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    Calculates locally in your browser · fixed-rate second mortgage
    Mortgage / home equity

    Home equity loan

    A closed-end second mortgage: a fixed rate, a fixed term, one lump sum. What decides how much you can borrow is not the equity you have but the combined loan-to-value the lender will accept — measured against the first mortgage, not against the house in isolation.

    CLTVWithinRate8.00%Term15 yr
    Monthly payment
    $975
    on $102,000 financed
    Combined LTV
    66.7%
    inside the 85% limit
    Available to borrow
    $210,000
    equity of $300,000
    Total interest
    $73,458
    $720 per $1,000 borrowed
    What the lender measures
    Capacity is set by the combined LTV against the first mortgage, not by the equity alone.
    66.7% CLTV
    What the lender measures
    MeasureValueNote
    Home value$600,000as appraised
    First mortgage$300,000balance outstanding
    Equity$300,000value less the first mortgage
    Maximum combined LTV85%lender policy, typically 85%
    Available to borrow$210,000at that limit
    Requested$100,000within capacity
    Combined LTV66.7%passes
    Closing costs$2,000financed
    Amount financed$102,000loan plus costs
    Payment$97515 years at 8.00%
    Total interest$73,458over the term
    HELOC first year$9,000at 9.00% variable

    The loan takes the combined LTV to 66.7%, inside the 85% limit, and leaves 110,000 of unused capacity.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Payment against loan amount
    Linear in the amount borrowed, because the rate and term are fixed.
    Payment against loan amount0.000568.351136.691705.042273.382841.73496.94$50k$50k974.77$100k$100k$150k$150k$200k$200k$250k$250kPayment
    Combined LTV against loan amount
    The limit is a hard line: past it the lender will not lend, whatever the equity.
    Combined LTV against loan amount0.00020.5341.0761.6082.13102.67$50k$50k$100k$100k$150k$150k$200k$200k$250k$250kCLTV %
    Canonical equations
    The exact relationships implemented by this engine.

    value − first mortgage · Not the borrowing limit.

    value × max CLTV − first · What the lender will allow.

    (first + second) / value · The number that is checked.

    P = A·r/(1−(1+r)^−n) · Fixed rate, fixed term.

    finance methodology

    A clear path from inputs to results.

    A closed-end second mortgage: a fixed rate, a fixed term, one lump sum. What decides how much you can borrow is not the equity you have but the combined loan-to-value the lender will accept — measured against the first mortgage, not against the house in isolation.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the home value and the first mortgage balance.
    2. Set the loan amount, rate and term.
    3. Choose the maximum combined LTV the lender allows.
    4. Read the payment, the combined LTV and the available capacity.

    The formula

    CLTV=first+secondvalue\text{CLTV} = \frac{\text{first} + \text{second}}{\text{value}}

    Reference: Lender CLTV policy, typically 85%, with level-payment amortisation for the second mortgage (Broverman, Mathematics of Investment and Credit).

    Worked example

    $100,000 second on a $600,000 home

    Inputs
    • Home value $600,000, first mortgage $300,000.
    • $100,000 second at 8% over 15 years, $2,000 of closing costs financed.
    • Maximum combined LTV 85%.
    Calculation path
    1. 1

      Equity is $300,000, but the borrowing capacity at 85% CLTV is only $210,000.

    2. 2

      The loan takes the combined LTV to (300,000 + 100,000) / 600,000 = 66.7%.

    3. 3

      With the closing costs financed, $102,000 is borrowed at 8% over 180 months.

    4. 4

      The payment is $974.80 and the total interest is $73,464.

    5. 5

      A HELOC at 9% would cost $9,000 in the first year on the same $100,000.

    Result

    $974.80 a month · 66.7% CLTV · $73,464 of interest.

    Interpreting the result

    The gap between equity and capacity is the point: a household with $300,000 of equity can usually borrow $210,000, not $300,000, because the lender is protecting the combined position rather than measuring the owner’s stake. That is also why a second loan gets a higher rate than a first.

    Assumptions & limitations

    • A closed-end fixed-rate second mortgage.
    • Closing costs are financed into the loan.
    • The first mortgage balance is unchanged.
    • No appraisal, title or credit adjustments are modelled.

    Frequently asked questions

    How is this different from a HELOC?

    A HELOC is a revolving line with a draw period and a variable rate. A home equity loan is a single lump sum at a fixed rate for a fixed term — cheaper to hold if rates rise, less flexible if you need to draw again.

    Is the interest tax-deductible?

    Only if the loan is used to buy, build or substantially improve the home, and only within the mortgage-interest limits. Using it to pay off cards generally makes the interest personal and non-deductible.

    What happens if home values fall?

    The CLTV rises with the value falling, which can push the loan above the lender’s limit and make a refinance impossible until values recover.

    Why is my capacity less than my equity?

    Because the limit is the combined LTV, not the equity. At 85% CLTV on a $600,000 home with a $300,000 first, the maximum total debt is $510,000, so $210,000 is available.

    Can I get a second loan with a high CLTV?

    Some lenders go to 90% or 95%, at a higher rate and with stricter credit requirements. The trade is rate for capacity.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.