Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A HELOC's payment structure changes fundamentally between its two phases, an often interest-only draw period followed by a fully amortizing repayment period, so the low payment familiar during the draw phase can jump substantially once repayment begins and principal starts being required alongside interest.
Before you rely on it
What to check
Calculate the repayment-period payment now, at the current balance and rate assumptions, rather than budgeting around the draw-period payment as if it would continue indefinitely.
The common error
Where people go wrong with HELOC payment calculator
Budgeting around a HELOC's draw-period payment as if it were permanent. The transition to the repayment period, when principal payments begin, typically raises the payment substantially, and planning only for the lower draw-period figure leaves no room to absorb that jump.
Sensitivity evidence
How variable annual rate changes the draw-period payment
| Variable annual rate | Draw-period payment | Repayment-period payment |
|---|---|---|
| 4.5% | $225 | $459 |
| 6.5% | $325 | $523 |
| 8.5%worked example | $425 | $591 |
| 10.5% | $525 | $663 |
| 12.5% | $625 | $740 |
Every input, tested
Which input moves the draw-period payment most
| Input | Tested from | To | Draw-period payment at each end | Swing |
|---|---|---|---|---|
| Variable annual rate | 6.5% | 10.5% | $325 to $525 | $200 (47%) |
| Amount drawn | $54,000 | $66,000 | $383 to $468 | $85 (20%) |
| Credit line | $90,000 | $110,000 | $425 to $425 | none |
| Repayment term | 11.0 years | 19.0 years | $425 to $425 | none |
Two variables at once
Draw-period payment by variable annual rate and amount drawn
| Variable annual rate \ Amount drawn | $48,000 | $60,000 | $72,000 |
|---|---|---|---|
| 4.5% | $180 | $225 | $270 |
| 6.5% | $260 | $325 | $390 |
| 8.5% | $340 | $425 | $510 |
| 10.5% | $420 | $525 | $630 |
| 12.5% | $500 | $625 | $750 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Credit line | $100,000 |
| Amount drawn | $60,000 |
| Variable annual rate | 8.5% |
| Repayment term | 15.0 years |
| Draw-period payment | $425 |
| Repayment-period payment | $591 |
Where the inputs come from
The credit line is the maximum, and the amount drawn is what you actually owe. The rate is variable and often tied to the prime rate plus a margin, so enter today's rate and expect it to move. The repayment term is the years after the draw period ends, commonly 10 to 20. Interest-only payments are typical during the draw period and are based on the drawn balance.
When the result stops applying
Lenders can freeze or reduce a line if home values fall. Interest is generally deductible only when the borrowed money is used to buy, build or substantially improve the home securing it. The estimate assumes the balance stays constant, but a HELOC allows repeated draws and repayments, which changes the payment.
What to compare it with
Set a personal rule for how much of the line you will use, and a schedule for repaying it. Compare a HELOC with a home equity loan if you need a fixed amount, using the HELOC versus home equity loan calculator. Watch the index the rate follows and any cap. If you plan a project, draw as you pay contractors, not all at the start, because interest accrues on the drawn balance only.
People also ask
Frequently asked questions
Is HELOC interest tax deductible?
Only when the funds are used to buy, build or substantially improve the home that secures the line, and only within IRS limits on total mortgage debt. Interest on money spent on other things is generally not deductible.
What happens when the draw period ends?
Once the draw period closes you can no longer take new advances, and the lender re-amortizes whatever you owe over the repayment term. The payment then includes principal as well as interest, so it is often noticeably higher than the interest-only bills you were paying.
Can my HELOC rate rise?
Yes. Most HELOCs are variable-rate loans that follow an index such as the prime rate plus a fixed margin, so the payment can change as often as monthly. Check the note for a rate cap and any option to lock part of the balance.