HELOC Calculator — Free Home Equity Line of Credit Tool

How to Use the HELOC Calculator

This HELOC calculator models both phases of a home equity line of credit: the draw period (interest-only payments) and the repayment period (principal plus interest). Understanding both phases is essential for budgeting and avoiding payment shock.

1. Enter your current home value. Input the estimated market value of your home from a recent appraisal or online estimate. This determines how much equity you have available. Lenders will conduct their own appraisal, but having a realistic estimate helps you plan how much you can borrow.
2. Enter your mortgage balance. Input the remaining balance on your primary mortgage. The difference between your home value and mortgage balance is your total equity. This number directly determines your maximum HELOC credit limit.
3. Set the HELOC credit limit. Enter the total credit line amount. This represents the maximum you could borrow, though you do not have to draw the full amount. Your lender will set this based on your equity, credit score, and income. The calculator shows the maximum based on 85% CLTV.
4. Enter the draw amount. Input how much you actually plan to withdraw from the HELOC. This can be any amount up to the credit limit. The draw amount determines your actual payments, while the credit limit simply represents your maximum borrowing capacity. You only pay interest on what you draw.
5. Set the interest rate. Enter the current HELOC rate from your lender or the average market rate. In 2026, HELOC rates are typically Prime + margin, ranging from 7.5% to 11%. Remember that HELOC rates are usually variable, so your actual rate may change over time.
6. Configure the draw and repayment periods. Enter the length of each phase. Standard HELOCs have a 10-year draw period and 20-year repayment period, but 5/15 and 10/15 structures also exist. The draw period determines how long you can borrow, and the repayment period determines how long you have to pay it back.
7. Review both payment amounts. The results show your interest-only payment during the draw period (lower) and your principal plus interest payment during the repayment period (higher). The difference between these two payments is the payment shock you need to prepare for.

Model different scenarios by varying the draw amount and repayment period to understand the impact on your monthly budget at each phase.

HELOC Payment Formulas

A HELOC has two distinct payment phases, each with a different calculation method. Understanding these formulas helps you anticipate payment changes and plan accordingly.

Where:

• Draw Period Payment = Interest-only monthly payment during the borrowing phase
• P = Principal balance at the start of the repayment period
• r = Monthly interest rate (Annual Rate ÷ 12 ÷ 100)
• n = Number of repayment period months

Worked Example

Calculate payments for a $50,000 draw on a HELOC at 8.5% with a 10-year draw period and 20-year repayment period:

1. Monthly rate: 8.5% ÷ 12 = 0.7083%
2. Draw period payment (interest only): $50,000 × 0.007083 = $354/month
3. Draw period total interest: $354 × 120 months = $42,500
4. Repayment period payment: $50,000 × [0.007083 × (1.007083)²⁴⁰] / [(1.007083)²⁴⁰ − 1] = $434/month
5. Repayment period total: $434 × 240 = $104,200
6. Repayment period interest: $104,200 − $50,000 = $54,200
7. Total interest (both periods): $42,500 + $54,200 = $96,700
8. Total amount paid: $42,500 + $104,200 = $146,700

The payment jump from $354 to $434 represents a 23% increase. If the repayment period were only 10 years instead of 20, the payment would jump to $620/month (75% increase) but total interest would drop to $74,400. Making principal payments during the draw period reduces the repayment period balance and softens the payment shock.

Practical HELOC Examples

These scenarios show how different homeowners use HELOCs and how the two-phase payment structure works in practice with 2026 market conditions.

Phased Home Renovation Project

Christina opens a $80,000 HELOC to fund a multi-year renovation of her 1990s home. In year one, she draws $30,000 for a kitchen remodel, paying $213/month interest-only at 8.5%. In year three, she draws another $25,000 for bathrooms, increasing her balance to $55,000 and her payment to $390/month. In year five, she draws $20,000 for exterior work, bringing her total to $75,000 and her payment to $531/month. The HELOC gave her flexibility to fund each phase when she was ready, rather than borrowing the full amount upfront and paying interest on unused funds. When her 10-year draw period ends, her $75,000 balance enters a 20-year repayment at $652/month.

Emergency Fund Access

Brian opens a $60,000 HELOC as a financial safety net, paying no fees or interest while the balance is zero. When his HVAC system fails unexpectedly ($12,000 replacement), he draws from the HELOC instead of depleting his emergency savings or using high-interest credit cards. At 8.5%, his monthly interest-only payment is $85 on the $12,000 draw. He aggressively pays $500/month ($85 interest + $415 principal), clearing the balance in 26 months and paying $1,180 in total interest. If he had used a credit card at 22% APR with the same $500/month payment, it would have taken 28 months and cost $1,880 in interest, a 59% increase. The HELOC remains open for future needs.

Investment Property Down Payment

Natalie uses a $100,000 HELOC to access her primary home equity for a rental property down payment. Her home is worth $550,000 with a $280,000 mortgage. She draws $75,000 for a 25% down payment on a $300,000 rental property. Her HELOC interest-only payment at 8.5% is $531/month. The rental property generates $400/month in positive cash flow after all expenses (including its own mortgage). Natalie uses the rental cash flow plus $200/month from her salary to pay down the HELOC balance, clearing it in about 5 years. This strategy allows her to invest without liquidating other assets, though it involves the risk of owing on both her HELOC and the rental mortgage if the investment underperforms.

HELOC Tips and Complete Guide

A Home Equity Line of Credit offers flexibility that a traditional loan cannot match, but that flexibility comes with unique risks. These strategies help you maximize the benefits while protecting yourself from the downsides.

Prepare for Rate Changes

Since most HELOCs have variable rates tied to the Prime Rate, your monthly payment can change with each rate adjustment. Build a budget buffer by calculating your payment at 2-3% above the current rate. If you are paying 8.5% today, know what your payment would be at 10.5% or 11.5%. On a $50,000 balance, a 2% rate increase raises your interest-only payment from $354 to $438/month and your repayment-period payment from $434 to $513/month. Some HELOCs offer rate caps (lifetime caps of 5-6% above the starting rate are common), which limit your worst-case scenario. Ask your lender about rate caps, adjustment frequency, and fixed-rate conversion options before signing.

Make Principal Payments During the Draw Period

Even though only interest-only payments are required during the draw period, making voluntary principal payments dramatically reduces your total interest cost and softens the payment transition. On a $50,000 HELOC at 8.5%, paying $500/month (instead of the $354 minimum) during the draw period reduces the balance to approximately $28,000 by the time the repayment period starts. Your repayment period payment then drops from $434/month (on $50,000) to $243/month (on $28,000), and total interest drops from $96,700 to about $54,000. Even small extra payments make a difference: an extra $100/month saves approximately $15,000 in total interest.

Consider Fixed-Rate Lock Options

Many lenders now offer the ability to lock portions of your HELOC balance into a fixed rate. This hybrid approach gives you the flexibility of a HELOC with the stability of a fixed-rate loan. For example, you might have a $100,000 HELOC: lock $60,000 at a fixed 8.75% for 15 years for predictable payments on a major renovation, while keeping $40,000 as a variable-rate line for ongoing or future needs. Fixed-rate locks typically have slightly higher rates than the variable portion but protect against rate increases. This is especially valuable when you expect rates to rise or when the draw is for a large, one-time expense.

Avoid Using a HELOC as a Long-Term Debt Vehicle

The interest-only draw period can create a false sense of affordability. Making minimum payments for 10 years on a $50,000 draw costs $42,500 in interest without reducing the principal by a single dollar. The HELOC is best used for short-to-medium-term borrowing needs where you have a clear repayment plan. If you need long-term fixed-rate financing, a home equity loan or cash-out refinance is usually more cost-effective. Treat the HELOC like a tool, not a permanent source of funds, and always have a plan to pay it off well before the end of the repayment period.

Common Mistakes to Avoid

• Treating the credit limit as available cash. Just because you have a $100,000 HELOC does not mean you should draw $100,000. Borrow only what you need, when you need it. Each dollar drawn accrues interest from the date of withdrawal.
• Ignoring the payment shock at repayment period transition. Many borrowers are caught off guard when their interest-only payment jumps to a fully amortizing payment. Plan ahead by either paying down the balance during the draw period or setting aside savings to cover the higher payment.
• Using HELOC funds for depreciating assets. Borrowing against your home to buy a car, fund vacations, or cover lifestyle expenses puts your home at risk for assets that lose value. Reserve your home equity for value-adding improvements, debt consolidation at significant interest savings, or investments with expected returns above the HELOC rate.
• Not shopping for the best HELOC terms. HELOC terms vary significantly between lenders. Compare the margin over Prime, annual fees, draw period and repayment period lengths, rate caps, early closure penalties, and fixed-rate conversion options. A HELOC with no annual fee and a 0.5% lower margin saves thousands over the life of the line.
• Failing to monitor the market value of your home. A significant decline in your home value can cause your CLTV to exceed the lender limit, potentially resulting in the lender freezing or reducing your credit line. This happened to many homeowners during the 2008 housing crisis. Monitor your local market and maintain a healthy equity cushion.