ReckonBoxWhat a home equity loan is
A home equity loan is a fixed-rate lump sum secured against your home and repaid over a set term, sitting behind the mortgage you already have. The CFPB draws the line between it and a HELOC at the rate: this one is fixed, a line of credit usually is not. The payment is settled the day you sign, so there's no draw period to get through and no rate ceiling to worry about.
Borrow $75,000 at 7.15% over 10 years and the payment is $876.62. It will be $876.62 in year nine.
How much your equity supports
Lenders cap the total of every loan against the property at a share of its value, called combined loan to value. Equity alone doesn't decide it. A $500,000 home with a $280,000 mortgage holds $220,000 of equity, but at an 85% CLTV ceiling the lender will go to $425,000 of total debt, which leaves $145,000 of headroom rather than the full $220,000.
Borrowing $75,000 against that moves your combined loan to value from 56% to 71%. That number decides both whether you qualify and what rate you're offered.
Ceilings differ across the lenders we fetched: Firstrust publishes 80%, NerdWallet describes 85% as the common maximum, Bank of America allows up to 85% on a primary residence for lines under $500,000 and 80% in Texas, and Navy Federal recommends staying inside 80%.
The comparison that matters
The fixed rate is the product, so the honest comparison against a HELOC is what each one guarantees rather than what each one costs today.
| Same $75,000 borrowed | Home equity loan | HELOC |
|---|---|---|
| Payment now | $876.62 | $531.25, interest only |
| Payment later | $876.62 | $650.87 when repayment starts |
| Worst case the contract allows | $876.62 | $1,157.48 at an 18% ceiling |
| Rate can move | no | yes |
The line starts $345 a month cheaper. Its contract permits a payment $281 a month higher than the fixed loan ever reaches. Both are true at the same time, which is the whole trade, and the HELOC calculator prices the other side of it.
What the cash actually is
Closing costs usually come out of the advance, so the amount you owe and the amount you receive are different numbers. Sign for $75,000 with $1,500 of costs and $73,500 arrives, while interest is charged on the full $75,000. Over 10 years the interest comes to $30,195 across $105,195 of payments, and the borrowing costs $31,695 all in.
That gap between signing and receiving is exactly what an APR is built to express, and the APR calculator prices it.
Where the numbers come from
The payment uses M = P times r times (1 + r) to the power n, divided by (1 + r) to the power n minus 1, with P the amount borrowed, r the annual rate over 12 and n the months. Combined loan to value is every secured loan added together over the home value. Headroom is the value times the CLTV ceiling, less what the first mortgage still owes, floored at zero.
The 7.15% default is what U.S. Bank published for a 10-year second-position home equity installment loan as of 1 October 2025. Your own rate will turn on credit, CLTV and the lender.
What this does not decide for you
This prices a loan. Whether to put more debt against your home is a different question, and it turns on things no calculator holds: how secure the income is, what the money is for, and what happens if the property falls in value. Borrowing to 71% CLTV on a $500,000 home puts $355,000 of debt against it, so a fall below that leaves nothing. The CFPB notes that a lender can foreclose where the debt is not repaid, and that applies to a second loan as much as a first. None of this is a quote, an approval or advice; speak to a licensed professional about your own circumstances.
Frequently asked questions
What is a home equity loan? A home equity loan is a fixed-rate lump sum secured against your home and repaid over a set term, sitting behind your first mortgage. Per the CFPB, the distinguishing feature against a HELOC is the rate: a home equity loan is fixed, while a HELOC usually carries an adjustable one. On $75,000 at 7.15% over 10 years the payment is $876.62 and cannot change.
How much can I borrow against my home? Lenders cap the total of your first mortgage plus the new loan at a share of the home value, called combined loan to value. At 85% CLTV on a $500,000 home with a $280,000 mortgage, the headroom is $145,000. NerdWallet describes 85% as the common maximum, Firstrust publishes 80%, and Bank of America allows up to 85% on primary residences for lines under $500,000.
What is combined loan to value? Combined loan to value is every loan secured against the property, added together and divided by the home value. Borrowing $75,000 behind a $280,000 mortgage on a $500,000 home moves the figure from 56% to 71%. It is the number that decides both whether you qualify and what rate you are offered.
Is a home equity loan better than a HELOC? They answer different needs and carry different risk, so the honest comparison is what each guarantees. The fixed loan here costs $876.62 a month for 10 years and $30,195 in interest, and that payment cannot move. A HELOC on the same $75,000 starts far cheaper at $531.25 interest only, and its contract ceiling permits $1,157.48 once repayment begins.
How much interest will a home equity loan cost? On $75,000 at 7.15% over 10 years, $30,195 in interest across $105,195 of total payments. Add $1,500 of closing costs and the borrowing costs $31,695, while the cash actually reaching you is $73,500. A longer term lowers the payment and raises that interest total.
Do closing costs come out of the loan? Usually, which is why the amount you receive is smaller than the amount you owe. On $75,000 with $1,500 of costs you sign for $75,000 and receive $73,500, and interest is charged on the full $75,000. The APR calculator prices what that gap does to the true rate.
What happens if my home value falls? The loan does not shrink with it, and combined loan to value rises. Borrowing to 71% CLTV on a $500,000 home puts the total debt at $355,000, so a fall below that figure leaves no equity at all. Both loans stay secured against the property, and the CFPB notes that a lender can foreclose if the debt is not repaid.