HELOC Calculator

What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by the equity in your home. Unlike a traditional home equity loan that provides a lump sum, a HELOC works like a credit card — you borrow what you need, when you need it, up to your approved credit limit.

HELOCs have two distinct phases that affect your payments:

• Draw Period (5–10 years): You can borrow funds and typically make interest-only payments. This is the flexibility phase.
• Repayment Period (10–20 years): You can no longer borrow. You pay back both principal and interest, which usually means significantly higher monthly payments.

How the HELOC Calculator Works

1. Enter your property details — home value and current mortgage balance — to determine your available equity.
2. Set the HELOC amount you want to borrow, along with the offered interest rate.
3. Choose your terms — draw period length, repayment period length, and whether you want interest-only or full P&I payments during the draw period.
4. Review the results — see payment amounts for each phase, total interest cost, equity breakdown, and the full amortization schedule.

Understanding Your Results

Draw Period Payment

If you choose interest-only payments during the draw period, your payment is simply the monthly interest on the outstanding balance. This gives you the lowest possible payment but means you are not reducing your principal. If you choose full P&I, your payment is amortized over the entire loan term (draw + repayment), which costs more monthly but saves significantly on total interest.

Payment Shock

When the draw period ends and the repayment period begins, interest-only borrowers experience a payment shock — their monthly payment can increase by 50% to 200% or more. This calculator clearly shows this transition so you can plan ahead.

Combined Loan-to-Value (CLTV)

The CLTV ratio measures total borrowing against your home value. Most lenders require CLTV to stay at or below 85%. For example, a $400,000 home with a $200,000 mortgage can support a maximum HELOC of $140,000 (85% × $400,000 − $200,000).

HELOC vs. Home Equity Loan

Tips for Managing a HELOC

• Budget for the repayment phase: Calculate what your payments will be after the draw period ends and make sure you can afford the increase.
• Pay principal during the draw period: Even if your lender allows interest-only payments, making principal payments reduces your total interest cost dramatically.
• Monitor your rate: HELOC rates are typically variable and tied to the prime rate. Set alerts for rate changes that affect your payment.
• Keep an equity cushion: Do not max out your borrowing capacity. Maintaining equity protects you if home values decline.
• Consider rate caps: Check if your HELOC has a lifetime rate cap, which limits how high your rate can go.
• Have an exit strategy: Know whether you plan to pay off, refinance, or convert your HELOC before the repayment period hits.

When Is a HELOC a Good Idea?

• Home renovations that increase property value (potential tax-deductible interest)
• Debt consolidation when replacing high-interest credit card debt with lower HELOC rates
• Emergency fund backup for unexpected large expenses
• Education expenses when federal student loans are insufficient
• Business investment when the expected return exceeds the HELOC cost

Frequently Asked Questions

What is a HELOC and how does it work?

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home equity. It has two phases: a draw period (typically 5–10 years) where you can borrow and often pay interest only, and a repayment period (10–20 years) where you pay back principal plus interest. The interest rate is usually variable.

How much can I borrow with a HELOC?

Most lenders allow a combined loan-to-value (CLTV) ratio up to 85%. This means your existing mortgage plus HELOC cannot exceed 85% of your home value. For example, if your home is worth $400,000 and you owe $200,000, your maximum HELOC would be $140,000 ($400,000 × 85% − $200,000).

What happens when the HELOC draw period ends?

When the draw period ends, you enter the repayment period. You can no longer borrow additional funds, and your payments typically increase significantly because you must now pay both principal and interest. This payment increase is often called "payment shock" and can catch borrowers off guard.

Is HELOC interest tax deductible?

HELOC interest may be tax deductible if the funds are used to buy, build, or substantially improve the home that secures the loan. Under current tax law, the total mortgage debt (including HELOC) must not exceed $750,000 for the deduction to apply. Consult a tax professional for your specific situation.

What is the difference between a HELOC and a home equity loan?

A HELOC is a revolving line of credit with variable rates and flexible withdrawals during the draw period. A home equity loan provides a lump sum with a fixed interest rate and fixed monthly payments from the start. HELOCs offer more flexibility, while home equity loans offer more predictability.