With the Fed set to meet soon to determine interest rate policy, homeowners may be thinking of taking action now.

Home equity loans and home equity lines of credit (HELOCs) allow homeowners to tap into the value of their homes. A home equity loan is a fixed-rate, lump-sum loan that allows homeowners to borrow up to 85% of their home’s value and pay that amount back in monthly installments.

Getting approved for a HELOC or home equity loan isn’t easy, with nearly half of applications denied. Poor credit, a high debt-to-income ratio or a large outstanding mortgage balance may contribute to being rejected for a HELOC or home equity loan.

Before getting started, however, it's always important to first calculate your potential costs, even if you're just borrowing a relatively small amount, like $20,000. Fortunately, since home equity loan rates are fixed, this is quick and easy to do, allowing you to move on to the next step in the application process. Below, we'll do the math.