Calculate monthly payments and borrowing power — loan or line of credit mode.
A cash-out refinance replaces your entire existing mortgage with a new, larger loan and pays you the difference in cash. A HELOC is an additional credit line that sits on top of your first mortgage without disturbing it. The two products serve the same goal — unlocking home equity — but they work very differently in practice.
When cash-out refinance wins: If current rates are lower than your existing mortgage rate, refinancing lets you both access equity and reduce your rate simultaneously. You pay one loan, one payment, one servicer. The trade-off is closing costs of 2–5% of the new loan balance and restarting your amortization clock from zero.
When HELOC wins: If your existing mortgage has a rate you would not want to give up, a HELOC leaves that loan untouched. You pay two bills (first mortgage + HELOC draw payment), but the total interest cost can be lower when the first mortgage rate is favorable. HELOCs also offer flexibility — you draw only what you need, when you need it, and interest accrues only on the drawn balance.
Rate structure: Cash-out refis are typically fixed-rate. HELOCs are almost always variable-rate, tied to the prime rate or another index. Rising rate environments increase HELOC carry costs in ways a fixed refi would not.
Decision framework: If your existing rate is below current market rates, a HELOC (or fixed home equity loan) preserves that rate. If your existing rate is above current market rates, a cash-out refi can be the more efficient path — you access equity and lower your rate in one transaction. In either case, compare the fully-loaded cost: rate, closing costs, draw-period payments, and the total interest paid over the projected holding period.
This is an educational overview. Actual loan terms depend on lender underwriting, property appraisal, credit profile, and market conditions. Consult a licensed mortgage professional for advice specific to your situation.
This tool calculates two types of home equity borrowing: a home equity loan (fixed lump sum, fixed payments) and a HELOC (revolving line, interest-only draw period followed by an amortizing repayment period). Toggle between modes using the buttons at the top, then enter your property details and loan parameters.
Home Value: Use your best estimate of your property's current fair market value, not the original purchase price. If you have a recent appraisal, use that figure. Lenders will order their own appraisal, so this is a planning estimate.
Mortgage Balance: The outstanding principal remaining on your first mortgage. Find this on your most recent mortgage statement. Do not include escrow or payment-in-advance amounts.
Max CLTV: Combined Loan-to-Value ratio. Most lenders allow 80–90% CLTV. The default of 85% means the sum of your first mortgage and the new loan cannot exceed 85% of your home's value. Adjusting this lets you model stricter or more lenient lender policies.
The calculator shows two equity figures as soon as you enter valid property data:
Worked example: Home value $400,000, mortgage balance $250,000, CLTV 85%.
Even though you own $150,000 in equity, the CLTV cap limits new borrowing to $90,000. The remaining $60,000 of equity acts as a buffer below the lender's threshold.
In loan mode, enter the requested loan amount, APR, and term in years. The calculator applies standard mortgage amortization:
Worked example: $50,000 at 7.5% APR, 15-year term.
Each monthly payment gradually shifts from mostly interest (in early months) to mostly principal (in later months). The amortization schedule below the results shows this breakdown for every payment.
A HELOC has two distinct phases. Switch to HELOC mode and enter a draw period (default 10 years) and repayment period (default 20 years).
Draw period — interest only: During this phase you access funds as needed, up to your credit limit, and pay interest only on the outstanding balance.
Repayment period — amortizing: After the draw period ends, the outstanding balance amortizes fully over the repayment period. The same formula as a home equity loan applies, but now on the balance remaining at end of draw.
Payment shock: The jump from interest-only to amortizing payments can be substantial — in this example, payments increase by $84.89/month (about 25%). Plan for this transition when sizing a HELOC.
Click "Show Amortization Schedule" to expand a row-by-row breakdown. For a home equity loan, each row shows month number, total payment, principal paid, interest paid, and remaining balance. For a HELOC, there are two block phases — Draw (interest-only) and Repay (amortizing) — so the schedule displays a Phase column.
The schedule is useful for two planning exercises: (1) identifying the breakeven point at which the majority of each payment goes to principal rather than interest, and (2) finding the balance at any future month if you want to model early payoff.
Home equity is among the largest assets most households hold, often exceeding 40–60% of net worth. Tapping it through a loan or HELOC converts illiquid equity into usable capital — at the cost of pledging the home as collateral. The interest rate is typically lower than unsecured debt (personal loans, credit cards) because the lender has recourse to the property in case of default.
From a portfolio perspective, borrowing against home equity makes sense when the after-tax cost of the loan is lower than the expected return on the capital's use (e.g., home improvements that increase property value, debt consolidation that eliminates higher-rate balances, or business investment with a credible expected return). It does not make sense as a substitute for an emergency fund or to fund lifestyle spending that leaves no tangible asset behind.
The APR you enter is a planning assumption. Your actual offered rate will depend on: credit score (most lenders require 680+; top rates go to 740+ borrowers), debt-to-income ratio (most lenders cap at 43–45%), the amount borrowed relative to available equity (lower CLTV = lower rate), and current interest rate conditions. Shop at least three lenders and compare the APR (which includes fees) rather than just the stated rate.
Since the 2017 Tax Cuts and Jobs Act, interest on home equity loans and HELOCs is deductible only if the proceeds are used to buy, build, or substantially improve the home securing the loan. Interest used for other purposes (debt consolidation, vacations, etc.) is generally not deductible. The deduction is subject to the overall $750,000 mortgage interest limit and requires itemizing deductions. Tax law changes frequently — consult a tax professional for guidance specific to your situation.
For a deeper look, see our full HELOC vs Home Equity Loan guide. Quick summary:
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Disbursement | Lump sum at closing | Draw as needed up to limit |
| Rate type | Fixed | Variable (prime + margin) |
| Payment shape | Equal payments throughout | Interest-only draw, then amortizing |
| Best for | One-time, defined-cost projects | Ongoing or variable-cost needs |
| Predictability | High — rate and payment locked in | Lower — rate fluctuates with index |
This calculator is an educational tool, not financial advice. Consult a licensed financial professional before making borrowing decisions. Results are estimates based on the inputs you provide and standard amortization formulas.