HELOC Payment Calculator
Estimate your Home Equity Line of Credit limit and monthly interest-only payments.
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Available Equity:
Max HELOC Credit Line:
Monthly Interest-Only Payment:
Annual Interest Cost:
Understanding Your HELOC Payments
A Home Equity Line of Credit (HELOC) works differently than a standard home equity loan. It is a revolving line of credit, similar to a credit card, but secured by your home's equity. During the initial "draw period" (usually 10 years), most lenders only require you to pay the interest on the amount you have actually borrowed.
How the Calculation Works
To determine your HELOC potential, lenders use the Combined Loan-to-Value (CLTV) ratio. The formula is:
(Home Value × Max CLTV %) – Current Mortgage Balance = Your HELOC Limit
Realistic Example:
Suppose your home is worth $450,000 and you owe $250,000 on your primary mortgage. If a lender allows an 80% CLTV:
1. 80% of $450,000 = $360,000
2. $360,000 – $250,000 = $110,000 Credit Line
At an 8.5% interest rate, your monthly interest-only payment would be approximately $779.17.
Suppose your home is worth $450,000 and you owe $250,000 on your primary mortgage. If a lender allows an 80% CLTV:
1. 80% of $450,000 = $360,000
2. $360,000 – $250,000 = $110,000 Credit Line
At an 8.5% interest rate, your monthly interest-only payment would be approximately $779.17.
Key Factors Influencing Your HELOC
- CLTV Ratio: Most lenders cap the CLTV at 80% to 85%, though some go higher for borrowers with excellent credit scores.
- Variable Rates: Unlike fixed-rate loans, HELOC rates are usually tied to the Prime Rate. This means your monthly payment can change as market interest rates fluctuate.
- Draw Period vs. Repayment Period: After the draw period ends (typically 10 years), you enter the repayment period (often 20 years), where you must pay back both principal and interest, significantly increasing your monthly payment.
Why Use a HELOC?
Homeowners often use HELOCs for high-impact home renovations, debt consolidation, or emergency expenses because the interest rates are generally lower than credit cards or personal loans. However, because your home is collateral, it is vital to manage the debt responsibly.