Home equity loan payment calculator
What is home equity loan?
Home equity loan enables a homeowner to unlock part of the home value, which is, otherwise not available as liquid finance to him. This home equity can then be used to buy any other asset, consolidate debts or pay for any education, etc. A second mortgage is taken on an existing home for using the home equity .
How is home equity loan different from home loans?
Home loans are taken for buying a home. Home equity loan can be taken for consolidating debts, or buying another home by mortgaging first home, and so on.
Interest on home equity loans is also slightly higher than home loans.
How does one calculate the amount payable on home equity loan?
Like home loans, home equity loan is also payable in equated monthly installments.
A home equity loan calculator can be created in the following manner.
Open an Excel worksheet.
Give the following legends
A2 = Home equity loan installment number
B2 = Home equity loan outstanding
C2= Interest rate
D2= Interest amount for the month
E2 = Principal amount for the month
F2= Home equity loan installment
G2= Prepayment, if any
H2=Principal amount paid in the month
Now, the following calculations
At A3, type =1
At A4, type = A3+1
At B3, type = the home equity loan obtained from credit union or bank
At C3, type = the interest rate advised by the credit union or bank
At D3, type = +B3+C3/100/12
At E3, type = +F3-D3
At F3, tentatively type an amount greater than D3
At G3, type 0 for now
At H3, type +E3+G3
At B4 type +B3-H3
At C4 type +C3
At D4 copy D3
At E4 copy E3
At F4 type + F3
At G4 copy G3
At H4 copy H3
Now calculate the number of months in the total loan term.Suppose the loan is granted for 10 years, then the number of installments in the equity home loan term would be 120 . Therefore the cell that would hold 120th installment in this example would be A121.
Copy the A4 to H4 right up to row 122.
At J1 type +B122. Cell B122 will hold the amount of home equity loan outstanding at the end of the period. Since this row is well out of the screen, and going up and down when doing permutations and combinations at cell F3 is time consuming, this amount has been copied on cell J1 as well.
Now go to cell F3. Keep on changing the amounts in the cell till the amount at J1 is as close to zero as possible. This is the installment on home equity loan.
This home equity loan payment calculator is useful for calculating
In case of variable interest rates, the total number of installments payable comes down if the interest rates dip.And when the interest rates increase during the home equity loan term, then, the installments increase or the borrower may be called to pay up some amounts and revise the installments .
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