HELOC Calculator

A home equity line of credit is revolving credit secured by your house, and it lives two separate lives. This model starts with how big the line can be. The Consumer Financial Protection Bureau describes the standard method: a lender takes a percentage of the appraised value and subtracts what you still owe on the first mortgage. The booklet works it at 75 percent — a $100,000 home gives $75,000, less $40,000 owed, for a potential line of $35,000 — and that example is pinned in the reference tests. The combined loan-to-value percentage is a field here rather than a constant, because it is the lender’s choice and offers commonly land anywhere from 75 to 90 percent. If you ask to draw more than the line supports, the calculator caps the draw at the line and tells you it did, instead of quietly pricing credit that nobody would extend. Phase one is the draw period, ten years by default. Many plans ask only for interest during it, so the minimum payment is just the balance times the annual rate divided by 1,200 — the interest accrued in one month, rounded to the cent. Nothing amortizes. The balance on the last day of the draw is exactly the balance you started with, which is why the draw interest is a multiplication rather than a schedule walk. Phase two is the repayment period, and it is an ordinary fully amortizing loan on that carried-over balance: the level payment from the Regulation Z Appendix J annuity relation, M = P·i(1+i)^n / ((1+i)^n − 1), walked month by month with each month’s interest rounded before principal is subtracted, so the totals match a servicer’s statement rather than a closed-form approximation. You set the repayment rate separately from the draw rate, because HELOC rates are usually variable and the rate you eventually amortize at is rarely the rate you drew at. The number worth staring at is the payment shock: the repayment payment minus the draw payment. Here is the part people do not anticipate. The shock is not mainly about the interest rate — it is about the calendar. On the default scenario, $50,000 at 8.5 percent with a ten-year draw and a twenty-year repayment, the payment moves from $354.17 to $433.91 with the rate completely unchanged. Shorten the repayment period to ten years and the same balance at the same rate demands about $620 a month. A HELOC whose repayment period is shorter than its draw period compresses the entire principal into fewer years than you spent borrowing it, and that geometry, not a rate reset, does most of the damage. Layer a rate increase on top and the two effects multiply. The second thing the draw period hides is its price. Ten interest-only years on that default line cost $42,500.40 and retire nothing, because you pay interest on the full balance the whole time. Paying principal during the draw attacks both the interest and the payment you inherit — check whether your plan charges a fee for it first. Regulation Z also lets a plan end the draw with the whole balance due at once as a balloon; this calculator models the fixed-repayment structure instead, so if yours balloons, the amount due is the balance shown crossing into repayment. Fees are excluded throughout: application, appraisal, annual maintenance, inactivity, transaction and early-termination charges are all real and none appear in these totals. If you want fixed payments from day one instead of this two-phase structure, compare against a home equity loan, and if the goal is replacing the first mortgage rather than sitting behind it, run a refinance calculator before you sign anything.