1. What is Home Equity Loan Interest?

Home equity loan interest is the cost of borrowing against the equity in your home. It represents the monthly payment amount that goes toward interest charges based on your loan balance and interest rate.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest (currency/month)
• \( B \) — Loan balance (currency)
• \( r \) — Monthly interest rate (decimal)

Explanation: This formula calculates the interest portion of your monthly payment by multiplying the current loan balance by the monthly interest rate.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps you budget effectively, see how much of your payment reduces principal versus interest, and make informed decisions about prepayments or refinancing.

4. Using the Calculator

Tips: Enter your current loan balance in currency units and the monthly interest rate as a decimal (e.g., 0.005 for 0.5%). Ensure both values are positive and the rate is between 0 and 1.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate by 12. For example, 6% annual rate = 6/12 = 0.5% monthly = 0.005 decimal.

Q2: Does this include principal payments?
A: No, this calculates only the interest portion. Your total monthly payment would include both principal and interest.

Q3: Why is my interest amount changing?
A: As you pay down your principal balance, the interest portion decreases each month (amortization).

Q4: What's the difference between fixed and variable rates?
A: Fixed rates stay constant, while variable rates can change based on market conditions, affecting your monthly interest.

Q5: How can I reduce my interest payments?
A: Make extra principal payments, refinance to a lower rate, or shorten your loan term to reduce total interest paid.