How to use this calculator
- Enter your home value, mortgage balance, and any other liens (existing second mortgages or HELOC balances). The calculator shows your available equity and the largest line the lender would let you draw at their combined LTV cap.
- Enter the amount you want to borrow. Tell it whether the HELOC rate is a flat rate or the lender's index plus their margin, and set the rate.
- Choose a draw period (years you can borrow) and a repayment period (years to pay back with no new draws). If you'll make interest-only payments during the draw period, or amortizing payments that include principal, pick one.
- In the "Compare to a home equity loan" section, enter the rate and term for a fixed-rate lump-sum loan for the same amount.
- Open Advanced to model a future rate change (a rate bump or drop after the first year or later) and a lifetime cap the rate can't exceed. The schedule updates to show how payments would move.
How it's calculated
Available equity is your home's value minus all liens (mortgage, second mortgages, and other liens). If you choose to borrow a specific amount, the calculator computes your combined loan-to-value (CLTV) after that borrowing: (mortgage + other liens + borrow amount) ÷ home value, shown as a percent. Lenders cap CLTV to manage risk — the default is 85%, a typical market standard, though some lenders set it lower and others allow up to 90%. Your maximum available to borrow is the amount that would bring your CLTV exactly to the cap.
HELOC structure: A home equity line of credit has two phases. During the draw period you can borrow (or draw) up to your credit line, and you may have a choice of payment types. During the repayment period you stop drawing new money and pay down the balance fully over the remaining years. When you draw money in month 1, it accrues interest from month 1; if you make additional draws each month, they accrue interest from the month they're drawn. The calculator can add an optional extra monthly draw alongside your initial draw.
Draw-period payment modes: Interest-only payments cover just the monthly interest accruing on your balance, so during a 10-year draw period you're not reducing the principal — this keeps early payments low but means the balance stays higher and interest accrues longer. Amortizing payments include both interest and principal, so the balance falls steadily. An amortizing draw-period payment is the level payment that would fully retire the balance by the end of the repayment period if the rate and balance stayed constant.
Variable rate and rate changes: HELOC rates are variable, usually set as a published index (such as the prime rate) plus the lender's margin. The calculator lets you enter a flat rate, or an index and margin separately. You can also model a rate-change scenario: a rate bump or drop of a few percentage points starting after year 1 (or any later year). When the rate changes, an amortizing payment is re-amortized over the months left to cover the remaining balance; an interest-only draw-period payment simply follows the new rate.
Lifetime rate cap: HELOCs often have a ceiling the rate can never reach, even if the index surges. If you set a cap, the rate in every month is clamped to it: with a 12% cap, an 8.5% rate that rises 5 percentage points stops at 12% rather than reaching 13.5%. A cap only bites when the rate would otherwise go above it.
Payment shock: The jump from your last payment in the draw period to your first payment in the repayment period can be large. For example, a $50,000 balance at 8.5% costs $354/mo interest-only during a 10-year draw period. When a 20-year repayment period begins, the full $50,000 has to be amortized, so the payment rises to $434/mo even if the rate never changes. The calculator alerts you to this shock.
Home equity loan comparison: A home equity loan is a one-time, fixed-rate, fully amortizing loan. You borrow the same total the HELOC draws (the initial draw plus any extra monthly draws) as one lump sum and pay a level monthly payment that retires the loan over the term you choose (5, 10, 15, 20, or 30 years). The comparison card shows total interest and peak payment side by side so you can weigh the variable-rate flexibility of a HELOC against the payment certainty of a fixed loan.
All payments are computed using standard amortization: M = L × r(1 + r)n ÷ [(1 + r)n − 1], where r is the monthly rate (annual rate ÷ 1200), n is months remaining, and L is the balance. Each month accrues interest on the balance at the current rate and compounds monthly; the payment in whole cents is computed and re-amortized only when the rate changes, a new draw lands, or the phase (draw to repayment) shifts.
Assumptions
- The combined LTV cap is a ceiling most lenders use but not all. Some lenders go higher; some go lower. Your actual limit depends on your credit, income, the home's appraisal, and the lender's underwriting. This calculator uses a typical 85% default; check with your lender for theirs.
- The interest rate is variable and can move with its index. A fixed-rate home equity loan has a locked rate for the full term.
- HELOC closing costs, annual fees, and appraisals aren't included in this calculation — the comparison is purely the cost of interest and the structure of payments. Your lender will quote these costs separately.
- Interest compounds monthly. A draw lands at the start of its month and earns interest that month; payments are made at the end of each month.
- No additional fees are charged after closing (e.g., no prepayment penalty, no maintenance fee). Real HELOCs may have them; check your disclosure.
- If you model a rate change, the rate shift is one-time (e.g., +1 point in month 25, then held steady). Real variable rates can move multiple times.
- If you set a lifetime cap, it's an absolute ceiling: whenever the index plus margin (plus any modeled change) would exceed it, the rate used that month is the cap. Periodic (per-adjustment) caps aren't modeled.
- The draw period and repayment period are separate and clear: no draws after the draw period ends. Real HELOCs sometimes allow draws in the early repayment period if the lender hasn't cut off the line.
- The home value, mortgage balance, and other liens are static. Property values, tax assessments, and payoff amounts change over time, which affects your available equity.
- Maximum term modeled is 30 years for each the draw and repayment periods, and 30 years for a home equity loan. Actual terms depend on the lender and your situation.
Frequently asked questions
What is a HELOC?
A home equity line of credit is a variable-rate revolving credit line backed by your home's equity. You can draw on it during the draw period (often 10 years), paying interest on what you've drawn, then stop drawing and pay it back over the repayment period (often 15 or 20 years). A HELOC works like a credit card but is secured by your home and usually has a lower interest rate.
How much equity can I borrow?
Equity is your home's value minus what you owe (mortgage and other liens). Most lenders set a combined loan-to-value (CLTV) cap — the most your total debt can be as a percent of your home's value — typically 80–85%. If your home is worth $400,000 and you owe $250,000, your equity is $150,000. At an 85% CLTV cap, the most you could borrow is $90,000. Your credit, income, and the appraisal also matter.
What's the difference between draw-period interest-only and amortizing payments?
Interest-only payments cover just the interest accruing each month, so the balance doesn't shrink. On a $50,000 draw at 8.5%, the interest-only payment is $354/mo. An amortizing payment includes principal, so the balance falls steadily. The amortizing payment is higher but you're building equity. Once the repayment period starts, all payments are amortizing regardless.
What is payment shock?
Payment shock is the jump in your payment when you move from the draw period to the repayment period. If you've been paying $354/mo interest-only on $50,000 at 8.5% and a 20-year repayment period begins, the payment jumps to $434/mo because you're now amortizing the full balance. The shock is especially big if rates have risen. The calculator shows the jump in dollars and percent.
Why is a HELOC rate variable?
HELOC rates are tied to a market index (usually the prime rate, which moves with the Federal Reserve's rate). The lender adds a margin (e.g., prime + 1%), and your rate moves when the index moves. This keeps the lender's margin steady while the rate floats with the market. Your payment can change if the rate does, unlike a fixed-rate loan.
Should I choose a HELOC or a home equity loan?
A HELOC gives flexibility: you draw only what you need, when you need it, and pay interest only on what you've drawn. A home equity loan gives certainty: you get a lump sum, a fixed rate, and a fixed payment. HELOCs usually have lower starting rates because they're variable. Home equity loans cost more upfront but your payment never changes. Use this calculator to compare the total interest and payments over time for your scenario.
Can HELOC rates increase a lot?
Yes — with no cap, a HELOC rate can rise as high as the index goes. Many HELOCs have a lifetime cap, a ceiling the rate can never exceed (e.g., prime + 1% with a 12% lifetime cap). If the prime rate soars, your rate stops at the cap. Check your lender's cap; it's a key protection. This calculator lets you model a cap to see the effect.
What if I stop drawing and want to pay off early?
Most HELOCs have no prepayment penalty, so you can pay extra or pay off the full balance anytime. Early payment saves interest. A home equity loan also usually allows prepayment with no penalty. The schedules this calculator shows assume on-time payments; paying ahead would shorten the term and save interest.
What happens if my home value drops?
If your home's value falls, your equity shrinks and your available credit line on a HELOC may drop or be frozen. Lenders often review HELOCs periodically and can reduce your available credit based on the home's current value, your payment history, and the market. A fixed home equity loan doesn't have this risk — your payment stays the same.
Can I borrow more if I have an existing HELOC or second mortgage?
Maybe. Other liens (like an existing HELOC or second mortgage) eat into your available equity. At an 85% CLTV cap, any existing liens reduce how much new credit you can get. This calculator includes "Other liens" to account for them. If you're refinancing an existing HELOC into a new one, that balance goes in "Other liens."
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Disclaimer: This calculator provides estimates for educational purposes only and is not financial, tax, or legal advice or an offer of credit. Actual payments depend on your lender, loan terms, taxes, and insurance. Consult a qualified professional before making financial decisions.