HELOC calculator

A home equity line of credit has two payments, not one: a small interest-only payment while you draw, and a larger payment once the balance starts amortizing. This puts them side by side — and shows what a variable rate does to both.

How the math works

A HELOC runs in two phases, and each has its own payment formula. The draw period is interest-only, so the payment is just the monthly interest on whatever you've drawn.

No principal comes off in the draw period, so the balance doesn't fall. When the draw period ends the balance is frozen and amortized — the same level-payment formula a mortgage uses — over the repayment term.

Here i is the monthly rate (annual rate divided by 12) and n is the number of repayment months. The repayment payment is larger than the draw payment because it now has to retire principal, not just cover interest. The gap between the two is the number this page leads with — most HELOC calculators show only one of them.

Worked example

Take a homeowner who has drawn $50,000 on a line at the 7.29% national average HELOC rate, on the common structure of a 10-year interest-only draw period followed by a 20-year amortizing repayment period.

During the draw period the payment is interest-only: $50,000 × 7.29% ÷ 12 = $303.75 a month. That number is comfortable, which is the trap. Over the full 10 years it adds up to $36,450 in interest, and at the end the borrower still owes the entire $50,000 — not a dollar of principal has come off.

Then the repayment period starts. The $50,000 now amortizes over 20 years at the same rate, which works out to $396.40 a month — about 1.3× the draw payment. Add the two phases together and the line costs $81,586.16 in interest over its full life on a $50,000 balance.

The jump from $303.75 to $396.40 is smaller than the "payment shock" headlines suggest — but only because the repayment term here is a full 20 years. Shorten it, or let the rate rise, and the jump gets steeper fast. That's the next section.

When this calculator is wrong

The result above assumes the rate you enter holds for 30 years. It won't. A HELOC is priced against the prime rate — currently 7.00% — plus a lender margin, and prime moves point-for-point with the Fed. The repayment payment any calculator shows you today is set at today's rate, not the rate that will actually apply years later when repayment begins.

The other ways this calculator simplifies:

• It assumes the rate is fixed. If prime rises 1.00 point before repayment starts, the rate on the example above goes from 7.29% to 8.29% and the repayment payment climbs from $396.40 to $427.29. The draw payment moves too, immediately, because it tracks the balance at the current rate.
• It assumes you pay no principal during the draw period. Nothing stops you from paying principal early, and every dollar you knock off before repayment starts shrinks both the balance that amortizes and the payment that comes with it. The interest-only minimum is a floor, not a plan.
• It assumes the full balance is still outstanding at repayment. If you drew and repaid during the draw period, the amortizing payment is set on whatever's left, not the peak balance.
• It ignores annual fees and the repayment term the lender actually sets. Some lines carry an annual fee; some amortize over 10 or 15 years rather than 20, which raises the repayment payment well above the gentle 1.3× in the example.

What to do with the result

Look at the repayment payment, not the draw payment, and decide whether you could carry it with the rate a point or two higher than it is today. If the honest answer is no, the interest-only draw payment is telling you the line is more affordable than it is. The practical move is to pay principal during the draw period rather than treating the interest-only minimum as the payment — that shrinks the amortizing payment before it ever arrives, and it's the one lever entirely in your control on a variable-rate line.

Common questions

What is the draw period on a HELOC?

It's the opening phase — commonly 10 years — when you can borrow, repay, and re-borrow up to your credit limit. During it, the required payment is usually interest-only on whatever you've drawn, so no principal comes off unless you choose to pay it.

Why does my HELOC payment go up after the draw period?

Because the payment stops being interest-only. When the repayment period begins, the balance is frozen and amortized with principal-and-interest payments over the repayment term, so the payment has to cover principal for the first time. On a $50,000 balance at 7.29% over a 20-year repayment, that's a jump from $303.75 to $396.40 a month.

Is a HELOC rate fixed or variable?

Almost always variable. It's tied to the prime rate plus a margin, so it moves when the Fed moves. A payment estimate at today's rate is a snapshot, not a lock — which is why this page lets you test a rate rise.

How much can I borrow with a HELOC?

Roughly your home's value times the lender's combined loan-to-value cap, minus what you still owe on the first mortgage. Most lenders cap combined loan-to-value at 80% to 85%. On a $414,900 home at an 85% cap, that's $352,665 of allowed combined debt; subtract the first mortgage balance to get the line.

Is a HELOC cheaper than a credit card?

On rate, yes — a HELOC near 7.29% is far below the 22.76% average credit card APR. But a HELOC is secured by your home, and the interest-only draw period can hide how much you're actually borrowing. A lower rate on a larger, longer balance is not automatically less money.