Home Equity Loan Payment Calculator and Formula

This calculator estimates the monthly payment and total interest on a fixed-rate home equity loan when you enter the amount borrowed, annual percentage rate (APR), and term in years. It uses a standard amortizing-loan formula; the results are estimates, not a lender quote.

Formula

The monthly payment is the amount needed to repay a fixed principal through equal monthly payments over the selected term, assuming a constant rate. The formula is:

Payment = P × r ÷ [1 − (1 + r)−n]

• P is the loan principal, in dollars.
• r is the monthly interest rate, calculated as APR ÷ 1,200. APR is entered as a percentage per year.
• n is the number of monthly payments, calculated as years × 12.

Total interest is estimated as monthly payment × number of payments − principal. The calculator applies the payment formula without rounding the monthly payment inside the total-interest calculation. As a result, the displayed payment is rounded to cents, while the displayed interest is calculated from the unrounded formula result. A lender’s actual payment schedule may use different rounding and fees.

Worked Example

Using the calculator’s default inputs: principal P = $20,000, APR 8%, and term 5 years.

1. Convert APR to a monthly rate: r = 8 ÷ 1,200 = 0.0066667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)−60].
4. The monthly payment is approximately $405.53.
5. Total interest is approximately $405.53 × 60 − $20,000 = $4,331.80 when calculated using the displayed, rounded payment. The calculator’s total-interest output uses the unrounded payment formula, which gives approximately $4,331.80.

Assumptions

• The rate stays fixed for the full term.
• Payments are made monthly, at regular intervals, with the first payment one month after borrowing.
• Interest compounds monthly using APR divided by 12.
• Fees, taxes, insurance, escrow, and any costs related to establishing or maintaining the loan are not included.

How Home Equity Loans Work

A home equity loan is borrowing secured by a home. The borrower receives a lump sum and repays it in scheduled installments. The home’s equity is generally the difference between its value and the debt secured against it, but the amount a lender may offer depends on its assessment and loan terms. This calculator does not estimate available equity, determine eligibility, or model a lender’s limits.

Unlike a revolving line of credit, a home equity loan is typically structured around a specific principal amount and repayment schedule. A fixed-rate structure makes the payment easier to estimate because the principal, rate, and term remain unchanged in the formula. The loan is secured by the property, so missed payments can have serious consequences, including risk to the home. The calculator cannot assess that risk or determine whether borrowing is appropriate.

How to Use and Interpret the Estimate

Enter the principal you expect to borrow, the APR supplied by a lender, and the repayment term in years. The first result is the calculated monthly principal-and-interest payment; the second is estimated interest over the full schedule. These figures do not include other amounts that might appear in a payment or at closing.

For instance, changing the term while keeping the same principal and APR changes both payment size and total interest. A longer term generally spreads repayment across more installments, reducing the formula’s monthly payment but extending the time interest accrues. The calculator shows the arithmetic for the values entered; it does not compare offers or account for a person’s finances.

Use the APR and term from a specific written loan estimate or disclosure when available. If the quoted rate is variable, promotional, or subject to later changes, a fixed-rate calculation cannot represent all future payments. Ask the lender which amount, rate, payment frequency, and charges apply to the quoted figures.

Costs and Limits to Keep in Mind

The formula isolates principal and interest. Actual borrowing costs can also include lender charges, appraisal or recording costs, insurance-related expenses, or other items, depending on the loan and jurisdiction. These are not included because the calculator has no fields for them. Its total-interest figure is not the same as total cost of borrowing when additional charges apply.

• APR and interest rate: APR may reflect certain costs in addition to interest, but the calculator uses the entered APR as its annual rate for the payment formula. That simplifies the estimate and may not match a lender’s detailed calculation.
• Payment timing: The formula assumes regular monthly payments. Irregular due dates, late payments, payment holidays, or extra principal payments are not modelled.
• Rounding: The displayed payment is rounded to cents. A lender may round each installment or adjust the final payment, so a statement can differ by a small amount.
• Changing terms: A variable rate, revised balance, or changed repayment schedule requires a different calculation.

A common misconception is that home equity itself makes a loan inexpensive or risk-free. Equity is a measure of ownership value relative to secured debt, not a guarantee of a particular rate, approval, or affordable payment. The loan remains debt secured by the home.

Frequently Asked Questions

How is a home equity loan payment calculated?
The payment is calculated from principal, monthly interest rate, and number of monthly payments using the standard fixed-payment amortization formula. This page converts annual APR to a monthly rate by dividing by 1,200.

Does this calculator show how much home equity I can borrow?
No. It estimates payments for a loan amount you enter. It does not calculate home value, existing secured balances, lender limits, or approval.

Does the payment include closing costs or taxes?
No. The estimate covers principal and interest only. Check the lender’s disclosure for charges and other amounts associated with the loan.

Can I use this for a home equity line of credit?
Not as a complete estimate. A line of credit may allow repeated borrowing and may have a variable rate or different draw and repayment periods. This calculator assumes one lump-sum loan with fixed monthly payments.

Why might my lender’s payment be different?
The lender may use a different APR or term, include financed charges, apply a different payment date or rounding method, or provide a rate that can change. Compare the same principal, rate basis, term, and included costs.

What happens if I pay extra?
Extra principal payments can change the payoff schedule and interest, but this calculator assumes only the regular fixed payment. Ask the lender how extra payments are applied and whether any conditions apply.

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

Related

• Fifth Third Home Equity Loan: Online Application
• Home Equity Loan Payment Calculator and FAQ
• Home Equity Loan Federal? Tax Rules and Key Facts

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