HELOC Calculator

Every HELOC quote you have seen is the smaller of two payments

A home equity line of credit is not one loan with one payment. It is two consecutive arrangements printed on the same contract. For the first ten years — the draw period — you can borrow and repay freely up to a limit, and the minimum payment is usually the interest alone. Then the line closes to new borrowing and the repayment period begins, typically twenty years long, during which the balance has to be fully amortised: principal and interest, every month, until zero.

Almost every payment figure quoted in a HELOC advertisement, and almost every number produced by a calculator on this topic, is the first one. It is the smaller of the two, it is correct for a decade, and then it stops being correct on a date fixed at closing. That date does not arrive with a renegotiation. There is no balloon to refinance and no obligation on the lender to offer you anything. The balance you were carrying simply starts amortising.

So the calculator above shows both payments side by side, in boxes of equal size, with the multiplier between them. Not because the second number is a warning, but because it is a fact of the contract that the first number conceals.

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

The line you qualify for is set by combined loan-to-value — combined, meaning every lien registered against the property counted together, not just the new one:

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

Most lenders cap CLTV somewhere between 80% and 85%. A handful go to 90% at a wider margin, and a few 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 follow that people find surprising. First, the appraisal governs, not your estimate or the neighbour's sale price — and appraisals ordered for equity lending are frequently automated valuation models rather than a person walking the house, which cuts both ways. Second, an existing second lien counts too. Third, the subtraction can come out negative, and negative means no line, not a smaller one. The tool reports zero in that case, because "−$20,000 of available credit" describes nothing.

The size of the cliff depends on the rate and the term — not on the balance

"Your payment doubles or triples" is the standard warning, and it is repeated without the condition that makes it true or false. The interest-only payment is B × i. The amortising payment is B × i ÷ (1 − (1 + i)⁻ⁿ). Divide one by the other and the balance cancels:

multiplier = 1 ÷ (1 − (1 + i)⁻ⁿ)

The jump does not depend on how much you drew at all. It depends on the monthly rate and the number of repayment months, and on nothing else. That single fact reorganises the whole topic:

Read the corners. The catastrophic conversions — triple, quintuple — belong to cheap money repaid over a short tail. That is exactly the population of lines opened in 2020 and 2021 at 3–4% with ten-year or fifteen-year repayment periods, and it is why the payment-shock stories cluster where they do. At 9% over twenty years, by contrast, an interest-only payment of $750 becomes $899.73 — a 20% step, not a catastrophe.

The practical reading is not "relax". It is that the two questions to ask a loan officer are the length of the repayment period and the rate, in that order, because those two numbers determine your cliff before you have decided how much to borrow.

Prime moves, and the payment moves with it — in both phases

HELOC pricing is quoted as prime plus a margin. Prime is the index, published daily and pinned three points above the upper bound of the Federal Reserve's target range. The margin is yours: fixed at closing for the life of the line, and the only part of the price you negotiate. Everything else is out of your hands, and the rate typically resets monthly.

That is not an abstraction. Between March 2022 and July 2023 prime went from 3.25% to 8.50%, a 5.25-point move in sixteen months. A borrower carrying $50,000 at prime plus one watched the interest-only payment go from roughly $177 to roughly $396 without drawing another dollar. Nothing about their loan changed. The index did.

Because of that, the calculator takes the index and the margin as separate inputs and asks what happens if the index rises. Two points is a modest test. Note where it lands: it does not stop hurting at conversion, because the amortising payment is priced off the same index. On the default scenario, +2 points raises the interest-only payment from $750 to $916.67 and the post-conversion payment from $899.73 to $1,032.19 — and adds about $41,800 of interest across the life of the line.

Two protections are worth knowing about. Federal rules require a variable-rate HELOC agreement to state a maximum APR — a lifetime cap — so find that number and treat it as your real worst case. Many lenders also offer a fixed-rate lock that converts part of the balance into a fixed instalment, usually for a fee and usually with a limit on how many locks you can have open. Both are decided at closing, not later.

You are charged on what you draw, not on what you were approved for

Interest accrues on the outstanding balance. A $125,000 line with $40,000 taken costs interest on $40,000; the other $85,000 costs nothing but the annual fee. This is the single largest difference between a line and a lump-sum loan, and it is why an open, undrawn HELOC works as a standby facility — cheaper than an emergency fund kept in cash, provided you can live with the fact that a lender may reduce or freeze it.

It also means the payment quoted before you name a draw amount is meaningless. Enter what you actually intend 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.

That freezing power is real and worth planning around. Lenders may suspend further advances or reduce the credit limit when the property's value declines significantly below the appraisal or when your financial circumstances change materially — the same provisions that were exercised across hundreds of thousands of lines in 2008 and 2009, often with no warning beyond a letter. A line is a promise conditioned on the collateral holding up, not a bank balance.

HELOC or home equity loan: they solve different problems

A home equity loan is a second mortgage: one lump sum, a fixed rate, a fixed term, one payment that never changes. A HELOC is revolving credit at a variable rate with the two-phase structure described above. Neither is better in general, and the choice is mostly determined by a single question — do you know the amount?

If the money is going to one known expense, a home equity loan is usually the cleaner instrument: the rate is locked, there is no conversion date, and the amortisation starts immediately, so there is no cliff to plan around. If the spending is staged and uncertain — a renovation billed by milestone, a business with seasonal working capital, a bridge between selling and buying — the line wins, because you pay for what you take and only while you have it.

The failure case is using a line for a lump-sum purpose because the interest-only payment looked more affordable. That is trading a known fixed cost for an unknown variable one plus a step change ten years out, in exchange for a lower payment in the early years. It is a defensible trade if you say it out loud. It is a bad one if nobody said it.

The costs that are not in the rate

HELOCs are marketed as low-cost to open, and often genuinely are. The costs that exist tend to be structured rather than large:

• Closing costs — appraisal, title work, recording. Frequently waived, which matters for the next item.
• Early closure fee. Close or pay off the line inside the first two or three years and the waived closing costs are usually clawed back. This is the fee that surprises people who open a line, sell the house eighteen months later, and discover the "no closing costs" line had a term attached.
• Annual fee. Commonly $0 to $100, charged whether or not you draw. On a small balance it can be a meaningful share of the total cost — the calculator flags it when the fee exceeds a tenth of the interest.
• Minimum initial draw. Many offers require you to take a set amount at closing to get the advertised rate, which converts a standby line into borrowed money from day one.
• Transaction and inactivity fees. Rarer, but they exist, and they are in the agreement rather than the advertisement.

One protection runs the other way: a HELOC secured by your principal residence carries a three-business-day right of rescission after closing, during which you can cancel without penalty. It is a real cooling-off window and it is short.

The interest is deductible less often than people assume

Home equity interest was broadly deductible before 2018 and is not now. The current test is what the money bought: interest qualifies only when the proceeds are used to buy, build or substantially improve the home that secures the debt, and only within the combined cap on mortgage debt, and only if you itemise rather than take the standard deduction. The 2025 tax legislation made those limits permanent rather than letting them lapse.

So a HELOC that pays for a new roof or an extension can qualify. The same HELOC used to consolidate credit cards, buy a car or pay tuition does not — even though debt consolidation is the most commonly advertised use of the product. The name of the loan is irrelevant; the use of the proceeds is everything, which is a good reason to keep the contractor invoices with the tax file. Everyone's facts differ, so confirm yours with a professional rather than with an advertisement.

What to check before signing

Six numbers, all of which exist in the agreement and none of which appear 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 the quiet lever — a minimum set at 1% of the balance pays down real principal and can leave the payment slightly lower after conversion instead of higher, because the balance being amortised has shrunk.

Then run the arithmetic with your own figures. Everything on this page is computed in your browser as plain arithmetic — no account, no upload, and nothing about your home, your mortgage or your income leaves the device.