HELOC Payment & Limit Calculator
*Note: This calculation assumes an interest-only payment during the draw period. Principal repayment will increase monthly costs during the repayment period.
How a HELOC Works
A Home Equity Line of Credit (HELOC) is a revolving line of credit, similar to a credit card, but secured by your home's equity. Unlike a standard home equity loan, which provides a lump sum, a HELOC allows you to borrow as needed, pay it back, and borrow again during the "draw period."
Understanding the HELOC Calculation
Lenders determine your HELOC limit based on your Combined Loan-to-Value (CLTV) ratio. Most lenders allow a CLTV of 80% to 85% of your home's appraised value. The formula used by our calculator is:
(Home Value × CLTV %) - Existing Mortgage Balance = HELOC Limit
Draw Period vs. Repayment Period
- Draw Period: Usually 5 to 10 years. During this time, you can borrow funds and typically have the option to make interest-only payments.
- Repayment Period: Usually 10 to 20 years. You can no longer borrow money, and you must pay back both the principal and interest, which significantly increases the monthly payment.
Example HELOC Scenario
If your home is worth $400,000 and your lender allows an 85% CLTV, your total borrowing power is $340,000. If you still owe $250,000 on your primary mortgage, your maximum HELOC limit would be $90,000.
If you then "draw" $20,000 from that line at an interest rate of 8%, your interest-only monthly payment would be approximately $133.33.