Calculator Inputs
Formula Used
The calculator compares the existing mortgage plus a second loan against replacing the current mortgage with a larger refinance.
1) Monthly payment formula
Payment = P × [ r × (1 + r)^n ] ÷ [ (1 + r)^n − 1 ]
Where P is principal, r is monthly interest rate, and n is number of monthly payments.
2) Available borrowing under LTV
Available borrowing = (Home value × LTV limit) − Current mortgage balance
This estimates the maximum additional debt allowed before crossing the selected loan-to-value cap.
3) Home equity loan total monthly debt
Total monthly debt = Current mortgage payment + Home equity loan payment
This keeps the original mortgage in place and adds a second-lien payment.
4) Cash-out refinance principal
New refinance principal = Current balance + Cash needed + Rolled closing costs
The existing mortgage gets replaced with one larger mortgage.
5) Lifetime outlay estimate
Lifetime outlay = Sum of scheduled payments + Any upfront cash fees
This provides a broad cost comparison, not a formal APR disclosure.
How to Use This Calculator
- Enter your current home value and outstanding mortgage balance.
- Provide the current mortgage rate and remaining term.
- Type the amount of cash you want to access.
- Choose an LTV limit that matches your lender’s rule.
- Enter the expected rate, term, and fees for a home equity loan.
- Enter the expected rate, term, and closing costs for a cash-out refinance.
- Select whether fees are financed or paid upfront.
- Submit the form and review payment, cost, eligibility, and chart results above the form.
Example Data Table
| Scenario | Home Value | Current Balance | Cash Needed | Rate | Term | Fees / Costs |
|---|---|---|---|---|---|---|
| Home Equity Loan example | $500,000 | $280,000 | $50,000 | 8.50% | 15 years | $1,200 |
| Cash-Out Refinance example | $500,000 | $280,000 | $50,000 | 6.25% | 30 years | $6,500 |
Frequently Asked Questions
1) What is the main difference between these options?
A home equity loan keeps your existing mortgage and adds a second payment. A cash-out refinance replaces the current mortgage with one larger loan and one new payment.
2) Which option usually has lower monthly payments?
Cash-out refinancing often lowers the monthly obligation when the new term is longer. A home equity loan can cost more monthly because you keep the first mortgage and add another payment.
3) Which option usually has lower fees?
Home equity loans often carry lower closing costs than a full refinance. However, the rate may be higher, so lower fees do not always mean lower total borrowing cost.
4) Why does term length matter so much?
A longer term spreads payments over more months, reducing the monthly amount but often increasing total interest. A shorter term raises payments but may reduce overall borrowing cost.
5) What does the LTV limit do?
The loan-to-value limit caps how much total debt can sit against your property. If your new combined balance exceeds that threshold, the scenario may be unavailable or more expensive.
6) Should I roll closing costs into the refinance?
Rolling costs into the loan reduces upfront cash needs but increases the amount borrowed. That can raise total interest because you pay financing charges on the added closing costs.
7) Does this calculator replace lender disclosures?
No. It is a planning tool for side-by-side comparison. Final offers depend on underwriting, lender pricing, taxes, insurance, escrow rules, and exact fee structures.
8) When might a home equity loan make more sense?
It can make sense when your existing first mortgage has a very low rate and you only need a modest amount of cash. That lets you preserve the older mortgage terms.