Equity Loan Calculator – Your Decision-Making Tool

2007-03-08 10:33:40

( Financial )



When you are taking out a home equity loan, you will find great use for an equity loan calculator. Before you decide among alternative options, you must know the financial consequences of each, so you can pick the package that matches your needs. The equity loan calculator helps you in this decision process.

One decision you make in equity loans is whether to get fixed-rate or adjustable-rate mortgage. When equity loan interest rate is low or trending down, you usually choose fixed-rate. But if equity loan rate is high and expected to decline, you tend toward adjustable-rate mortgage (ARM).

With an equity loan calculator, you determine the net savings advantage of an ARM over a fixed-rate. The total net savings generated throughout the life of the loan should be calculated.

Another decision is whether or not to refinance your existing mortgage. When equity loan interest rates are lower than your first-mortgage loan rate, you will consider refinancing. You should determine if there will be a net financial advantage to you, by comparing the total net savings to the costs of refinancing (processing fees and other closing costs). Savings should exceed costs to justify refinancing. You can use an equity loan calculator for these comparisons.

If you know how to make spreadsheets in your computer, you can easily devise a simple equity loan calculator. You need to know the term of the loan, the equity loan rate for fixed-rate and adjusted-rate mortgage, and the number of months that the ARM equity loan interest rate will stay until it is adjusted (there will be several adjustment periods until the loan matures at the end of the term).

For convenience, you can use the equity loan calculator usually featured in mortgagors’ websites. These calculators are simple tools, but they are very helpful when you make key loan decisions.


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