Real Estate / HELOC Calculator
🏦 HELOC 🆓 Free Home Equity

🏦 HELOC Calculator

Enter your home value, mortgage balance, and desired credit line to calculate your maximum available HELOC, draw period interest-only payments, repayment period full principal + interest payments, payment shock risk, and total interest cost. The comparison tab puts HELOC against a home equity loan so you can choose the right product for your situation.

🏦 HELOC Calculator

🏠 Home Equity
💳 HELOC Terms

⚠️ Disclaimer: HELOC rates are variable and can change. Your home is collateral - failure to repay can result in foreclosure. Consult a financial advisor.

⚖️ HELOC vs Home Equity Loan

Two main ways to borrow against your home equity - each works differently.

Feature 🔵 HELOC 🟢 Home Equity Loan

📊 HELOC vs HE Loan - Your Numbers

Run the calculator first to see personalised comparison.

📐 How HELOC Works

What is a HELOC?

A HELOC (Home Equity Line of Credit) is a revolving credit line secured by your home equity. Like a credit card - but secured by your home: - Borrow up to your credit limit during draw period - Pay back and borrow again (revolving) - Variable interest rate (usually Prime + margin) - Your home is collateral

How Much Can You Borrow?

Step 1: Calculate your home equity Equity = Home Value - Mortgage Balance Step 2: Apply lender CLTV limit (typically 80-85%) Max CLTV = Home Value x 85% Max HELOC = (Home Value x 85%) - Mortgage Balance Example: Home Value: $550,000 Mortgage: $320,000 Max at 85% CLTV: $550,000 x 85% = $467,500 Max HELOC: $467,500 - $320,000 = $147,500

Draw Period Payments (Interest-Only)

Monthly Interest = Balance x (Rate / 12) Example: $80,000 at 8.5% Monthly Interest = $80,000 x (8.5% / 12) = $80,000 x 0.007083 = $566.67/month During draw period, minimum payment = interest only. You can pay more to reduce principal. Balance stays at drawn amount if only interest paid.

Repayment Period Payments (P&I)

At end of draw period: - No new draws allowed - Balance fully amortises over repayment period Monthly P&I = Balance x [r(1+r)^n] / [(1+r)^n - 1] Where r = monthly rate, n = repayment months Payment shock example: Draw period (interest-only): $566/month Repayment period (P&I 20yr): $693/month Payment increase: +$127/month (+22%)

Variable Rate Risk

HELOCs are typically Prime Rate + Margin Prime Rate (May 2025): ~8.50% Typical HELOC margin: 0% to 2% If Prime rises +2%: Current payment: $566/month After +2% rate: $700/month (+24%) To manage rate risk: - Make extra principal payments during draw period - Some lenders offer rate lock on portion of balance - Consider fixed-rate home equity loan instead

❓ Frequently Asked Questions

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📊 HELOC Quick Facts

Typical max CLTV80–85%
Min credit score620–680+
Min equity needed15–20%
Draw period5–15 yrs
Repayment period10–20 yrs
Rate typeVariable (Prime+)
Closing costsLow / None
Tax deductible?If home use

🔗 Related Calculators

🏦 Refinance Calculator 🏡 Home Affordability 📋 Amortization 💵 Down Payment

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HELOC Calculator - How Home Equity Lines of Credit Work and What They Actually Cost

A HELOC can be one of the most cost-effective ways to borrow money - or one of the most dangerous financial tools a homeowner can use. The difference comes down to understanding how the two phases work, how variable rates change the payment over time, and what "payment shock" looks like in practice. This calculator makes all of that concrete before you sign anything.

Quick example: $600,000 home, $350,000 mortgage. At 85% CLTV limit: Max HELOC = (600,000 × 0.85) − 350,000 = $160,000. Borrow $100,000 at 8.5% variable rate. Draw period (10 yrs, interest-only): $708/month. Repayment period (20 yrs): $868/month. Payment jump at repayment start: +$160/month. Total interest over full 30-year term: approximately $123,000.

The Two Phases of a HELOC - Draw vs Repayment

Every HELOC has two distinct periods that behave very differently:

Draw Period (Typically 5–15 Years)

  • Access the credit line as needed - withdraw, repay, withdraw again
  • Minimum payment is usually interest-only
  • Your balance can fluctuate month to month
  • Rate is variable - typically Prime Rate + margin (1–2%)
  • When Prime rises, your payment rises automatically
  • Making extra principal payments during draw reduces payment shock

Repayment Period (Typically 10–20 Years)

  • Credit line closes - no more withdrawals
  • Balance at end of draw period is frozen and fully amortised
  • Full principal + interest payments required each month
  • Payment jumps significantly from interest-only minimum
  • Rate is still variable unless you convert to fixed
  • Lump sum "balloon" payment required at some HELOCs' end

HELOC vs Home Equity Loan - Choosing the Right Product

Both products let you borrow against home equity, but they serve different financial situations:

  • Choose a HELOC when: you have an ongoing or uncertain need (home renovation in phases, tuition spread over years, a business that needs intermittent capital), you want flexibility to borrow and repay as needed, or you think rates may fall in the near future.
  • Choose a Home Equity Loan when: you have a single known expense (debt consolidation, a specific renovation), you value payment certainty and a fixed monthly payment from day one, or you're concerned about rising rates and want to lock in a fixed rate now.
  • The critical HELOC risk: variable rates. A HELOC opened at 7% can become 10%+ if the Federal Reserve raises rates. Your draw period payment on $100,000 would jump from $583/month to $833/month - a $250/month increase on an "interest-only minimum."

How CLTV Determines Your Maximum HELOC

CLTV (Combined Loan-to-Value) = (First Mortgage + HELOC) ÷ Home Value. Lenders cap total debt against your home at a set CLTV - usually 80–85%. This protects against over-leverage:

  • At 80% CLTV limit: $500,000 home × 80% = $400,000 max total debt. With a $280,000 mortgage: max HELOC = $400,000 − $280,000 = $120,000
  • At 85% CLTV limit: $500,000 × 85% = $425,000 max. Same mortgage: max HELOC = $145,000
  • If your home value falls: available equity shrinks and lenders can freeze or reduce your HELOC - even one you've already been approved for. This happened to many homeowners during the 2008 financial crisis.

CLTV is one reason many financial advisors recommend not borrowing the full HELOC maximum - maintaining a buffer below the CLTV limit protects against lender freezes if property values decline.

Is HELOC Interest Tax Deductible?

HELOC interest deductibility is one of the most misunderstood tax rules among homeowners. Under the Tax Cuts and Jobs Act (2018–2025 tax years), HELOC interest is deductible only if the borrowed funds are used specifically to buy, build, or substantially improve the home that secures the loan. Key points:

  • Deductible uses: kitchen remodel, addition, roof replacement, new HVAC - major capital improvements to the same home that secures the HELOC
  • Not deductible: credit card debt consolidation, car purchase, college tuition, medical bills, vacation - any non-home improvement use
  • The deduction applies to combined mortgage + HELOC debt up to $750,000 ($375,000 for married filing separately)
  • You must itemise deductions (not take the standard deduction) to claim this
  • If you use part of the HELOC for home improvement and part for other purposes, only the home-improvement portion qualifies

Consult a tax professional for guidance specific to your situation - the deductibility rules have changed over time and are subject to further legislative changes.