HELOC Calculator

Every HELOC quote you've seen is the smaller of two payments

A home equity line of credit is two arrangements printed back to back on one contract. For the first ten years, the draw period, you borrow and repay freely up to a limit, and the minimum payment is usually just the interest. Then the line closes to new borrowing and the repayment period starts, typically twenty years, during which the balance gets fully amortized. Principal and interest, every month, down to zero.

Nearly every payment in a HELOC ad, and nearly every number other calculators on this topic spit out, is the first one. It's the smaller of the two. It's correct for a decade, and then it stops being correct on a date that was fixed at closing. Nobody renegotiates on that date. There's no balloon to refinance, and the lender owes you no offer of any kind. The balance you were carrying just starts amortizing.

So the calculator above puts both payments side by side, in boxes of the same size, with the multiplier between them. The second number isn't there to scare you. It's a term of the contract, and the first number hides it.

Available HELOC credit is a subtraction, and it can come out negative

Your line is set by combined loan-to-value. Combined means every lien recorded against the property counts, the new one and the old ones together:

available credit = appraised value × maximum CLTV − existing mortgage balance

Most lenders cap CLTV somewhere between 80% and 85%. A few go to 90% at a wider margin, and some credit unions publish higher numbers with conditions attached. On a $500,000 home at 85%, total lending stops at $425,000. A $300,000 first mortgage leaves a $125,000 line.

Three things catch people off guard. The appraisal decides, not your estimate and not the neighbor's sale price. Appraisals for equity lending are often automated valuation models instead of a person walking the house, and that can go either way for you. An existing second lien counts too. And the subtraction can go negative, which means no line, not a smaller one. The tool shows zero in that case, because "−$20,000 of available credit" doesn't describe anything.

The payment jump depends on the rate and the term, not the balance

"Your payment doubles or triples" is the standard warning. People repeat it without the condition that decides whether it's true. The interest-only payment is B × i. The amortizing payment is B × i ÷ (1 − (1 + i)⁻ⁿ). Divide one by the other and the balance drops out:

multiplier = 1 ÷ (1 − (1 + i)⁻ⁿ)

How much you drew has nothing to do with the size of the jump. Only the monthly rate and the number of repayment months matter. That changes how you should shop:

Look at the corners. The brutal conversions, triple and quintuple, come from cheap money repaid over a short tail. That describes the lines opened in 2020 and 2021 at 3% to 4% with ten-year or fifteen-year repayment periods, and it's why the payment-shock stories cluster where they do. At 9% over twenty years, an interest-only payment of $750 becomes $899.73. That's a 20% step you can budget for.

That doesn't mean relax. It means you ask the loan officer two things, in this order: how long is the repayment period, and what's the rate. Those two numbers set your jump before you've decided how much to borrow.

Prime moves, and your HELOC payment moves with it in both phases

HELOCs are priced as prime plus a margin. Prime is the index. It's published daily and pinned three points above the upper bound of the Federal Reserve's target range. The margin is yours: set at closing for the life of the line, and the only part of the price you negotiate. The rest is out of your hands, and the rate usually resets monthly.

This has already happened. Between March 2022 and July 2023 prime went from 3.25% to 8.50%, a 5.25-point move in sixteen months. Someone carrying $50,000 at prime plus one saw the interest-only payment go from roughly $177 to roughly $396 without drawing another dollar. Their loan didn't change. The index did.

That's why the calculator takes the index and the margin as separate inputs and asks what happens if the index rises. Two points is a mild test. Notice that the pain doesn't stop at conversion, because the amortizing payment is priced off the same index. On the default scenario, +2 points raises the interest-only payment from $750 to $916.67, lifts the post-conversion payment from $899.73 to $1,032.19, and adds about $41,800 of interest over the life of the line.

You get two protections, and both are settled at closing. Federal rules require a variable-rate HELOC agreement to state a maximum APR, a lifetime cap. Find it and plan around it as your real worst case. Many lenders also offer a fixed-rate lock that turns part of the balance into a fixed installment, usually for a fee and usually with a limit on how many locks you can have open at once.

You pay interest on what you draw, not on the approved line

Interest runs on the outstanding balance. A $125,000 line with $40,000 taken charges interest on $40,000. The other $85,000 costs nothing but the annual fee. That's the biggest single difference between a line and a lump-sum loan, and it's why an open, undrawn HELOC works as a standby facility. It's cheaper than an emergency fund sitting in cash, as long as you can live with the lender's right to cut or freeze it.

It also means any payment quoted before you pick a draw amount is useless. Enter what you actually plan to take. The tool defaults to a partial draw for that reason, with a button to fill the whole line only if you mean it.

Plan around the freeze. Lenders can suspend new advances or lower the limit when the property's value drops well below the appraisal or when your finances change materially. Those same clauses were used on hundreds of thousands of lines in 2008 and 2009, often with nothing more than a letter. A line is a promise that depends on the collateral holding up. It isn't money in the bank.

HELOC or home equity loan: pick by whether you know the amount

A home equity loan is a second mortgage: one lump sum, a fixed rate, a fixed term, and a payment that never changes. A HELOC is revolving credit at a variable rate with the two-phase setup above. Neither one wins in general. One question mostly decides it: do you know the amount?

If the money goes to one known expense, the home equity loan is usually cleaner. The rate is locked, there's no conversion date, and amortization starts right away, so there's no jump to plan for. If the spending is staged and uncertain, like a renovation billed by milestone, a business with seasonal working capital, or a bridge between selling and buying, take the line. You pay for what you take, and only while you have it.

Where people go wrong is using a line for a lump-sum purpose because the interest-only payment looked easier. That swaps a known fixed cost for an unknown variable one, plus a step change ten years out, to get a lower payment in the early years. It's a defensible trade if you make it on purpose. It's a bad one if nobody noticed it was being made.

HELOC costs that aren't in the rate

HELOCs are sold as cheap to open, and often they really are. The costs that do exist are more about structure than size:

• Closing costs cover the appraisal, title work and recording. They're often waived, which matters for the next item.
• An early closure fee usually claws back those waived closing costs if you close or pay off the line in the first two or three years. This is the one that surprises people who open a line, sell the house eighteen months later, and find out the "no closing costs" line had a term attached.
• The annual fee is commonly $0 to $100, charged whether you draw or not. On a small balance it can be a real share of the total cost. The calculator flags it when the fee is more than a tenth of the interest.
• A minimum initial draw is required by many offers to get the advertised rate. That turns a standby line into borrowed money from day one.
• Transaction and inactivity fees are rarer, but they exist, and you'll find them in the agreement, not the ad.

One protection runs your way. A HELOC secured by your principal residence comes with a three-business-day right of rescission after closing, when you can cancel without penalty. It's a real cooling-off window, and it's short.

HELOC interest is deductible less often than people assume

Home equity interest was broadly deductible before 2018. It isn't now. The test today is what the money bought: interest qualifies only when the proceeds buy, build or substantially improve the home that secures the debt, only within the combined cap on mortgage debt, and only if you itemize instead of taking the standard deduction. The 2025 tax legislation made those limits permanent instead of letting them lapse.

So a HELOC that pays for a new roof or an addition can qualify. The same HELOC used to consolidate credit cards, buy a car or pay tuition doesn't, even though debt consolidation is the use the product is most often advertised for. What the loan is called doesn't matter. What the money paid for decides it, so keep the contractor invoices in the tax file. Everyone's facts differ. Confirm yours with a professional, not an ad.

What to check before you sign a HELOC

Get six numbers. All of them are in the agreement and none of them show up in the headline rate: the length of the draw period, the length of the repayment period, the margin over prime, the lifetime maximum APR, the early closure fee and how long it applies, and whether the minimum payment during the draw is interest only or a percentage of the balance. That last one is easy to miss and moves a lot. A minimum set at 1% of the balance pays down real principal and can leave the payment slightly lower after conversion, because the balance being amortized has shrunk.

Then run the math with your own figures. Everything on this page is plain arithmetic done in your browser. There's no account and no upload, and nothing about your home, your mortgage or your income leaves your device.