Home Equity Loan Payment Calculator and Formula

This calculator estimates the fixed monthly principal-and-interest payment on a home equity loan from the amount borrowed, annual APR, and repayment term. Enter those three figures to see the monthly payment and the total interest implied by the same scheduled payment.

Formula

The monthly payment is the loan principal multiplied by the monthly interest rate, divided by one minus the discount factor for all monthly payments:

Payment = P × r ÷ [1 − (1 + r)⁻ⁿ]

• P is the amount borrowed, in dollars.
• r is the monthly interest rate as a decimal: annual APR ÷ 1,200.
• n is the number of monthly payments: years × 12.

The calculator’s second result uses total interest = monthly payment × n − P. This assumes each payment is made as scheduled and uses the unrounded payment in the displayed formula. In actual loan servicing, payment amounts and final payoff figures can differ because payments are rounded to cents and timing or fees may vary.

Worked Example

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

1. Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667.
2. Find the number of monthly payments: 5 × 12 = 60.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰].
4. The unrounded result is about $405.53 per month. The calculator displays $405.53.
5. Estimated total interest using the displayed payment: $405.53 × 60 − $20,000 = $4,331.80.

Small differences from a lender’s quoted total can result from cent rounding, payment dates, how the lender calculates interest, or charges not entered here.

Assumptions

• The interest rate is fixed for the full term.
• Payments are level monthly payments made at the end of each monthly period.
• Interest compounds monthly using APR ÷ 12.
• The estimate excludes fees, taxes, insurance, PMI, and escrow; it also does not model late payments or extra principal payments.

What a Home Equity Loan Payment Includes

A home equity loan is generally structured as a lump-sum borrowing secured by a home’s equity, repaid in installments. The payment calculated here covers principal and interest only. Principal is the amount borrowed; interest is the charge calculated on the remaining balance. A lender’s full bill or required payment may include separate charges, so compare the calculator’s scope with the loan disclosure rather than treating the estimate as a complete housing-cost figure.

Unlike a home equity line of credit, which typically allows borrowing and repayment over time within a credit limit, a home equity loan has a set advance and scheduled repayment. The calculator is for level-payment amortization, not a draw-period or variable-payment arrangement.

What Changes the Monthly Amount

• Borrowed amount: With other inputs unchanged, a larger principal produces a larger payment.
• APR: A higher entered rate increases the calculated payment and generally raises total interest. Use the APR provided for the loan being evaluated; this page does not estimate or predict a lender’s rate.
• Term: Spreading repayment over more months usually lowers the scheduled monthly payment, but increases the number of months interest can accrue. A shorter term tends to require a higher monthly payment.
• Charges and payment structure: Fees financed into the balance increase the amount being repaid. Variable rates, irregular payments, or interest-only periods do not match this formula.

For a rough comparison, change one input at a time and keep the others constant. That isolates the arithmetic effect of principal, rate, or term; it does not establish whether a loan is suitable or what a lender will approve.

Using the Estimate and Avoiding Mistakes

Enter the amount actually borrowed, not the home’s value or the total equity shown in an estimate. Equity is not automatically the amount available to borrow. Enter APR as a percentage such as 8 for 8%, not 0.08; the formula converts the annual percentage to a monthly decimal rate. Enter the term in years, not months.

Check whether a quoted APR or rate is fixed for the entire period and whether the offered term is expressed in years. If the loan has financed charges, including those in the amount borrowed is necessary to estimate their payment effect. The calculator rounds displayed money to cents, so multiplying a rounded payment by the term may differ slightly from a lender’s exact amortization schedule.

Because a home equity loan is secured by the home, missed payments can have consequences beyond an ordinary unsecured bill. The calculator cannot assess repayment risk, household budget, property value, eligibility, or the consequences of default. It is a mathematical estimate, not a decision tool or a substitute for reading loan documents.

Frequently Asked Questions

How do I calculate a home equity loan payment?
Use the fixed-payment formula with the principal, monthly rate (APR ÷ 1,200), and number of monthly payments (years × 12). This calculator applies that formula and displays an estimate.

Does a home equity loan payment include taxes and insurance?
No. The calculator estimates principal and interest only. Ask the lender which other charges, if any, are part of the required payment.

Why does a longer term lower the monthly payment?
The same principal is divided across more scheduled payments. Since interest accrues over more periods, total interest can increase even when the monthly payment decreases.

Is a home equity loan payment the same as a HELOC payment?
Not necessarily. This calculation assumes a lump sum repaid in equal monthly installments at a fixed rate. A HELOC may have a different borrowing and repayment structure, which this calculator does not model.

Can I use the result as my exact lender payment?
No. It excludes loan-specific charges and details such as payment timing and lender rounding. Use the lender’s disclosed payment and terms for the exact figures.

This result is an estimate for educational arithmetic; the lender’s disclosure gives the exact figures.

Related

• Open an Escrow Account? How It Works
• Leasing Escrow Account: How It Works and What to Know
• Lawyer Escrow Account: How It Works

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