Home Equity Line of Credit (HELOC) Calculator

Quick start

1. Enter your home value and existing mortgage balance.
2. See your available equity (85% LTV maximum).
3. Enter your desired credit line amount.
4. Enter the interest rate (APR).
5. Set the draw period and repayment period lengths.
6. Enter your initial draw amount to see payment estimates.
7. View your draw period payment (interest-only) and repayment period payment (principal + interest).

Your results — what they mean

• Available equity: The maximum credit line you can access (85% of home value minus existing mortgage).
• Draw period payment: Your monthly interest-only payment during the draw period. You can borrow, repay, and borrow again during this phase.
• Repayment period payment: Your monthly payment during the repayment period (principal + interest). This is typically much higher than the draw period payment.
• Total interest paid: The total interest you'll pay over the life of the HELOC if you make only the minimum payments.
• The chart shows payment comparison between draw and repayment periods to help you plan for the payment increase.

How this calculator works (plain English)

• A HELOC is a revolving line of credit secured by your home's equity, similar to a credit card.
• Most lenders allow you to borrow up to 85% of your home's value minus any existing mortgage balance.
• HELOCs have two phases: the draw period (usually 5-10 years) where you make interest-only payments, and the repayment period (usually 10-20 years) where you pay principal + interest.
• We calculate your available equity, then estimate monthly payments for both periods based on your inputs.
• Interest rates are typically variable in real HELOCs, but this calculator uses a fixed rate for simplicity.

Draw Period vs. Repayment Period

Draw Period (Years 1-10)

During the draw period, you can withdraw funds up to your credit limit as needed. Most HELOCs only require interest-only payments during this phase, which keeps monthly payments relatively low. You can typically borrow, repay, and borrow again as long as you stay within your credit limit. This flexibility makes HELOCs popular for ongoing projects or expenses like home renovations or college tuition.

Repayment Period (Years 11-30)

Once the draw period ends, the repayment period begins. During this phase, you can no longer withdraw funds, and your payments increase significantly because you must now pay back both principal and interest. The outstanding balance is amortized over the repayment period, typically 10 to 20 years, similar to a traditional mortgage. This transition can cause payment shock if you're not prepared for the higher monthly obligations.

Key Differences

• •Draw period: Interest-only payments, can borrow and repay repeatedly, lower monthly payments
• •Repayment period: Principal + interest payments, no more borrowing allowed, higher monthly payments
• •Planning: Budget for the payment increase when transitioning from draw to repayment period

Frequently Asked Questions

What is the maximum loan-to-value ratio for a HELOC?

Most lenders allow up to 85% combined loan-to-value (CLTV) ratio for primary residences. This means your total debt (existing mortgage plus HELOC) cannot exceed 85% of your home's appraised value. Some lenders may offer up to 90% for borrowers with excellent credit, while others cap at 80%. The exact limit depends on your credit score, income, debt-to-income ratio, and the lender's requirements.

Are HELOC interest rates fixed or variable?

Most HELOCs have variable interest rates that change with the prime rate, typically monthly or quarterly. This means your monthly payment can fluctuate over time as interest rates change. Some lenders offer the option to convert a portion of your balance to a fixed rate for a fee. Our calculator assumes a fixed rate for simplicity, but remember that your actual HELOC rate will likely vary throughout the loan term.

Can I pay off my HELOC early?

Yes, most HELOCs allow early payoff without penalties, but it's important to check your specific loan terms. Some lenders may charge an early closure fee if you pay off and close the line within the first 2-3 years. You can typically make extra payments toward principal at any time to reduce your balance and save on interest charges.

What's the difference between a HELOC and a home equity loan?

A HELOC is a revolving line of credit that works like a credit card - you can borrow, repay, and borrow again during the draw period. A home equity loan (sometimes called a second mortgage) is a lump sum loan with fixed monthly payments from day one. HELOCs offer more flexibility and lower initial payments but have variable rates. Home equity loans provide predictable fixed payments and rates but less flexibility. Choose based on whether you need ongoing access to funds (HELOC) or a one-time lump sum (home equity loan).

Tips for using a HELOC wisely

• Shop around for rates. Compare offers from multiple lenders, including credit unions and online banks.
• Borrow only what you need. Just because you qualify for a large credit line doesn't mean you should use it all.
• Plan for payment shock. Budget for the higher repayment period payments before the draw period ends.
• Make principal payments during the draw period. Paying more than interest-only can significantly reduce your total interest paid.
• Watch for rate changes. Most HELOCs have variable rates tied to the prime rate, so your payment can increase or decrease.
• Understand all fees. Check for annual fees, transaction fees, early closure fees, and appraisal costs.
• Use for value-adding purposes. Home improvements that increase your home's value or debt consolidation at lower rates make more sense than discretionary spending.

Assumptions

• Maximum LTV (loan-to-value) ratio is 85% of home value.
• Interest rate remains constant throughout the life of the HELOC.
• Draw period payments are interest-only on the current balance.
• Repayment period payments include both principal and interest, amortized over the repayment period.
• No additional draws or payments beyond the initial draw amount.
• No annual fees, transaction fees, or other charges are included.
• Results are rounded to cents for readability.

Glossary (all terms used)

Home Equity Line of Credit (HELOC):

A revolving line of credit secured by your home's equity. You can borrow, repay, and borrow again during the draw period.

Home Value:

The current market value of your home.

Existing Mortgage Balance:

The remaining balance on your first mortgage (or any other liens on the property).

Home Equity:

The difference between your home's value and what you owe on it. Calculated as home value minus existing mortgage balance.

LTV (Loan-to-Value Ratio):

The percentage of your home's value that you're borrowing. Most lenders cap HELOCs at 85% LTV.

CLTV (Combined Loan-to-Value Ratio):

Total debt (first mortgage + HELOC) divided by home value. Cannot exceed 85% for most lenders.

Available Equity:

The maximum amount you can borrow. Calculated as (home value × 85%) - existing mortgage balance.

Credit Line:

The maximum amount you can borrow from the HELOC. Must not exceed available equity.

APR (Annual Percentage Rate):

The yearly interest rate charged on your HELOC balance. Most HELOCs have variable APRs tied to the prime rate.

Draw Period:

The phase (typically 5-10 years) when you can borrow from your credit line and usually make interest-only payments.

Repayment Period:

The phase (typically 10-20 years) when you can no longer borrow and must repay both principal and interest.

Interest-Only Payment:

A payment that covers only the interest charges, not the principal balance. Common during the draw period.

Principal Payment:

The portion of your payment that reduces the loan balance. Required during the repayment period.

Initial Draw Amount:

The amount you borrow immediately when opening the HELOC. Used to calculate your estimated payments.

Variable Interest Rate:

An interest rate that changes over time based on an index (usually the prime rate). Most HELOCs have variable rates.

Prime Rate:

The interest rate banks charge their most creditworthy customers. HELOC rates are typically prime rate plus a margin.

Home Equity Loan:

A different product from a HELOC. Provides a lump sum with fixed payments from day one (also called a second mortgage).

Second Mortgage:

Another term for a home equity loan. A fixed-rate, fixed-payment loan secured by your home equity.