HELOC Payment & Equity Calculator
Your HELOC Summary
Total Available Credit Line: $0
Estimated Interest-Only Monthly Payment: $0
*Calculations are based on the Draw Period. Payments will increase significantly during the Repayment Period when principal is included.
Understanding Your HELOC Calculation
A Home Equity Line of Credit (HELOC) functions much like a credit card secured by your home's equity. Unlike a traditional home equity loan that provides a lump sum, a HELOC allows you to borrow as needed during a set timeframe known as the "Draw Period."
How Available Credit is Determined
Lenders typically use a Loan-to-Value (LTV) ratio—often 80% to 85%—to determine your borrowing limit. The formula is:
(Home Value × LTV %) – Current Mortgage Balance = Maximum Credit Line
For example, if your home is worth $500,000 and the lender allows an 80% LTV, your total allowed debt is $400,000. If you still owe $300,000 on your first mortgage, your HELOC limit would be $100,000.
Interest-Only vs. Principal Payments
Most HELOCs feature a 10-year draw period where you are only required to pay interest on the amount you actually spend. This keeps monthly costs low during the initial years. However, once the draw period ends, you enter the repayment period (usually 15-20 years), during which you must pay back both the principal and interest.
Key Factors to Consider
- Variable Rates: HELOC interest rates are usually variable, meaning your monthly payment could increase if market rates rise.
- Closing Costs: Similar to a mortgage, HELOCs may have appraisal fees, application fees, and annual maintenance fees.
- Tax Deductibility: Interest may be tax-deductible if the funds are used to substantially improve the home that secures the loan, but you should always consult a tax professional.