HELOC Calculator
Your details
Result
Payment during draw period
- Payment once repayment starts
- $852
- Payment increase
- $165 more a month (1.2× higher)
- Credit available to you
- $125,000
- Equity in the home
- $200,000
- Current loan-to-value
- 60.00%
- Interest paid during draw
- $82,500
- Total interest over both periods
- $186,996
- When the draw period ends after 10 years, the payment rises from $688 to $852 — 1.2× higher. Nothing comes off the principal during the draw period, so the full $100,000 still has to be repaid over 20 years. This is the single most important thing to understand about a HELOC, and it is where borrowers get caught.
- HELOC rates are variable, tied to the prime rate plus a margin. The payments above assume today's rate holds for 30 years, which it will not — a two-point rise would take the draw payment on this balance up by a quarter.
Payments by amount drawn
You pay interest only on what you draw, so a smaller draw costs proportionally less.
| Amount drawn | Draw-period payment | Repayment payment | Increase |
|---|---|---|---|
| $31,250 | $215 | $266 | 1.2× |
| $62,500 | $430 | $533 | 1.2× |
| $93,750 | $645 | $799 | 1.2× |
| $125,000 | $859 | $1,065 | 1.2× |
Sensitivity to the variable rate
HELOC rates move with prime. This is the same draw at rates two points either side of today's.
| Rate | Draw-period payment | Repayment payment |
|---|---|---|
| 6.25% | $521 | $731 |
| 7.25% | $604 | $790 |
| 8.25% (today) | $688 | $852 |
| 9.25% | $771 | $916 |
| 10.25% | $854 | $982 |
| 11.25% | $938 | $1,049 |
How is a HELOC payment calculated?
A HELOC payment is interest-only during the draw period: multiply the drawn balance by the annual rate and divide by 12. Once the draw period ends, the payment becomes fully amortising over the repayment period, which typically more than doubles it because no principal was repaid earlier.
draw period: P = balance × r ÷ 12 repayment: P = B · [r(1+r)^n] / [(1+r)^n − 1] available = (value × LTV) − mortgage- balance
- The amount actually drawn, not the full credit line
- r
- Annual rate; r ÷ 12 is the monthly rate
- B
- Balance outstanding when the draw period ends
- n
- Months in the repayment period
- LTV
- Maximum combined loan-to-value the lender allows
A HELOC has two distinct phases and two completely different payments, which is what makes it misunderstood. During the draw period — usually ten years — you borrow what you need and pay interest only, so the payment is simply the balance times the monthly rate. Nothing comes off the principal. When the draw period ends the line closes and the outstanding balance amortises over the repayment period, typically twenty years, using the standard loan payment formula. Because ten years of interest-only payments left the principal untouched, the full balance now has to be repaid in a shorter window, and the payment commonly rises by two to three times overnight. Borrowing capacity is the other half of the page: a lender caps the combined loan-to-value across both liens, so available credit is the home's value times that cap, less the first mortgage. And the rate is variable — tied to prime plus a margin — so every figure here is today's, not a fixed commitment.
- Multiply the home's value by the lender's combined loan-to-value limit.
- Subtract your first mortgage balance to get available credit.
- Multiply the amount drawn by the annual rate, divide by 12.
- That is the interest-only payment during the draw period.
- Amortise the same balance over the repayment period for the later payment.
Worked example: A $500,000 home with a $300,000 mortgage, drawing $100,000 at 8.25%, 10-year draw and 20-year repayment
A $500,000 home with a $300,000 mortgage, drawing $100,000 at 8.25%, 10-year draw and 20-year repayment
At an 85% combined loan-to-value the lender will lend up to $425,000 across both liens. Subtracting the $300,000 first mortgage leaves $125,000 of available credit, so a $100,000 draw is within the limit. During the draw period the payment is interest only: 100,000 × 0.0825 ÷ 12 = $688 a month. Over ten years that is $82,500 of interest with the balance still at $100,000, because none of it touched the principal. When the draw period ends, that $100,000 amortises over 20 years at 8.25%, which is $852 a month — a 1.24× increase, and the total interest across both phases comes to $187,900. The shock is far worse on a shorter repayment period: over 10 years instead of 20 the payment would be $1,227, nearly double the draw payment. And because the rate is variable, a two-point rise would take the draw payment to $854 on the same balance.
What each heloc input means
- Home value
- Current market value. The lender will order an appraisal and use their figure, which is often lower than an online estimate.
- Mortgage balance
- What you still owe on your first mortgage. A HELOC sits behind it as a second lien.
- Maximum combined loan-to-value
- How much of the home's value the lender will allow across both loans. 80–85% is typical; some lenders go to 90% at a higher rate.
- Amount you plan to draw
- What you actually intend to borrow, not the full line. You pay interest only on what you draw, which is the main advantage over a lump-sum loan.
- Interest rate
- HELOC rates are almost always variable, tied to the prime rate plus a margin. The rate you enter is today's — it will move.
- Draw period
- How long you can borrow and pay interest only. Ten years is standard. Nothing comes off the principal during this time unless you choose to pay more.
- Repayment period
- The amortising period after the draw ends. Twenty years is standard, and this is when the payment jumps.
What this heloc does not account for
- The payment shock at the end of the draw period is the main risk and the thing most calculators omit. Nothing comes off the principal during the draw, so the full balance amortises in a shorter window afterwards.
- HELOC rates are variable, tied to prime plus a margin. Every figure here assumes today's rate holds for thirty years, which it will not. The sensitivity table shows the range.
- A HELOC is secured on your home as a second lien. Default risks foreclosure, which is the fundamental difference from unsecured borrowing at a similar rate.
- Lenders may reduce or freeze a credit line if your home's value falls or your credit deteriorates, even if you have never missed a payment.
- Annual fees, inactivity fees, early-closure fees and appraisal costs are common and are not included here.
- Interest is only tax-deductible when the funds are used to buy, build or substantially improve the home that secures the loan. Using a HELOC to consolidate debt or buy a car is not deductible.
- Some HELOCs require interest-only payments but allow principal payments during the draw. Paying principal voluntarily is the simplest way to defuse the payment shock.
Frequently asked questions
How much can I borrow with a HELOC?
Most lenders allow a combined loan-to-value of 80% to 85% across your mortgage and the HELOC. On a $500,000 home with a $300,000 mortgage at 85%, that is $125,000 of available credit.
What happens when the HELOC draw period ends?
The line closes and the outstanding balance begins amortising over the repayment period. Because interest-only payments left the principal untouched, the payment typically rises by two to three times overnight.
Are HELOC payments interest-only?
During the draw period, usually yes — typically the first ten years. After that the payment becomes principal and interest over the repayment period, commonly twenty years, and rises sharply.
Is a HELOC rate fixed or variable?
Almost always variable, tied to the prime rate plus a margin. Payments move when prime moves, so a rate rise during a long draw period increases your payment on the same balance.
Is HELOC interest tax-deductible?
Only when the funds are used to buy, build or substantially improve the home securing the loan. Using a HELOC for debt consolidation or other spending is not deductible under current rules.
What is the difference between a HELOC and a home equity loan?
A home equity loan is a lump sum at a fixed rate with level payments from day one. A HELOC is a revolving line at a variable rate, interest-only during the draw period.
Sources and review
“A home equity line of credit is a revolving form of credit that uses your home as collateral.”
What you should know about home equity lines of credit — Consumer Financial Protection Bureau
Last reviewed .