HELOC Calculator
See how large a credit line your equity supports, what the interest-only payment is during the draw period, and what the payment jumps to when repayment begins.
Your details
How a home equity line of credit works
A HELOC is a revolving credit line secured against your home, in the same way a credit card is secured against your promise to pay. You are approved for a limit, you draw what you need when you need it, and you pay interest only on what you have actually drawn. That is the main advantage over a home equity loan, which hands you a lump sum and starts charging interest on the whole amount immediately.
The structure matters more than most borrowers realise, because a HELOC has two distinct phases. During the draw period, which commonly runs ten years, most lenders require interest only. Then the draw period ends, you can no longer take money out, and whatever is outstanding is amortised over the repayment period. On a fifty thousand dollar balance at 8.5 percent, that means the payment goes from 354 dollars a month to 434 dollars. Borrowers who spent the draw period paying interest only are frequently surprised by that step up.
How much you can borrow is set by the combined loan-to-value ratio. Lenders add your first mortgage to the credit line and cap the total, usually at 80 or 85 percent of the appraised value. On a five hundred thousand dollar home with a two hundred and fifty thousand dollar mortgage at an 85 percent cap, the ceiling is 425,000 dollars, leaving a 175,000 dollar line. The equity you feel you have is 250,000 dollars, so the gap between the two figures is worth understanding before you plan a renovation around it.
The rates are usually variable and tied to the prime rate, which means your payment can rise. That is a different risk from a fixed home equity loan, and it is the reason a HELOC suits short-term borrowing you intend to clear rather than a long-term debt you intend to carry. Drawing against your home also puts the home at risk if you cannot repay, which is why lenders price it more cheaply than unsecured credit.
How the figures are calculated
Available credit is what remains beneath the combined loan-to-value ceiling. The payments come from the standard amortisation formula applied to each phase separately.
| Symbol | Meaning |
|---|---|
Value |
The appraised value of the home |
maxLTV |
The lender's cap on total borrowing as a percentage of value |
Mortgage |
What is still owed on the first mortgage |
i |
Monthly interest rate: the annual HELOC rate divided by 12 |
Drawn |
The amount you have actually taken from the line |
The draw period payment assumes interest only, which is what most lenders require. The repayment payment is the full amortising payment for the outstanding balance over the repayment period, which is why it is higher.
Worked example: 500,000 dollar home with a 250,000 dollar mortgage
An 85 percent combined cap at 8.5 percent, drawing 50,000 dollars over a 10-year draw period with a 20-year repayment period.
| Figure | Result |
|---|---|
| Maximum total debt allowed | $425,000.00 |
| Remaining mortgage balance | $250,000.00 |
| Credit line available | $175,000.00 |
| Total home equity | $250,000.00 |
| Amount drawn | $50,000.00 |
| Draw period payment (interest only) | $354.17 |
| Repayment period payment | $433.91 |
| Payment increase at the end of the draw | $79.74 |
| Interest during 10-year draw period | $42,500.00 |
| Interest during 20-year repayment | $54,138.79 |
| Total interest over the life of the line | $96,638.79 |
The 354 dollar draw payment is interest only, so after ten years of paying it you still owe the full 50,000 dollars. Then the payment rises to 434 dollars and finally starts reducing the balance. Over the full thirty years you pay 96,639 dollars of interest to borrow 50,000, which is the real cost of a line you never pay down during the draw period.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Borrowing against your home without losing it
Plan for the payment step-up from day one
The interest-only draw payment is not the real cost of the borrowing. Work out the repayment payment before you draw, and make sure you could afford it, because that is what you will owe when the draw period ends. Borrowers who only check the draw payment are the ones who struggle.
Pay principal during the draw period if you can
Nothing stops you reducing the balance while the draw period is running. Every dollar of principal you repay early is a dollar that never gets amortised over twenty years at a variable rate, and it lowers the repayment payment you eventually face.
Understand that the rate can move
Most HELOCs are priced at prime plus a margin and adjust with it. On a 50,000 dollar balance, a two point rise adds about 83 dollars a month. If your budget cannot absorb that, a fixed-rate home equity loan may be the safer structure even at a slightly higher starting rate.
Compare against the alternatives honestly
A HELOC is cheap because it is secured on your home, not because it is cheap in absolute terms. Before drawing at 8.5 percent, check whether a 0 percent balance transfer or a personal loan would cover the same need without putting your home at risk. For a small, short-term need, it often would.
Email me the schedule
We will send the results once. No account, no marketing list, unsubscribe any time.
Frequently asked questions
How much can I borrow with a HELOC?
It depends on your home's value, what you still owe on the first mortgage, and the lender's combined loan-to-value cap. At an 85 percent cap on a 500,000 dollar home with a 250,000 dollar mortgage, the ceiling is 425,000 dollars, so the line could be 175,000 dollars. Many lenders cap at 80 percent instead, which would reduce that to 150,000 dollars.
Why is my payment so much higher after the draw period?
Because the draw period payment is usually interest only, so the balance never falls. When the draw period ends, the whole outstanding balance is amortised over the repayment period, which means you start repaying principal as well as interest. On a 50,000 dollar balance that is the difference between about 354 and 434 dollars a month.
Is a HELOC better than a home equity loan?
A HELOC suits borrowing you will draw gradually and repay quickly, because you pay interest only on what you use. A home equity loan gives you a fixed rate and a fixed payment, which is better for a single known expense you will repay over years. If the rate matters more than flexibility, take the fixed loan.
Can the lender reduce or close my line?
Yes. Most agreements let the lender freeze or reduce a line if your home value falls, your credit worsens, or broader market conditions change. This happened widely in 2008. Treat the available credit as something that could be withdrawn rather than as guaranteed money.
What happens if I cannot repay a HELOC?
The line is secured on your home, so a default can lead to foreclosure, exactly as with a first mortgage. This is the crucial difference from credit card debt, which is unsecured. Borrow only against your home for something you are confident you can repay.