Interest-Only (Draw Period)
Principal + Interest (Repayment Period)
How a HELOC Payment is Calculated
A Home Equity Line of Credit (HELOC) is a revolving line of credit that uses your home as collateral. Unlike a traditional home equity loan, HELOC payments typically change based on your current balance and fluctuating interest rates. Understanding how these payments are structured is crucial for long-term financial planning.
The Draw Period: During the initial phase (usually 5 to 10 years), most HELOCs require only interest payments. You can borrow, repay, and borrow again during this time.
The Repayment Period: Once the draw period ends, you can no longer withdraw funds. You must pay back the remaining balance plus interest over a fixed term, typically 10 to 20 years. This results in significantly higher monthly payments because you are now paying down the principal.
Realistic Example:
Imagine you have a $50,000 balance on your HELOC with an 8.5% APR.
Interest-Only Payment: ($50,000 x 0.085) / 12 = $354.17 per month.
Repayment Phase (20 Years): Using standard amortization, your payment would jump to approximately $433.91 per month to clear the debt.
Factors That Influence Your HELOC Payment
Variable Interest Rates: Most HELOCs are tied to the Prime Rate. If the Federal Reserve raises rates, your HELOC payment will likely increase immediately.
Credit Limit vs. Balance: You only pay interest on the amount you have actually spent, not the entire credit limit.
Balloon Payments: Some HELOC structures require a large "balloon" payment at the end of the term. Always check your loan agreement for these terms.
// Toggle the visibility of repayment term based on selection
document.getElementById('paymentType').onchange = function() {
var termDiv = document.getElementById('repaymentTerms');
if (this.value === 'repayment') {
termDiv.style.display = 'block';
} else {
termDiv.style.display = 'none';
}
};
function calculateHELOC() {
var balance = parseFloat(document.getElementById('helocBalance').value);
var annualRate = parseFloat(document.getElementById('helocRate').value);
var paymentType = document.getElementById('paymentType').value;
var resultDiv = document.getElementById('heloc-result');
var resultText = document.getElementById('resultText');
// Validation
if (isNaN(balance) || balance <= 0) {
alert("Please enter a valid balance amount.");
return;
}
if (isNaN(annualRate) || annualRate <= 0) {
alert("Please enter a valid interest rate.");
return;
}
var monthlyRate = (annualRate / 100) / 12;
var monthlyPayment = 0;
if (paymentType === 'interestOnly') {
// Formula: Balance * Monthly Interest Rate
monthlyPayment = balance * monthlyRate;
resultDiv.style.display = 'block';
resultText.innerHTML = "Estimated Monthly Payment:$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "This is an interest-only payment during your draw period.";
} else {
var years = parseInt(document.getElementById('repaymentYears').value);
if (isNaN(years) || years <= 0) {
alert("Please enter a valid repayment term in years.");
return;
}
var numberOfPayments = years * 12;
// Standard Amortization Formula: P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var x = Math.pow(1 + monthlyRate, numberOfPayments);
monthlyPayment = (balance * x * monthlyRate) / (x – 1);
resultDiv.style.display = 'block';
resultText.innerHTML = "Estimated Monthly Payment:$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "This includes both Principal and Interest for a " + years + "-year repayment term.";
}
// Scroll to result for mobile users
resultDiv.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}