HELOC Payment Calculator

How to use this calculator

1. Enter the amount you plan to borrow — not your full credit limit, unless you expect to use all of it.
2. Enter the interest rate. HELOC rates are usually quoted as the Prime Rate plus a margin, for example “Prime + 1%”.
3. Choose the draw and repayment periods from your loan offer. Ten years of draw and twenty years of repayment is the most common structure.
4. Pick the payment type. Interest-only is standard; choose principal & interest if you plan to pay the balance down from the start.
5. Stress-test. Add 1–3 percentage points to see what happens if rates rise.

How HELOC payments work

A HELOC is a revolving line of credit secured by your home. It has two phases:

• Draw period (typically 5–10 years): you can borrow, repay and borrow again up to your limit. Most lenders only require interest on what you’ve borrowed.
• Repayment period (typically 10–20 years): borrowing stops and the balance is repaid in equal monthly installments of principal and interest.

Because you only pay interest on the amount you actually draw, a HELOC can be cheaper than a lump-sum home equity loan for projects with uncertain or staged costs, such as renovations.

The repayment “payment shock”

The biggest surprise with HELOCs is the jump in payment when the draw period ends. During the draw period, an interest-only payment doesn’t reduce the balance at all, so the full amount must then be repaid over a shorter window. Many borrowers plan to refinance or sell before that happens — but if rates are higher or your home is worth less at that time, those options may not be available. Budget for the repayment payment from the start.

Worked example

Pat borrows $50,000 on a HELOC at 8.5% with a 10-year draw period and a 20-year repayment period.

Paying about $30 a month more from the beginning keeps the payment level for 30 years, avoids the jump at year 10 and saves about $8,200 in interest. Paying the balance off even faster saves far more.

Variable rates: stress-test your payment

Most HELOC rates are variable, tied to the Prime Rate, which moves with the Federal Reserve’s federal funds target. A 2-point increase on a $50,000 interest-only balance adds about $83 a month. Before borrowing, ask your lender about:

• Lifetime and periodic rate caps — the maximum the rate can reach or rise at once.
• Fixed-rate lock options that convert part of your balance to a fixed-rate installment loan.
• Introductory “teaser” rates and what the rate becomes afterward.

Fees, closing costs and taxes

• Closing costs can include an appraisal, title search and recording fees. Many lenders waive them, but may charge them back if you close the line within the first few years.
• Annual or inactivity fees are charged by some lenders — check the fee schedule.
• Tax deductibility: HELOC interest is deductible only when the funds buy, build or substantially improve the home securing the line, you itemize, and total mortgage debt stays within the $750,000 limit.
• Line freezes: federal rules allow lenders to freeze or reduce your line if your home’s value drops significantly or your finances change materially.

Formulas used

The calculator assumes the full amount is drawn at the start and the rate stays constant (plus any stress-test increase). Real HELOCs accrue interest daily on the actual balance, and draws, repayments and rate changes will alter your payments.

Frequently asked questions

Sources

• What you should know about home equity lines of credit (HELOC brochure) — Consumer Financial Protection Bureau
• Regulation Z §1026.40 — requirements for home equity plans — Consumer Financial Protection Bureau
• Publication 936, Home Mortgage Interest Deduction — Internal Revenue Service
• Selected Interest Rates (H.15) — bank prime loan rate — Board of Governors of the Federal Reserve System

Key terms

• Amortization
• Combined loan-to-value (CLTV)
• Draw period
• HELOC (home equity line of credit)
• Prime rate
• Repayment period