Home Equity Installment Loan Payment Calculator

A home equity installment loan is a lump-sum loan secured by your home and repaid in scheduled installments, usually over a set term. This calculator estimates the monthly payment and total interest from the amount borrowed, APR, and term; enter the figures shown in your lender’s offer for an estimate.

Formula

The calculator uses the standard fixed-payment amortization formula:

Monthly payment = P × r ÷ [1 − (1 + r)⁻ⁿ]

• P is the amount borrowed, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 100 ÷ 12, or APR ÷ 1200.
• n is the number of monthly payments: loan term in years × 12.
• APR is the annual percentage rate entered as a percent.

Total interest is estimated as the monthly payment multiplied by the number of payments, minus the original principal: Total interest = payment × n − P. The result is rounded to cents for the displayed payment; totals use that displayed payment.

Worked Example

Using the calculator’s defaults—$20,000 borrowed at 8% APR for 5 years:

1. Convert APR to a monthly decimal rate: 8 ÷ 1200 = 0.0066667.
2. Convert the term to payments: 5 × 12 = 60 months.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰] = $405.53 per month, rounded to cents.
4. Estimate total interest using the displayed payment: $405.53 × 60 − $20,000 = $4,331.80.

Assumptions

• The interest rate stays fixed throughout the term.
• Payments are equal, made monthly, with the first payment one month after borrowing.
• Interest compounds monthly at APR ÷ 12.
• The estimate excludes lender fees, taxes, insurance, and any other costs not entered in the calculator.

What a Home Equity Installment Loan Is

Home equity is the difference between a home’s value and the debt secured by it. A home equity installment loan, often called a second mortgage, lets a homeowner borrow a set amount against available equity. The borrower receives the proceeds as a lump sum and repays principal and interest in scheduled payments. The home secures the debt, so failure to meet the agreement can put the property at risk.

This differs from a home equity line of credit (HELOC), which generally provides a revolving credit limit that can be drawn during a specified period. An installment loan instead gives the borrower the agreed principal at the outset, with repayment structured over a term. A cash-out refinance is different again: it replaces an existing mortgage with a larger mortgage, rather than adding a separate installment loan. Product terms vary, so compare the actual contract and disclosures.

How the Estimate Relates to the Loan

The payment estimate isolates principal and interest. Early in a typical amortizing loan, more of each payment goes toward interest; later, more goes toward reducing principal. The scheduled payment is designed to pay the balance down to zero by the end of the stated term, assuming the rate, payment timing, and payment amount remain as modelled.

For example, the $20,000, 8%, five-year illustration produces an estimated payment of $405.53. It is an arithmetic example, not a market quote or a statement about what any lender offers. Enter the loan amount, APR, and term supplied in the specific loan documents to see how those inputs affect the estimate.

APR and interest rate are related but not always identical in loan disclosures. APR may account for certain borrowing costs, while the rate used to calculate scheduled interest may be stated separately. This calculator treats the entered APR as the rate applied to the balance. If the lender provides both a note rate and an APR, check which figure its payment schedule uses; fees and disclosure conventions are not modelled here.

Costs, Risks, and Limits

A lower payment does not necessarily mean a lower borrowing cost: a longer term can reduce the scheduled monthly amount while increasing total interest because the balance remains outstanding for more months. Conversely, a shorter term generally means fewer scheduled payments, but a larger monthly payment under the same principal and rate. Compare the full repayment schedule and all stated costs, rather than focusing on one number.

• Home-secured debt: the property is collateral, making missed payments a serious risk.
• Fees and closing costs: any charges may affect the overall cost but are not included in this calculation.
• Rate structure: the calculator assumes a fixed rate. A variable-rate contract or payment changes will not match the estimate.
• Payment timing: late, skipped, or extra payments can change interest and payoff timing.
• Borrowing amount: the calculator does not determine available equity, eligibility, or a lender’s maximum loan amount.

Do not treat the result as an approval, a commitment, or a complete cost disclosure. Review the lender’s payment schedule, fees, rate terms, and consequences of nonpayment. A lender’s figures may differ because of payment dates, rounding, fees, or a calculation method not represented here.

Using the Calculator Carefully

Enter the principal you expect to borrow—not the home’s value or its estimated equity—along with the APR and term. The term is in years, and the APR is entered as a percentage: enter 8 for 8%, not 0.08. The calculator converts years to monthly payments and the annual rate to a monthly rate. Small differences can arise from rounding or from the loan’s exact payment dates.

The model assumes the full principal is advanced at the start and that level monthly payments begin one month later. It does not include additional payments, a changing balance due to new draws, late charges, taxes, insurance, or lender-specific fees. If the actual loan has different terms, the estimate will not reproduce its complete payment schedule.

Frequently Asked Questions

Is a home equity installment loan the same as a HELOC?
No. An installment loan typically provides a lump sum repaid in scheduled installments. A HELOC generally lets a borrower draw and repay funds within a revolving credit arrangement, subject to its contract terms.

Is a home equity installment loan a second mortgage?
It is commonly described as a second mortgage when it is an additional loan secured by a home that already has a mortgage. The exact lien position and contract depend on the transaction.

Does this calculator include fees?
No. It estimates principal-and-interest payments from the entered amount, APR, and term. Use the lender’s disclosures for fees and the complete cost information.

Why might my lender’s payment differ?
The lender may use a different interest rate than the APR entered here, or account for fees, payment dates, rounding, or other contract details. Compare the inputs and the lender’s schedule.

Can I borrow the full amount of my home equity?
This calculator does not estimate available equity or approval. Those depend on information and criteria outside the formula; obtain the relevant figures directly from the lender.

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

Related

• Accrued Interest Revenue Journal Entry Explained
• Accrued Interest Payable: Meaning and Calculation
• Accrued Interest Paid? How It Works on a Loan

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 | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2