically spreads repayment across more months, so its payment may be smaller even though interest accrues for longer. Model both quotes at a matching term to examine rate effects, then review each actual offer on its own terms.

Costs and Limits of the Estimate

The total interest shown is calculated using the displayed monthly payment rounded to cents, as specified by the calculator. Real loan schedules can differ slightly because lenders may calculate interest using exact payment dates, daily balances, different rounding practices or other contract terms. Fees that are paid upfront or added to the balance are not separately modeled here.

The estimate also cannot establish whether a quoted rate is available to a particular borrower. Lenders set their own offers and eligibility decisions using their processes and information; rates, fees and limits are not universal. Get current figures directly from the lender and use its disclosure for a like-for-like review. Do not treat a sample APR or a calculator result as an offer, approval, or measure of how much borrowing is manageable.

Common Misunderstandings

• Payment is not total cost. A longer term can lower the monthly payment while increasing the number of payments and potentially the interest paid.
• APR and interest rate are not always interchangeable. APR may account for certain costs that a stated interest rate does not; check the lender’s explanation of both figures.
• Home equity is not cash already approved. A home’s estimated equity does not show the amount a lender will offer or the terms it may quote.
• This is not a home equity line of credit model. A line of credit can allow repeated borrowing and may have changing rates or payment rules, unlike the fixed lump-sum assumptions here.

Frequently Asked Questions

What is the current home equity loan rate?
This calculator does not provide live market rates. Rates change and vary by lender and offer; request a current written quote and enter its APR to estimate payments.

How do I compare home equity loan rates?
Compare written APRs using the same loan amount and term, then review fees, rate type, payment schedule and other contract terms. The calculator estimates principal-and-interest payments only.

Does a lower APR always mean a lower monthly payment?
Not if the loan amounts or terms differ. A longer term can reduce the monthly payment despite a higher APR, so compare matching assumptions before interpreting the results.

Does this calculator include closing costs?
No. It estimates monthly principal and interest and derives total interest from those payments. Check the lender’s disclosure for fees and any costs not included in the model.

Is a home equity loan the same as a HELOC?
No. A home equity loan typically provides a lump sum with scheduled repayment, while a HELOC is a credit line that may have different borrowing, rate and payment mechanics. This calculator models only a fixed-rate, lump-sum loan.

This result is an estimate for education, and the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2