Using the Home Equity Line Payment Calculator
Navigating a Home Equity Line of Credit (HELOC) can be complex because your payments often change over time. Our home equity line payment calculator is designed to provide clarity by estimating your monthly obligations during both the draw period and the repayment period. Whether you are currently using your line of credit or planning for the future, this tool helps you visualize how interest rates and balances impact your monthly budget.
To get the most accurate results, you should know your current balance, your current variable interest rate, and the length of your repayment term. Keep in mind that most HELOCs have variable rates, meaning your payment could change if market indices move.
- Current HELOC Balance
- This is the total amount you have currently drawn from your line of credit. If you haven't used the line yet, enter the amount you plan to borrow.
- Interest Rate (APR)
- The annual percentage rate charged by your lender. Since HELOCs are typically variable-rate products, use your current rate or a slightly higher one to see a "worst-case" scenario.
- Repayment Term
- The number of years you have to pay back the principal. Standard repayment terms are often 10 or 20 years after the draw period ends.
How It Works: HELOC Math Explained
A HELOC typically consists of two distinct phases: the Draw Period and the Repayment Period. The home equity line payment calculator switches formulas based on which phase you are in.
1. The Draw Period (Interest-Only)
During the initial 5 to 10 years, most lenders only require you to pay the interest on what you've borrowed. The formula is straightforward:
Monthly Payment = (Balance × Annual Interest Rate) / 12
2. The Repayment Period (Amortized)
Once the draw period ends, you can no longer take money out, and you must begin paying back both the principal and the interest. This uses the standard amortization formula:
Payment = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- P: Principal balance
- i: Monthly interest rate (Annual Rate / 12)
- n: Total number of months in the repayment term
Calculation Example
Scenario: Imagine you have a $30,000 balance on your HELOC with an 8% interest rate, and you are entering a 20-year repayment phase.
Step-by-step solution:
- Current Balance = $30,000
- Annual Interest Rate = 8% (0.08)
- Monthly Rate (i) = 0.08 / 12 = 0.006667
- Repayment Term = 20 Years (240 months)
- Calculate: $30,000 [ 0.006667(1 + 0.006667)^240 ] / [ (1 + 0.006667)^240 – 1 ]
- Monthly Payment = $250.93
Common HELOC Questions
Can my HELOC payment change?
Yes, most HELOCs have variable interest rates tied to an index like the Prime Rate. If the index increases, your interest rate and monthly payment will also increase. Using a home equity line payment calculator with different interest rate assumptions can help you prepare for potential rate hikes.
What happens at the end of the draw period?
When the draw period ends, you enter the repayment phase. Your payment will likely increase significantly because you are now paying back the principal balance in addition to the interest. This "payment shock" is why it is critical to calculate your future repayment obligations early.
Is interest on a HELOC tax-deductible?
Under current IRS rules, HELOC interest is generally only deductible if the funds are used to "buy, build, or substantially improve" the home that secures the loan. Always consult with a tax professional regarding your specific situation.