What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home equity. Unlike a traditional loan, you draw funds as needed up to your credit limit during the draw period, making it ideal for ongoing expenses like home renovations. This HELOC calculator estimates your interest-only draw period payments, principal-and-interest repayment payments, and total interest cost over the life of the line.

How HELOC Payments Are Calculated

Draw Period (interest only): Payment = Balance × Monthly Rate. Repayment Period: Payment = P × [r(1+r)^n] ÷ [(1+r)^n − 1]. Where P = outstanding balance, r = monthly rate, n = repayment months. Maximum credit line = (Home Value × 85%) − Existing Mortgage Balance.

HELOC Rates and Terms

HELOCs are variable-rate products tied to the prime rate (currently 8.5% as of 2024). Draw periods typically run 5–10 years with interest-only payments. Repayment periods are 10–20 years. Some lenders offer rate caps to limit how high your rate can go. Compare HELOCs from credit unions, banks, and online lenders.

Smart HELOC Strategies

Use HELOCs for home improvements that increase property value — the interest may be tax-deductible. Avoid drawing for consumer spending or depreciating assets. Have a repayment plan before drawing — the payment shock at end of draw period catches many homeowners unprepared. Consider fixing the rate during repayment if rates are expected to rise.