How this HELOC calculator works
A home equity line of credit lets you borrow against the equity in your home. Enter your home value and current mortgage balance. The calculator shows the credit line you may qualify for and the interest-only payment on the amount you draw.
The HELOC formula
Maximum line = home value × lender’s combined loan-to-value limit − mortgage balance
Many lenders cap the combined loan-to-value at 80% to 85%. On a $400,000 home with a $250,000 mortgage and an 85% limit, the line is $400,000 × 0.85 − $250,000 = $90,000.
How HELOC payments work
A HELOC usually has two phases. During the draw period, often 10 years, you can borrow and repay freely and many lenders require interest only. In the repayment period, often 10 to 20 years, you pay principal and interest and can no longer draw.
Interest-only payment = balance × yearly rate ÷ 12
A $50,000 balance at 8% costs about $333 a month in interest. Most HELOC rates are variable, so the payment changes when rates move.
What the result means
The credit line is an upper limit based on your equity. It is an estimate. A lender also looks at your income, debts and credit before setting the line, and may offer less. The payment shown is interest on the amount you draw, not on the whole line. If you open a $90,000 line and draw $50,000, you pay interest on $50,000.
More examples
Credit line at different home values
Each row assumes a $250,000 mortgage balance.
| Home value | Line at 80% limit | Line at 85% limit |
|---|---|---|
| $350,000 | $30,000 | $47,500 |
| $400,000 | $70,000 | $90,000 |
| $500,000 | $150,000 | $175,000 |
Interest-only payment at different rates
On a $50,000 balance, the monthly interest is $291.67 at 7%, $333.33 at 8% and $375.00 at 9%. Each one-point change in the rate moves the payment by about $42. These rates are examples, not quotes.
Payment in the repayment period
When the draw period ends, the payment rises because you start repaying principal. A $50,000 balance at 8% repaid over 20 years costs about $418 a month. Over 10 years it costs about $607 a month. Compare that with $333 during the interest-only phase.
What changes the result
- Home value. A higher value raises the line. In the table, $50,000 more value adds $40,000 at an 80% limit.
- Mortgage balance. Every dollar you still owe comes off the line.
- The lender’s limit. Moving from 80% to 85% on a $400,000 home adds $20,000.
- The rate and the amount drawn. These set the payment. Drawing less is the surest way to keep it low.
Common mistakes
- Using an optimistic home value. The lender relies on its own valuation.
- Budgeting only for the interest-only payment and ignoring the higher payment in the repayment period.
- Assuming the rate is fixed. Most HELOC rates are variable.
- Forgetting that your home secures the loan. Missed payments put it at risk.
Related calculators
Lenders count the HELOC payment in your debts, so check the debt-to-income ratio calculator. If you would rather replace your first mortgage, compare the numbers in the refinance calculator. Planning a project with the money? The renovation cost calculator helps you size the draw.
Frequently asked questions
How much equity do I need for a HELOC?
Most lenders want you to keep at least 15% to 20% equity after the line is opened.
What is the difference between a HELOC and a home equity loan?
A home equity loan is a lump sum with a fixed rate and fixed payment. A HELOC is a revolving line, usually with a variable rate.
Is HELOC interest tax deductible?
It may be when the money is used to buy, build or substantially improve the home securing the loan. Ask a tax professional about your case.
Do I pay interest on the whole credit line?
No. Interest is charged on the balance you have drawn. An unused line has no interest cost, though a lender may charge fees.
What happens when the draw period ends?
You can no longer borrow, and the payment changes from interest only to principal and interest. On a $50,000 balance at 8% over 20 years, that is about $418 a month instead of $333.
Can my HELOC payment go up?
Yes. With a variable rate, the payment rises when rates rise. On a $50,000 balance, a move from 8% to 9% adds about $42 a month in interest.