A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home's equity. It allows you to borrow funds as needed up to a certain limit, similar to a credit card. HELOCs typically have two phases: a draw period and a repayment (amortization) period.
Draw Period
During the draw period, which usually lasts for several years, you can borrow money from your HELOC. Many HELOCs allow you to make interest-only payments during this phase, which can lower your monthly outgoings. However, interest-only payments do not reduce the principal balance, meaning you'll owe the full amount borrowed at the end of the draw period.
Repayment (Amortization) Period
Once the draw period ends, the repayment period begins. During this phase, you can no longer draw funds. You will be required to make regular principal and interest (P&I) payments that will gradually pay down the outstanding balance of your HELOC over a set term. This is the amortization phase, and this calculator helps you estimate your minimum monthly payment during this period.
How the HELOC Amortization Calculator Works
This calculator estimates your monthly principal and interest (P&I) payment based on the loan amount, the annual interest rate, and the loan term in months. The formula used is a standard loan amortization formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
M = Your total monthly mortgage payment (Principal & Interest)
P = The principal loan amount (the amount you borrowed)
i = Your monthly interest rate (your annual interest rate divided by 12)
n = The total number of payments over the loan's lifetime (your loan term in months)
For example, if you have a HELOC with a remaining balance of $50,000, an annual interest rate of 4.5%, and a repayment term of 120 months (10 years):
The monthly interest rate (i) would be 4.5% / 12 = 0.045 / 12 = 0.00375
The number of payments (n) is 120
The principal (P) is $50,000
Plugging these into the formula, the estimated monthly P&I payment would be approximately $505.36.
Key Considerations for HELOCs:
Variable Interest Rates: Most HELOCs have variable interest rates tied to a benchmark rate (like the prime rate). This means your interest rate and monthly payments can change over time, especially during the draw period and potentially even in the repayment period depending on the terms.
Interest-Only Payments: During the draw period, you might have the option to make interest-only payments. While this reduces immediate cash flow needs, it means you're not paying down the principal, and your payments will significantly increase when the repayment period begins.
Risk: A HELOC is secured by your home. If you default on your payments, your lender could foreclose on your home.
Fees: Be aware of any origination fees, annual fees, or other costs associated with opening and maintaining your HELOC.
Use this calculator to get an estimate of your potential monthly payments during the repayment phase of your HELOC. It's crucial to understand the full terms and conditions of your specific HELOC agreement with your lender.
This calculator provides an estimate for educational purposes only. It does not account for all possible fees, taxes, or specific lender terms. Consult with your financial institution for exact figures.
function calculateHELOCAmortization() {
var principal = parseFloat(document.getElementById("helocAmount").value);
var annualRate = parseFloat(document.getElementById("annualInterestRate").value);
var termMonths = parseInt(document.getElementById("loanTermMonths").value);
var monthlyPaymentResultElement = document.getElementById("monthlyPaymentResult");
// Input validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid HELOC amount greater than zero.");
monthlyPaymentResultElement.innerText = "$0.00";
return;
}
if (isNaN(annualRate) || annualRate <= 0) {
alert("Please enter a valid annual interest rate greater than zero.");
monthlyPaymentResultElement.innerText = "$0.00";
return;
}
if (isNaN(termMonths) || termMonths <= 0) {
alert("Please enter a valid loan term in months greater than zero.");
monthlyPaymentResultElement.innerText = "$0.00";
return;
}
var monthlyRate = annualRate / 100 / 12;
var n = termMonths;
var P = principal;
var monthlyPayment;
// Handle case where monthlyRate is 0 to avoid division by zero in formula
if (monthlyRate === 0) {
monthlyPayment = P / n;
} else {
monthlyPayment = P * (monthlyRate * Math.pow(1 + monthlyRate, n)) / (Math.pow(1 + monthlyRate, n) – 1);
}
// Format the result to two decimal places
monthlyPaymentResultElement.innerText = "$" + monthlyPayment.toFixed(2);
}