A Home Equity Line of Credit (HELOC) is a revolving credit facility, similar to a credit card, that allows homeowners to borrow against the equity they've built in their home. Unlike a home equity loan, which provides a lump sum, a HELOC offers a draw period during which you can borrow funds up to a set limit. Following the draw period, a repayment period begins where you must repay the outstanding balance, plus interest. This calculator focuses on the amortization of the outstanding balance during the repayment period.
How HELOC Amortization Works
During the draw period of a HELOC, you typically only pay the interest on the amount you've borrowed. Some HELOCs may require a minimum principal payment during this phase, but it's not always the case. This calculator assumes you are entering the repayment period, where you pay down both the principal and the interest.
The calculation for the monthly payment during the repayment period of a HELOC is similar to that of a traditional mortgage or loan. It's calculated using the following formula:
P = The principal loan amount (the outstanding balance of your HELOC).
i = Your monthly interest rate. This is your annual interest rate divided by 12. (e.g., 7.5% annual rate becomes 0.075 / 12 = 0.00625 monthly).
n = The total number of payments over the loan term. This is the loan term in years multiplied by 12. (e.g., a 10-year term becomes 10 * 12 = 120 payments).
Once the monthly payment is determined, each payment consists of an interest portion and a principal portion. Initially, a larger part of your payment goes towards interest, and as you progress through the repayment period, more of your payment is applied to reducing the principal balance.
Key Terms Explained:
HELOC Draw Amount: The current outstanding balance you wish to amortize over the repayment period.
Annual Interest Rate: The yearly rate charged on the outstanding balance. HELOC rates are often variable, meaning they can change over time. This calculator uses a fixed rate for the calculation.
Loan Term: The duration, in years, over which you will repay the outstanding balance.
Monthly Payment: The fixed amount you'll pay each month during the repayment period to cover both principal and interest.
Total Paid Over Term: The sum of all monthly payments made over the entire loan term.
Total Interest Paid: The total amount of interest you will pay over the life of the loan term.
When to Use This Calculator
This calculator is useful when:
You are nearing the end of your HELOC's draw period and want to understand your repayment obligations.
You've drawn a specific amount from your HELOC and want to estimate the monthly payments and total cost if you were to amortize that amount over a set term.
You are comparing different repayment strategies or terms for your HELOC.
Remember that HELOC interest rates are often variable. The results from this calculator are an estimate based on the provided fixed annual interest rate.
function calculateAmortization() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
var monthlyPaymentSpan = document.getElementById("monthlyPayment");
var totalPaidSpan = document.getElementById("totalPaid");
var totalInterestSpan = document.getElementById("totalInterest");
if (isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(loanTermYears) || loanTermYears 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// If interest rate is 0, payment is just principal divided by number of payments
monthlyPayment = loanAmount / numberOfPayments;
}
var totalPaid = monthlyPayment * numberOfPayments;
var totalInterest = totalPaid – loanAmount;
// Format to two decimal places for currency
monthlyPaymentSpan.textContent = "$" + monthlyPayment.toFixed(2);
totalPaidSpan.textContent = "$" + totalPaid.toFixed(2);
totalInterestSpan.textContent = "$" + totalInterest.toFixed(2);
resultDiv.style.display = 'block';
}