HELOC Payment Calculator
Estimate your monthly interest-only or principal + interest payments.
How a HELOC Payment is Calculated
A Home Equity Line of Credit (HELOC) is a flexible revolving loan that works differently than a standard mortgage. Understanding your payments depends on which phase of the loan you are in: the Draw Period or the Repayment Period.
1. The Draw Period (Interest-Only)
During the initial draw period (usually 5 to 10 years), many lenders only require you to pay the interest on the amount you have actually borrowed. The formula for an interest-only HELOC payment is:
(Balance × Annual Interest Rate) / 12 months = Monthly Payment
Example: If you have a $50,000 balance at an 8.5% interest rate, your monthly interest-only payment would be approximately $354.17.
2. The Repayment Period (Principal + Interest)
Once the draw period ends, you enter the repayment period (usually 10 to 20 years). During this stage, you can no longer withdraw funds, and you must pay back the principal plus interest. This is calculated using a standard amortization formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M: Total monthly payment
- P: Principal balance
- i: Monthly interest rate (Annual Rate / 12)
- n: Total number of months in the repayment term
Variable vs. Fixed Rates
Most HELOCs feature variable interest rates tied to an index, such as the U.S. Prime Rate. This means your payment can fluctuate monthly even if your balance stays the same. Some lenders offer "Fixed-Rate Loan Options" (FRLO) that allow you to lock in a portion of your balance at a fixed rate to provide payment stability.
Key Factors Influencing Your HELOC Costs
- Credit Score: Higher scores typically secure lower margins over the Prime Rate.
- LTV (Loan-to-Value) Ratio: Borrowing a smaller percentage of your home's equity often results in better rates.
- Prime Rate Changes: If the Federal Reserve adjusts interest rates, your HELOC payment will likely follow suit shortly after.