How to Calculate Home Equity Loan Rates

By DB Jenkins

  • Overview

    If you have a home equity line of credit, you need to understand how the loan works. Calculating payments and rates on the loan are predetermined, but you do have flexibility in how much you can pay, and how fast you would like to pay it off. In order to perform correct calculations, you'll need to know the interest rate (or rates) set for the loan.
    • Step 1

      Find and remove all paperwork from your loan closing documents. The most important form is going to be the loan agreement. Pull this out and put it aside. Then, review the rest of the paper work for any documents that read, "revolving loan agreement," "revolving loan rider" or "adjustable rate rider." If you have any of these, set these aside. Find a recent loan statement and place with the other documents that you have put aside. Put the rest of the paperwork away.
    • Step 2

      Log on to the Bankrate website listed in the Resources section below. Using your recent loan statement, plug in the corresponding numbers on your loan statement to the fields on the website. Double-check your figures and hit "Calculate." On the next screen you'll be able to calculate for rate, term, payment and loan amount using different figures.


    • Step 3

      Compare the numbers on your loan statement to your loan agreement. If the rate or term does not match, call your lender as there may be a serious discrepancy. Plug in the amount of your outstanding balance, your term (from the loan agreement) and your payment as listed on the statement. Hit "Calculate." If the rate given does not match the rate on your loan agreement and statement, call your lender.
    • Step 4

      If you have any of the documents reading "revolving," "adjustable" or "revolving," you need to carefully review each document with the loan agreement to determine if and when the loan rate will adjust or change. If you cannot understand the document, review it with your lender. If you do understand, and you believe your loan has adjusted in error, contact your lender.
    • Step 5

      You can use the calculator to figure out a plan to pay off the loan in a manner different than the loan agreement. Plug in higher payment options to review how many years (and how much interest you can save) you can cut off your loan.
    • Skill: Moderately Easy
    • Tip: If you decide to cut your loan term by making higher payments, you'll need to be disciplined to make an extra payment each month.
    • Warning:
    • Beware of murky terms in the loan agreement. If you are confused, or believe the documents you signed do not correspond to the numbers you originally agreed to, contact your attorney.

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