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# How Does The Home Equity Line of Credit Calculator Work?

The Home Equity Line of Credit Calculator checks whether a lender might agree to offer a home equity loan against your house. Besides, it gives you an idea of how much money you may be able to borrow. Home equity is a term that outlines what share of the house against which you can apply for loans. It is a metric that increases whenever you make a mortgage payment or if the value of your property increases. The higher your equity, the better your chances of obtaining a loan by borrowing against it.

Home equity loans are a solid choice for most citizens due to their flexible terms and promising interest rates. Think of it as using your house as collateral. In effect, they give you the funds you need in a one-time lump sum that you can use as you deem fit.

The main reasons why one would opt for a home equity loan are if one wishes to purge a debt or renovate a home. Other reasons include education, trips, or other large-scale purchases. Be warned; due diligence is a must when it comes to obtaining a home equity loan. Should you get into a position that prevents you from repaying the said loan as per the terms agreed upon, the lender may confiscate your home. This provision makes it a tad riskier than other forms of loans.

While the calculation to determine the amount you can get a loan against home equity is daunting to many, this calculator does the tiring work for you. Fill the empty fields with the specified values about the nature of your loan. The calculator will handle the rest.

## How To Calculate Home Equity Loan Amount?

For instance, let us assume that Jerome would like to obtain a loan against his home equity. With a credit limit of \$7500, he seeks to borrow \$50000. For the sake of convenience, let us assume the following:

• A starting interest rate of 6 percent is applied.

• The draw period as ten years, where the interest begins to accumulate from the first of the year, paid annually.

• With a minimum payment rate of 0.5 percent, he aims to pay off the loan in 10 years.

• With a minimum interest rate of 2 percent and a maximum of 10 percent, Jerome sets the fixed payment amount to \$800.

• Taking into account the volatility of the market, he also sets the minimum and maximum changes in the interest rate to -0.35 and 0.35 percent, respectively.

On entering the values into the calculator’s fields and pressing calculate, he finds that his payments total \$30,054. This resultant figure is from the interest that has accumulated over the ten years. With a maximum payment of \$3017 permitted during the draw period, Jerome is in better control of his expenses, thanks to the loan. With the help of these values, understand prospective loan opportunities better. Calculate home equity loan amounts in a few clicks with the help of this handy tool.

Should you choose to work with other financial metrics such as ROI or a take-home paycheck, click here. Numerous calculators await, be it for the tasks of calculating salaries, inflation rates, or other relevant terms.