Calculate borrowing power and variable interest-only payments
Current market value of the property
Total balance of first mortgage
Loan-to-Value limit (usually 80-90%)
Amount you plan to use immediately
The index rate (e.g., WSJ Prime)
Spread added by lender (+/-)
Maximum HELOC Limit:–
Available to Borrow (after Draw):–
Initial Interest Rate (Variable):–
Monthly Interest-Only Payment (Start):–
Variable Rate Risk Analysis: See how your monthly interest-only payments change if the Prime Rate increases.
Scenario
New Rate
Monthly Payment
Difference
Understanding Variable Rate HELOCs
A Variable Rate Home Equity Line of Credit (HELOC) is a revolving credit line secured by the equity in your home. Unlike a fixed-rate home equity loan, the interest rate on a HELOC fluctuates based on market conditions. This calculator helps homeowners estimate their borrowing capacity and understand the volatility of future payments.
The Mathematics of Variable Rates
The interest rate on a HELOC is derived from two primary components:
The Index (Prime Rate): This is the variable component. It is usually tied to the Wall Street Journal (WSJ) Prime Rate, which moves in correlation with the Federal Reserve's Federal Funds Rate.
The Margin: This is the fixed component determined by your lender based on your credit score (FICO) and Loan-to-Value (LTV) ratio. The margin stays constant for the life of the loan.
The formula for your rate is: Rate = Index + Margin.
Draw Period vs. Repayment Period
Variable rate HELOCs typically operate in two phases:
Draw Period (Usually 10 Years): During this time, you can borrow funds up to your limit. Payments are often "Interest-Only," meaning you only pay interest on the amount withdrawn, not the principal.
Repayment Period (Usually 20 Years): After the draw period ends, the line freezes. You must pay back the principal plus interest. This often results in a significant payment shock (higher monthly payments) as the amortization schedule kicks in.
Why Use a Variable Rate Calculator?
Because the Prime Rate can change, your monthly payment is not static. A small increase in the Federal Reserve rate can increase your monthly financial obligation immediately. This tool provides a sensitivity analysis, showing what your "Interest-Only" payments would look like if rates rise by 1%, 2%, or 3%, helping you stress-test your budget before borrowing.
Calculating Equity Availability
Lenders do not allow you to access 100% of your home's equity. They cap the Combined Loan-to-Value (CLTV) ratio, typically at 80% to 90%. The calculation for your credit limit is:
(Appraised Value × Max LTV%) - Existing Mortgage Balance = Available HELOC Limit
function calculateVariableHeloc() {
// 1. Get Inputs using var
var homeValueInput = document.getElementById('homeValue');
var mortgageBalanceInput = document.getElementById('mortgageBalance');
var ltvLimitInput = document.getElementById('ltvLimit');
var drawAmountInput = document.getElementById('drawAmount');
var primeRateInput = document.getElementById('primeRate');
var marginInput = document.getElementById('margin');
// 2. Parse values
var homeValue = parseFloat(homeValueInput.value) || 0;
var mortgageBalance = parseFloat(mortgageBalanceInput.value) || 0;
var ltvLimit = parseFloat(ltvLimitInput.value) || 0;
var drawAmount = parseFloat(drawAmountInput.value) || 0;
var primeRate = parseFloat(primeRateInput.value) || 0;
var margin = parseFloat(marginInput.value) || 0;
// 3. Logic: Calculate Maximum Line Amount
// Formula: (Home Value * LTV%) – Mortgage Balance
var maxLTVDecimal = ltvLimit / 100;
var maxPotentialLending = homeValue * maxLTVDecimal;
var maxHelocLimit = maxPotentialLending – mortgageBalance;
// Edge case: Negative limit (underwater or not enough equity)
if (maxHelocLimit < 0) {
maxHelocLimit = 0;
}
// Logic: Calculate Actual Available after Draw
var remainingAvailable = maxHelocLimit – drawAmount;
if (remainingAvailable maxHelocLimit) {
effectiveDraw = maxHelocLimit;
}
// 4. Logic: Calculate Variable Rates and Payments
var initialRate = primeRate + margin;
// Monthly Interest Only Payment = (Principal * AnnualRate) / 12
var monthlyRateDecimal = (initialRate / 100) / 12;
var monthlyPayment = effectiveDraw * monthlyRateDecimal;
// 5. Display Main Results
var resultSection = document.getElementById('resultSection');
var resMaxLimit = document.getElementById('resMaxLimit');
var resAvailable = document.getElementById('resAvailable');
var resInitialRate = document.getElementById('resInitialRate');
var resMonthlyPayment = document.getElementById('resMonthlyPayment');
// Helper for currency formatting
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
var currencyWithCents = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2,
});
resMaxLimit.innerText = formatter.format(maxHelocLimit);
resAvailable.innerText = formatter.format(remainingAvailable);
resInitialRate.innerText = initialRate.toFixed(2) + "%";
resMonthlyPayment.innerText = currencyWithCents.format(monthlyPayment);
// 6. Logic: Sensitivity Analysis (Stress Test)
// We will calculate payment for Rate, Rate+1%, Rate+2%, Rate+3%
var sensitivityBody = document.getElementById('sensitivityBody');
sensitivityBody.innerHTML = ""; // Clear previous
var scenarios = [
{ label: "Current Rate", rateAdd: 0 },
{ label: "Rate + 1%", rateAdd: 1 },
{ label: "Rate + 2%", rateAdd: 2 },
{ label: "Rate + 3%", rateAdd: 3 }
];
for (var i = 0; i < scenarios.length; i++) {
var s = scenarios[i];
var scenarioRate = initialRate + s.rateAdd;
var scenarioMonthlyPayment = effectiveDraw * ((scenarioRate / 100) / 12);
var diff = scenarioMonthlyPayment – monthlyPayment;
var diffText = (s.rateAdd === 0) ? "-" : "+" + currencyWithCents.format(diff);
var rowColor = (s.rateAdd === 0) ? "#e8f6f3" : "#fff";
var rowHtml = "