How the interest builds up
Interest is charged monthly on the balance you still owe at one twelfth of the annual rate, so early payments are mostly interest.
Lenders may use a different method, such as daily interest, so rely on the figures in your offer.
Worked example
Borrowing £40,000 at 7.5% over 10 years costs £16,976.85 in interest. Over 20 years the payment falls to £322.24 a month, but the interest more than doubles to £37,336.95.
Think about the total cost
Long terms make secured borrowing look affordable month to month but can make it much more expensive overall. Your home may be repossessed if you don't keep up repayments.
What this calculator assumes
The interest figures come from an amortisation schedule for the equity loan: equal monthly payments on one nominal rate, with each month's interest charged on the balance still owed at one twelfth of the annual rate. It suits a fixed-rate loan repaid in equal instalments, not a line of credit.
It leaves out fees, early repayment charges and changes in your home's value, so the total interest is an estimate to compare options with.
Inputs for the equity loan interest calculator
Amount to borrow
How much you want to borrow against your home.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over. A longer term means paying interest for longer.
CALCULATOR QUESTIONS
Equity loan interest calculator questions
How much interest will an equity loan cost?
Enter your figures above. For example, £40,000 at 7.5% over 10 years costs £16,976.85 in interest.
Does a longer term cost more?
Yes. Doubling the term in the example adds £20,360.10 in interest.
Why do I pay more interest at the start?
Interest is charged on the balance you owe, which is highest at the start. As you repay, the balance falls and so does the interest.
What's the risk?
Because the loan is secured on your home, missing payments can lead to repossession.